Jerrils and Associates, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The process of performing an appraisal consists of an evaluation which leads to an opinion of value. This opinion or estimate is discerned by a formal method that typically uses three "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the house, minus age and physical deterioration, plus the land value. The Sales Comparison Approach deals with finding similar properties in the vicinity and discerning value based on comparing those prior sales to the property being appraised. Being the most common approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a house. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does(Return to top) An appraiser provides a fair and credible determination of market value, often in the context of a real estate exchange. Appraisers summarize their expert analysis in appraisal reports.
What are the reasons I would request a real estate appraisal?(Return to top) There are many reasons to obtain an appraisal from Jerrils and Associates, Inc. with the usual reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal include:
How is an appraiser different than a home inspector? (Return to top)Appraisers do not do provide home inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the home from basement to top. The usual home inspector's report will include an evaluation of the integrity of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Simply put, it's like comparing Shakespeare to reality TV. The CMA utilizes market trends to create most of their business. Appraisals use similar sales which are verifiable resources. The appraisal report will also contain neighborhood and building prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
Who's creating the report is frankly the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, state licensed professional who has formed their livelihood on valuing homes in and around Kent County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat sum for assignments, regardless of their value conclusion.
What's in an appraisal report? (Return to top)Each report must reflect a believable estimate of value and will clearly state the following:
After completing the appraisal, what guarantee is there that the value indicated is valid?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who are an appraiser's customers?(Return to top) Commonly, appraisers are called upon by lenders to estimate the value of a house involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Jerrils and Associates, Inc. get the information used to estimate values in Kent County or other areas?(Return to top) Gathering information is one of the primary things an appraiser performs. Data can be split into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is collected from a variety of sources. To find out about recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers routinely have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Return to top) An appraisal is a worthwhile whenever the value of your home is relevant to a financial decision. For those selling a home, you'll want to determine the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. PMI protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Should I do anything in advance of the appraisal inspection(Return to top) The first step in most appraisals is the home inspection. What this entails is the appraiser, after setting up an appointment, personally going through the home - recording the layout of the rooms, taking photos and documenting the general status of its amenities. Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Return to top) In most real estate transactions, the appraisal is ordered by the lender. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is entitled to a copy of the appraisal - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner hires an appraiser directly. In these scenarios, the appraiser may define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Return to top) This really depends on where the home is. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
No matter where you go, however, renovating a kitchen is almost always a safe investment. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms were second, yielding 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.