Aurora Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The process of creating an appraisal report consists of an investigation which leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or estimate. The Cost Approach is one of the approaches that appraisers use to find value; it involves finding what the improvements would cost less physical degradation, plus the land value. The Sales Comparison Approach deals with finding similar houses in close proximity and discerning value based on making a comparison of those homes to the home in question. The Sales Comparison Approach is commonly the most definitive and clearest indicator of value for a home. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to find the value of a property based on what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(Top) An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers present their professional conclusions in appraisal reports.
What would cause me to need a real estate appraisal?(Top) There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
How is an appraiser different than a home inspector? (Top)Appraisers do not do complete house inspections and are not home inspectors. A third-party home inspector will investigate the structure of the house, from the top to the foundation. Generally, a home inspection report will evaluate the amenities and the necessities of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Top) Simply put, it's like comparing opera to country. The CMA uses market trends to generate most of their business. The appraisal relies on similar proven comparable sales. The appraisal report will also contain location and construction values. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is the person behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for work they perform, regardless of their outcome.
What are the contents of an appraisal report? (Top)The main objective of an appraisal report is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
Upon completion of the report, what guarantee is there that the value indicated is valid?(Top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(Top) Typically, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Deschutes County or other areas?(Top) Gathering data is one of the primary tasks an appraiser engages in. Data can be categorized as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need 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 service.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser?(Top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out a price that gets you the most profit but doesn't leave your home on the market too long; 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. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Top) PMI is short for for Private Mortgage Insurance. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on 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.
Does the appraiser need anything from the homeowner in advance?(Top) The first step in most appraisals is the home inspection. During this process, we will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, 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:
What is "Market Value?"(Top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(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 bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
How can I get the most ROI out of home improvements?(Top) A home's location - what city it is in and even what part of that city - is key to this popular question. 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
As a rule, the best ROI from renovating a home comes in the kitchen. 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 are right up there with kitchens, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.