Bailey Valuation and Consulting has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The process of producing an appraisal report consists of an estimation which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or estimate. One of them is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. Easily the most common approach in finding the value of a house is the Sales Comparison Approach which deals with figuring a comparison to similar houses close by. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. One of the least common approaches in appraising houses is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Top) An appraiser generates an objective and well justified assessment of market value, to be used in making real estate transactions. Appraisers present their findings in appraisal reports.
What are the reasons I would request your services?(Top) There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal report include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Frankly, it's like comparing opera to country. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are verifiable resources. Location and construction values are also precedent in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is who's behind the report. 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. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an independent party, with no conditional interest in the value of a home, unlike the agent, who gets a commission based upon the price of the home.
Once the assignment is done, what guarantee is there that the value conclusion is legitimate?(Top) In communicating an appraisal report, each appraiser must make sure of the following:
Who employs appraisers?(Top) Most of the time, appraisers are called upon by lenders to render a value opinion on property involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Bailey Valuation and Consulting get the information used to estimate values in Maricopa County or other areas?(Top) One of the primary things an appraiser does is to assimilate data. Data can be described as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is received from a variety of places. To find out about recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To verify actual sales prices, we research tax records and other public documents. Appraisers often need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
What can a full appraisal do for me?(Top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house 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 an acronym for Private Mortgage Insurance. It guards the lender in the event a borrower doesn't pay on the loan and the market price of the property is less 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.
Should I do anything in advance of the appraisal appointment(Top) We start with an inspection of the home. During this process, the appraiser 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access appliances like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "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 certainly entitled to a copy of the report - 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 situations, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Top) The added value of a particular amenity truly depends on the local market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
No matter where you go, however, renovating a kitchen is almost always a safe move. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.