Ken Colley & Associates Inc. has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(See list of FAQ's) The method of performing an appraisal report consists of an inspection which leads to an opinion of value. This opinion or estimate is concluded using a formal process that typically uses three "common approaches to value". One of the methods is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Another of the processes is the Sales Comparison Approach - which deals with making a comparable analysis to other similar properties within a close vicinity which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is primarily used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
What does an appraiser do?(See list of FAQ's) An appraiser offers a fair and credible opinion of market value, to be used in making real estate transactions. Appraisers present their conclusions in appraisal reports.
What would cause me to require a real estate appraisal?(See list of FAQ's) There are a lot of reasons to obtain an appraisal from Ken Colley & Associates Inc. with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
How is an appraiser different than a home inspector? (See list of FAQ's)The appraiser is not a home inspector and does not do a full home inspection. An inspection is a third-party investigation of the available structure and systems of a property, from the top to the bottom. Usually, a home inspection report will discuss 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?(See list of FAQ's) Frankly, it's like comparing Shakespeare to reality TV. What the CMA relies upon are superficial trends. Appraisals use comparable sales which are valid resources. The appraisal report will also contain location and construction costs. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the biggest difference is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat fee for work they perform, regardless of their value conclusion.
What can I expect to see in my appraisal report? (See list of FAQ's)Every report should reflect a credible value opinion and must clearly state the following:
After completing the report, what guarantee is there that the value indicated is valid?(See list of FAQ's) In communicating an appraisal report, each appraiser must make sure of the following:
Who are an appraiser's customers?(See list of FAQ's) Most of the time, appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Sebastian County or other areas?(See list of FAQ's) Gathering information is one of the primary occupations of an appraiser. Data can be divided into Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers routinely need to report when a property lies 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 collective knowledge gained from creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(See list of FAQ's) 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 the most appropriate price. 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. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. It covers the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the loan balance. 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 me in advance?(See list of FAQ's) We begin with an inspection of the home. 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 condition of its amenities. On the home's interior, pick up any clutter and make sure we can get to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"?(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(See list of FAQ's) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly 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.
This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(See list of FAQ's) 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
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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.