Herzog Appraisal has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal" (Go to list of questions)The process of writing an appraisal report deals with an evaluation which leads to an opinion of value. The real estate appraiser will use a several "approaches," typically three, to conclude the estimation of market value. One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, minus depreciation and physical deterioration, plus the land value. Another of the processes is the Sales Comparison Approach - which concerns finding a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the money produced by the property.
Describe what an appraiser does (Go to list of questions)An appraiser offers an objective and well justified opinion of market value, in the support of real estate exchanges. Appraisers reveal the details of their findings in appraisal reports.
Why would I require a real estate appraisal? (Go to list of questions)There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an report include:
How is an appraisal different than a home inspection? (Go to list of questions)Home inspectors do not produce an opinion of value and do not do appraisal reports. A third-party home inspector will evaluate the structure of the house, from the roof to the foundation. The stereotypical house inspector's report will include an evaluation of the condition of the house's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
What is the difference between an appraisal and a comparative market analysis (CMA)? (Go to list of questions)Frankly, it's like comparing Shakespeare to reality TV. The CMA relies on vague trends in the market. An appraisal relies on comparable sales that can be verified by records. The appraisal report will also contain neighborhood and construction values. 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 most significant factor is the person behind the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A Certified Real Estate Appraiser, licensed in the state of Michigan is the most qualified person when it comes estimating value. Further, the appraiser is an unbiased voice, with no conditional interest in the value conclusion, unlike the agent, whose income is tied to the price of the home.
What's in an appraisal report? (Go to list of questions)The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
After completing the appraisal, what assurance is there that the value indicated is valid? (Go to list of questions)In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers? (Go to list of questions)Typically, appraisers are called upon by lenders to render a value opinion on real estate involved in a loan transaction. Private party, Attorneys, or CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values ? (Go to list of questions)Gathering data is one of the primary roles of an appraiser. Data can be described as either Specific or General. Specific data is taken 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 numerous sources. To look up recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. To double-check actual sales prices, we use tax records and other public documents. Appraisers routinely have 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 assembles 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? (Go to list of questions)If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your house, an appraisal assists you in setting the most appropriate price. When buying, be sure you're not overpaying by commissioning an independent appraisal. For people settling an estate, an appraisal from Herzog Appraisal is the best way to ensure assets are divided properly. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark.
My mortgage statement has an item on it for PMI? Can I get rid of that? (Go to list of questions)PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental policy takes care of the lender if a borrower defaults on the loan and the market price of the house is lower 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 appointment (Go to list of questions)We start with an inspection of the property. 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. Inside, make sure it is clutter free and that we can get to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help expedite our work plus ensure a more accurate report, try if possible to have the following items:
What does "Market Value" mean? (Go to list of questions)In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer? (Go to list of questions)For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 included with all the other closing documents - but is not allowed 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 stipulate how the appraisal can be used; 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.
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