Herzog Appraisal has answers to "Frequently Asked Questions"


	Herzog Appraisal is always ready to handle any questions you might have about Real Estate Appraisals. Contact Todd Herzog at Herzog Appraisal today to talk about how we can help solve your specific valuation problems. 989 305-1296

Define the term "Appraisal"
Describe what an appraiser does
Why would I require a real estate appraisal?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
After completing the appraisal, what assurance is there that the value indicated is valid?
What does it mean for an appraiser to be licensed?
Who employs appraisers?
Where does an appraiser get the data used to estimate values?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Should I do anything in advance of the appraisal appointment
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
How can I get the most ROI out of home improvements?

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:

To obtain a loan.
To reduce your tax burden.
To demonstrate a homeowner's acquired equity and remove insurance.
To contest high property taxes.
If you need to take care of an estate.
To give you an edge when purchasing a home.
To determine a reasonable price when selling your home.
To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
Because an official agency such as the IRS requires it.
If you ever find yourself in a lawsuit.

Click here for a more extensive explanation of the process dealing with getting an appraisal.

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:

The client and whose purposes the appraisal is to serve.
The intended use of the report.
The appraisal's purpose.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Relevant property characteristics, including: location, physical attributes, legal attributes, economic attributes, the property rights valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible factors.
Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
Division of interest, such as fractional interest, physical segment and partial holding.
The scope of work used when completing the job.

For a more detailed view of what goes into an appraisal report click here: Sample Appraisal Report

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:

The appraisal used an appropriate analysis of the data.

That crucial errors of omission or commission were not committed individually or collectively.

That appraisal services were not carried out in a careless or negligent manner.

That a trustworthy, substantiated appraisal report was imparted.

To become a state licensed appraiser, we must satisfy extensive education and experience requirements that train us to produce an unbiased opinion. Likewise, appraisers must obey a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Go to list of questions) Licensing and certification is achieved through classroom study, tests and real world experience. Once an appraiser is licensed, he or she is required to engage in continuing education courses so the license stays up to date. To see the specific requirements for any state click here.

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.


	The savings from cancelling your PMI pays for the appraisal in a matter of months. Nobody is more qualified than Herzog Appraisal when it comes to analyzing the real estate market. Contact us today. 989 305-1296

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:

Written property agreements, such as a maintenance easement for a shared driveway.
Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
A list of "proposed" improvements when the property is being appraised "as complete".

What does "Market Value" mean? (Go to list of questions)

In real estate appraising, Market Value is commonly defined as:

"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

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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