Kellett Real Estate Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(List of questions) An appraiser performs an evaluation that leads to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or estimate. 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. The most common approach in finding the likely sales price of a home is the Sales Comparison Approach which concerns making a comparison to similar homes nearby. Usually, the Sales Comparison Approach is the most definite indicator of market value of a home. The Income Approach is mainly 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?(List of questions) An appraiser produces a fair and credible determination of market value, often in the context of a real estate purchase. Appraisers show their expert conclusions in appraisal reports.
What are the reasons a person would need your services?(List of questions) There are a lot of reasons to obtain an appraisal from Kellett Real Estate Appraisals 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? (List of questions)Home inspectors do not produce an opinion of value and are not appraisers. An inspection is a third-party evaluation of the livable structure and systems of a house, from the roof to the foundation. For the most part, a home inspection report will explain the amenities and the necessities of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(List of questions) Simply put, it's like comparing Shakespeare to reality TV. The CMA relies on indefinite market trends. Appraisals use comparable sales which are valid resources. In addition, the appraisal looks at other factors like condition, area and replacement prices. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is the person doing the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, Arkansas licensed professional who made a career on valuing homes in and around Randolph County creates the appraisal. 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 collect only a flat fee for assignments, regardless of their outcome.
What are the contents of an appraisal report? (List of questions)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:
After completing the report, what guarantee is there that the value indicated is valid?(List of questions) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(List of questions) Commonly, appraisers are hired by lenders to estimate the value of real estate involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Randolph County or other areas?(List of questions) One of the most important tasks an appraiser performs is to collect data. Data can be divided into Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is received from a many places. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why do I need a professional appraisal?(List of questions) If you're making any kind of financial decision and the value of your home is relevant, you'll want an appraisal. If you're selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from Kellett Real Estate Appraisals is the best documentation to ensure assets are split up properly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(List of questions) PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the value of the house is less than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(List of questions) The first step in most appraisals is the property 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, make sure it is clutter free and that 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 speed things along plus ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"?(List of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(List of questions) For mortgage transactions, the lender requests 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 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.
The exception to this rule is when a home owner hires an appraiser directly. In these scenarios, 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.
Are some home improvements more worthwhile than others?(List of questions) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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 weren't far behind, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.