Bradley & Associates has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) An appraisal report is an estimation allowing the appraiser to come to an opinion of value. The appraiser will typically use a number of "approaches," typically three, to conclude the estimation of market value. The Cost Approach is one of the processes that real estate appraisers use to find the value of a home; it involves finding what the improvements would cost without physical deterioration, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparison to other similar properties within a close vicinity which have recently sold. The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a house. 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 income generated by the property.
Describe what an appraiser does(Return to top) An appraiser provides a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers demonstrate their expert analysis in appraisal reports.
Why would I require a real estate appraisal?(Return to top) There are a lot of reasons to obtain an appraisal from Bradley & Associates with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
What is the difference between an appraisal and a home inspection? (Return to top)The appraiser is not a home inspector and he or she does not do a full home inspection. The point of a home inspection is to evaluate the structure of the property from bottom to top. For the most part, a home inspection report will explain the amenities and the necessities of the home: 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 other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) To be blunt, it's like comparing opera to country. The CMA depends on vague trends in the market. An appraisal utilizes comparable sales that can be verified by public record. Also, the appraisal looks at other factors like condition, location and construction costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person behind the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is produce 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 previously agreed upon sum for assignments, regardless of their outcome.
What are the contents of an appraisal report? (Return to top)Each appraisal should reflect a believable value opinion and must document the following:
After completing the appraisal, how can I have confidence that the value indicated is accurate?(Return to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who hires an appraiser?(Return to top) Most of the time, appraisers are hired by mortgage lenders to render a value opinion on a house 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 Napa County or other areas?(Return to top) One of the most important things an appraiser does is to gather data. Data can be categorized as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is received from a many sources. To look up recent sales to be used as "comps", we typically use the local Multiple Listing Service. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Appraisers routinely have 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 product.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal?(Return to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your home, an appraisal helps you set a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from Bradley & Associates is the best documentation to ensure assets are divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is an acronym for Private Mortgage Insurance. It takes care of the lender if a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes 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.
How do I get ready for the appraiser?(Return to top) We start 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 features. Inside, pick up any clutter and make sure we can access 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.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
What is "Market Value?"(Return to 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?(Return to top) In most real estate transactions, the appraisal is ordered by the lender. 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 included 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 scenarios, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price?(Return to top) It really depends on the 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.
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 are right up there with kitchens, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.