Carolyn Davis has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) An appraisal report is an inspection allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or estimate. The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves figuring what the improvements would cost minus physical depreciation, plus the land value. Another of the approaches is the Sales Comparison Approach - which involves making a comparable analysis to other similar properties within a close vicinity which have recently sold. Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property. One of the least common approaches in appraising houses is the Income Approach, which is commonly used to find the market value of a property based on what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(Top) An appraiser offers a fair and credible determination of market value, often in the context of a real estate sale. Appraisers illustate their professional findings in appraisal reports.
What are the reasons I would request a real estate appraisal?(Top) There are many reasons to get an appraisal from Carolyn Davis with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Simply, they share nothing in common. The CMA depends on indefinite local market trends. An appraisal utilizes comparable sales that can be validated by public record. In addition, the appraisal checks other factors like condition, neighborhood 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.
But the largest differentiator is who's doing 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 produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for assignments, regardless of their outcome.
Upon completion of the report, what assurance is there that the final number is valid?(Top) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Top) Mortgage lenders are an appraiser's typical customer, requiring their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does Carolyn Davis get the data used to estimate values in Manatee County or other areas?(Top) One of the main things an appraiser does is to gather property data. Data can be divided into Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is gathered from a variety of sources. To research recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service. To double-check actual sales prices, we look at items in the assessor's office and other public documents that are usually online nowadays. Appraisers often need 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 assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
What can a full appraisal do for me?(Top) 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 helps you set a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house 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?(Top) PMI stands for Private Mortgage Insurance. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is lower 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.
How do I get ready for the appraiser?(Top) The first step in most appraisals is the property inspection. 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, pick up any clutter and make sure we can get to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
How does an appraiser define "Market Value"?(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?(Top) 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 bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner engages an appraiser directly. In these situations, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(Top) The added value of a particular amenity truly depends on the local market. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI from renovating a home comes in the kitchen. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. 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 overbuilt for your neighborhood in terms of size.