J.S. Appraisals, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The method of creating an appraisal report consists of an inspection which leads to an opinion of value. There are three "common approaches to value" which assists 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 concluding what the improvements would cost without physical deterioration, plus the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which deals with making a comparison to similar homes close by. The Sales Comparison Approach is normally the most accurate and best indicator of a liklely sales price for a residence. One of the least common approaches in appraising houses is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Return to top) An appraiser generates a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers demonstrate their professional conclusions in appraisal reports.
What would cause me to request services from J.S. Appraisals, Inc.?(Return to top) There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal include:
How is an appraiser different than a home inspector? (Return to top)Home inspectors do not produce an opinion of value and are not appraisers. A third-party home inspector will judge the structure of the home, from the top to the foundation. For the most part, a home inspection report will discuss 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Simply put, it's night and day. The CMA depends on indefinite market trends. Appraisals use similar sales which are verifiable resources. Area and architectural prices are also precedent in an appraisal. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
Who's behind the report is hands down the most significant 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 created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an unbiased party, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.
What are the contents of an appraisal report? (Return to top)Each appraisal must demonstrate a credible value opinion and should identify the following:
Once the report has been completed, how can I have certainty that the value indicated is trustworthy?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers?(Return to top) Commonly, appraisers are called upon by mortgage 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 J.S. Appraisals, Inc. get the data used to estimate values in Dupage County or other areas?(Return to top) Gathering data is one of the primary functions of an appraiser. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is collected from a number of sources. To research recently sold homes to be used as "comps", we often use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is available from FEMA data outlets, 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.
Why should I hire a licensed appraiser?(Return to top) If you're making some sort of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. When selling your home, an appraisal will help you determine a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Return to top) PMI is short for for Private Mortgage Insurance. It protects the lender in case a borrower defaults on the loan and the market price of the property is less 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) The first step in most appraisals is the property inspection. During this process, the appraiser 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. Inside, 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 outside walls.
You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
Define "Market Value"(Return to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(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 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 situations, the appraiser may define 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.
I want to get more for my house. Where should I spend money renovating?(Return to top) This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
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 were second, returning 85%. Adding bedrooms and baths can also increase the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.