Holly and Associates has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The method of creating an appraisal report deals with an evaluation which forms an opinion of value. This opinion or estimate is arrived at using a formal method that usually utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the home, minus age and physical dilapidation, plus the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which concerns making a comparison to comparable houses nearby. The Sales Comparison Approach is normally the most definitive and clearest indicator of a liklely sales price for a residential property. The Income Approach is mainly used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.
What does an appraiser do?(See list of FAQ's) An appraiser produces a fair and credible assessment of market value, often in the context of a real estate exchange. Appraisers summarize their analysis in appraisal reports.
What are the reasons a person would request a real estate appraisal?(See list of FAQ's) There are many reasons to obtain an appraisal from Holly and Associates with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
How is an appraiser different than a home inspector? (See list of FAQ's)The appraiser is not a home inspector nor does he/she do a full home inspection. An inspection is a third-party investigation of the available structure and mechanical systems of a home, from the roof to the bottom. Usually, a home inspection report will discuss the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible 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?(See list of FAQ's) To be blunt, it's night and day. The CMA uses market trends to generate most of their business. Appraisals use similar sales which are verifiable resources. Location and architectural costs are also a priority in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person doing the report. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their outcome.
What's in an appraisal report? (See list of FAQ's)Every report must demonstrate a supported value opinion and must identify the following:
Once the report has been completed, how can I have assurance that the final number is legitimate?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(See list of FAQ's) Mortgage lenders are an appraiser's typical client, using their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the information used to estimate values in Orange County or other areas?(See list of FAQ's) Compiling information is one of the primary occupations of an appraiser. Data can be classified as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is received from a numerous places. Local Multiple Listing Services (MLS) provide data 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 available from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
How can a licensed appraiser help me?(See list of FAQ's) An appraisal is a worthwhile whenever your home's value is pertinent to a financial decision. For those selling a home, you'll want to figure out a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from Holly and Associates is the best documentation to ensure assets are split up evenly. 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?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. It protects the lender in the event 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?(See list of FAQ's) The first step in most appraisals is the home 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would get in our way while we measure the structure. On the inside, make sure we can get to appliances like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
Define "Market Value"(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) 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 appraisal - 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; 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.
Which home renovations add the most to the price?(See list of FAQ's) This really depends on where the home is. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 increase the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.