Sax & Associates, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The method of creating an appraisal consists of an estimation which leads to an opinion of value. The real estate appraiser will typically use a number of "approaches," typically three, to draw up the estimation of market value. One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, then adding 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 proximity which have recently sold. Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a home. The Income Approach is generally 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.
Describe what an appraiser does(Back to top) An appraiser produces a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers show their expert investigation in appraisal reports.
What would cause me to request services from Sax & Associates, Inc.?(Back to top) There are a lot of reasons to order an appraisal from Sax & Associates, Inc. with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
Is an appraisal the same as a home inspection? (Back to top)The appraiser is not a home inspector and does not do a comprehensive home inspection. The point of a home inspection is to investigate the structure of the home from bottom to rooftop. The standard house inspector's report will contain an evaluation of the integrity of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Back to top) Honestly, they have nothing in common. What the CMA depends on are vague trends. An appraisal utilizes comparable sales that can be proven by records. Also, the appraisal looks at other factors like condition, area and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is who's creating the report. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an unbiased party, with no vested interest in the property's value, unlike the agent, whose income is tied to the value of the home.
What's in an appraisal report? (Back to top)The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
Once the assignment has been completed, how can I have a guarantee that the value indicated is legitimate?(Back to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Back to top) Typically, appraisers are employed by lenders to estimate the value of property involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Sax & Associates, Inc. get the information used to estimate values in Washington County or other areas?(Back to top) One of the main things an appraiser does is to collect data. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a variety of sources. To find out about recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. 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 product.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Back to top) An appraisal is a worthwhile whenever the value of your home is pertinent to some financial decision. For those selling a home, you'll want to determine 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. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Sax & Associates, Inc. is the best documentation to ensure assets are divided evenly. 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?(Back to top) PMI stands for Private Mortgage Insurance. This supplementary policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Does the appraiser need anything from me in advance?(Back to top) The first step in most appraisals is the home 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 status of its amenities. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any bushes and move any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can easily access items like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(Back 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 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may stipulate the purpose of the appraisal; 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.
How can I get the most ROI out of home improvements?(Back to top) The answer to this is different depending upon the location of the home. 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.
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.