FREQUENTLY ASKED QUESTIONS ABOUT REAL ESTATE APPRAISALS AND APPRAISERS
What is an Appraisal?
(click here to watch appraisal video)
An appraisal is an impartial estimate or opinion of value, usually
written, of an adequately described property, as of a specific date, and supported by the presentation and analysis of relevant
data.
An appraisal report must contain the following :
* the estimate of value
* the effective date of the
appraisal
* the purpose of the appraisal
*the identification of the property and its ownership
* the condition of the neighborhood
* the factual data
* the qualifying conditions
* an analysis and interpretation of the data and the assumptions made by the
processing of the data by one or more
of the three approaches to value
*other descriptive support materials such as maps, plans, charts, photographs,
etc.
the certification and signature
How do I prepare for a home inspection?
( Click here To watch inspection video )
For homeowners, a real estate appraisal is the linchpin to buying or selling their home.
It allows the property transactions to occur among the buyer, seller, real estate agent and mortgage lender.
Before an Appraiser arrives, there are a few things you should know. By law, an appraiser
must be state licensed to perform appraisals prepared for federally related transactions. Also by law, you are entitled to
receive a copy of the completed appraisal report from your lender.
To facilitate the appraisal process, it's beneficial to have these documents ready for
the appraiser:
-
A plot plan or survey of the house and land (if readily available)
-
Information on the latest purchase of the property in the last three years
-
Written property agreements, such as a maintenance agreement for a shared driveway
-
List of personal property to be sold with the home
-
Title policy that describes encroachments or easements
-
Most recent real estate tax bill and or legal description of the property
-
Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco)
wall systems, septic systems and wells
-
Brag sheet that lists major home improvements and upgrades, the date of their installation
and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available)
-
A copy of the current listing agreement and broker's data sheet and Purchase Agreement
if a sale is "pending".
-
Information on "Homeowners Associations" or condominium covenants and fees.
-
A list of "Proposed" improvements if the property is to be appraised "As Complete".
Once your appraiser has arrived, you do not need to accompany him or her along on the
entire site inspection, but you should be available to answer questions about your property and be willing to point out any
home improvements.
Here are some other suggestions:
-
Accessibility: Make sure that all areas of the home are accessible, especially to the
attic and crawl space
-
Housekeeping: Appraisers see hundreds of homes a year and will look past most clutter,
but they're human beings too! A good impression can translate into a higher home value
-
Maintenance: Repair minor things like leaky faucets, missing door handles and trim
-
FHA/VA Inspection Items: If your borrower is applying for an FHA/VA loan, be sure to
ask your appraiser if there are specific things that should be done before they come. Some items they may recommend might
be: Install smoke detectors on all levels (especially near bedrooms); install handrails on all stairways; remove peeling paint
and repaint the effected area; provide inspection access to the attic and crawl
How is the value estimated?
There are three basic approaches to value:
The Direct Sales Comparison
Approach, is based on the theory that an informed purchaser would pay no more for a property than the cost of acquiring another
existing and equivalent property. The value estimated is based on the selling price and listing of comparable properties.
The
Cost Approach estimates the cost of building a new building identical to the subject being appraised, at current prices, subtracting
accumulated depreciation and adding the estimated land value.
The Income Approach relates to income producing property
and is based on the theory that value is the present worth of the income stream which the property is capable of producing
when developed to its highest and best use. The net operating income is capitalized in a value by an appropriate method and
rate.
What is the role of the appraiser?
The
role of the appraiser is to provide an accurate and impartial, third-party estimate of real estate value - providing assistance
to those who own, manage, sell, invest in and/or lend money on the security of real estate.
What
qualifications must appraisers have?
At minimum, all states require appraisers to be state licensed or certified.
How do well-credentialled appraisers add value to real estate
transactions?
They bring knowledge, experience, impartiality and trust to the transaction. In so doing, they
help protect real estate buyers from overpaying for property and lenders from over-lending to buyers.
What
are the components of an appraisal?
An appraisal generally consists of: a legal description of the property; description
of the interior and exterior of the property; square footage measurements; listing of comparable properties "as near the subject
property as possible;" description of the neighborhood; and information regarding current real estate activity and/or market
trends in the neighborhood.
What are the most important considerations in the
valuation of real estate property?
The value indicated by recent sales of comparable properties, the current cost
of reproducing or replacing a building, and the value that the property's net earning power will support are the most important
considerations in the valuation of real estate property.
What is the range of services appraisers
provide?
In addition to residential and/or commercial appraisals
- and depending upon an appraiser's designation and qualifications - he or she can provide/assist with some or all of the
following:
- Estate planning and estate settlements
- Tax assessment review and advice
- Advice in eminent domain and condemnation property transactions
- Dispute resolution - including divorce, estate settlements, property partition suits,
foreclosures, and zoning issues
- Feasibility studies
- Expert witness testimony
- Market rent and trend studies
- Cost/Benefit or investment analysis, e.g. financial return on remodeling
- Land utilization studies
- Supply and demand studies
When hiring an appraiser, what types of questions should
I ask?
The following questions would be appropriate:
-
What professional designations do you have and from whom?
-
Are you licensed or certified in the state in which you live?
-
How long have you been in practice?
-
What level of experience do you have in this particular market and with
this type of property?
-
Are you familiar with property in this neighborhood?
-
What types of clients have you had (homeowners, estates, lenders, relocation
companies)?
What is PMI,
and how to know if you can eliminate it?
(click here to watch PMI video)
PMI or Private Mortgage Insurance is normally required when you buy a house
with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure.
This insurance protection is provided by private mortgage-insurance companies. It enables lenders to accept lower down payments
than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide
to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be
able to buy a home without a 20% down payment.
The cost of PMI increases as your down payment decreases. Example: The cost
of PMI on a 10% down payment is less than the cost of PMI on a 5% down payment. Your PMI premium is normally added to your
monthly mortgage payment.
The decision on when to cancel the private insurance coverage does not depend
solely on the degree of your equity in the home. The final say on terminating a private mortgage-insurance policy is reserved
jointly for the lender and any investor who may have purchased an interest in the mortgage. However, in most cases, the lender
will allow cancellation of mortgage insurance when the loan is paid down to 80% of the original property value. Some lenders
may require that you pay PMI for one or two years before you may apply to remove it.
To cancel the PMI on your loan, contact your lender. In most cases, an appraisal
will be required to determine the value of your property. You will probably also be required to pay for the cost of this appraisal.
Another way of cancelling the PMI on your loan is to refinance and to get a new loan without PMI.
What is EDI?
(click here to watch technology video)
EDI stands for Electronic Data Interchange. At RHL Real Estate Appraisals Inc, we offer to our customers
at no additional charge, electronically transmitted reports in real time, which dramatically cuts down on turnaround time
and reports delayed in the mail. Complete reports including color digital photos, mapping and electronic signatures are available
to you now with a minimum amount of software and hardware required. We now have the capability to transmit the appraisal report
via email! The advantages of electronically transmitting the appraisal report are many, including:
- Faster turnaround time
- No more reports lost in the mail
- Print out as many originals as you want
- With electronic retrieval, you'll always have a copy
- For those that will be electronically packaging loans, you will be able
to attach the appraisal report along with it!
If your office has a Pentium-based computer and a connection
to the Internet, you’re already halfway there! You can also print out the high resolution photos on your color printer! Contact us for details. For customers wishing traditional reporting, a verbal or fax after completion can be sent at your request.
Professional Services
Most people consider themselves Knowledgeable with regards to property values.
By either purchasing a house, or simply by owning real estate, they have formed an opinion of value. Usually this opinion
is subjective.
An independent real estate appraiser is a specialist who writes objective reports dealing with estimates
of market value. The appraiser does not set or determine, or establishes value.
A careful inspection of the property
is made. The present sales market is utilized along with historical sale evidences, market trends are analyzed and interpreted,
all concluding with an estimate of the most probable selling price of the property.
A Real Estate appraiser deals with
facts and applies these facts to a uniform methodology which will, through application of one or more approaches to value,
results in an appraisers objective opinion of market value.
When you buy your home, for example, the lender will often
call for a property appraisal. This is to assure the lender that the value of the property is sufficient to cover the mortgage
loan in the event the borrower defaults.
Appraisers are called on by lawyers, mortgage lenders, all levels of government
and private individuals when a third-person, accurate estimate of property value is needed. Appraisers can provide historical
values for such purposes as Capital Gains.
Appraisers must keep up to date on trends, property taxes, special assessments
and other variables which may affect value. Ask a qualified appraiser about his or her experience and ability to meet your
needs.
