Central Alabama Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraiser performs an evaluation that generates an opinion of value. This opinion or estimate is found through a formal process that generally utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the property, less the age and physical dilapidation, adding the land value. The Sales Comparison Approach involves searching for similar properties nearby and discovering the value based on comparing those houses to the property being appraised. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.
Describe what an appraiser does(Back to top) An appraiser provides a fair and credible opinion of market value, often in the context of a real estate exchange. Appraisers summarize their expert analysis in appraisal reports.
Why would a person require your services?(Back to top) There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
What is the difference between an appraisal and a home inspection? (Back to top)Home inspectors do not produce an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the livable structure and electrical and mechanical systems of a home, from the top to the foundation. The archetypal house inspector's report will include an evaluation of the integrity of the house's heating systems, 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) Frankly, they have nothing in common. The CMA relies on vague local market trends. An appraisal is based on comparable sales that can be proven by public record. In addition, the appraisal checks other factors like condition, area 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 most significant factor is who's doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their value conclusion.
What's in an appraisal report? (Back to top)Each report should demonstrate a credible estimate of value and should identify the following:
After completing the appraisal, what assurance is there that the final number is trustworthy?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Back to top) Mortgage lenders are an appraiser's typical client, needing their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Central Alabama Appraisals get the data used to estimate values in Elmore County or other areas?(Back to top) One of the main tasks an appraiser must accomplish is to compile 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 gathered by the appraiser during an inspection.
General data is collected from a numerous sources. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. To verify actual sales prices, we look at items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal?(Back to top) An appraisal is a worthwhile whenever your home's value is relevant 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. When buying, be sure you're not overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Central Alabama Appraisals is the best way to ensure assets are divided properly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making smart financial decisions.
What exactly is PMI and how can I get rid of it?(Back to top) PMI stands for Private Mortgage Insurance. It guards the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed 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.
Should I do anything in advance of the appraisal appointment(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. 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 shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access items like furnaces and water heaters.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
What does "Market Value" mean?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. 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 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.
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 stipulated otherwise, the home owner can do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Back to top) The answer to this is different depending upon the location of the home. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
As a rule, the most value returned 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 are right up there with kitchens, yielding 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.