HI-Appraisals has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Top) An appraisal report is an investigation that concludes with an opinion of value. There are three "common approaches to value" which helps the appraiser conclude this opinion or estimate. One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, minus age and physical dilapidation, plus the land value. The Sales Comparison Approach involves searching for comparable homes nearby and figuring out the value based on comparing those houses to the house being investigated. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to figure the value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do?(Top) An appraiser provides an objective and well justified opinion of market value, in the support of real property exchanges. Appraisers show their professional conclusions in appraisal reports.
Why would a person need a real estate appraisal?(Top) There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for purchasing an report include:
Is an appraisal the same as a home inspection? (Top)Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. An inspection is a third-party evaluation of the accessible structure and systems of a house, from the top to the bottom. The general home inspector's report will contain an evaluation of the integrity of the house'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.
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Honestly, they share nothing in common. The CMA relies on indistinct local market trends. The appraisal relies on specific verifiable comparable sales. Location and architectural costs are also important in an appraisal. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The person behind the report is frankly the most significant difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created 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 whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for assignments, regardless of their value conclusion.
What's in an appraisal report? (Top)Every appraisal should reflect a believable value opinion and must identify the following:
After completing the appraisal, how can I have certainty that the value indicated is valid?(Top) In communicating an appraisal report, each appraiser must ensure the following:
Who engages the services of appraisers?(Top) Mortgage lenders are an appraiser's typical customer, requiring 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 divorce and estate settlements.
Where does HI-Appraisals get the data used to estimate values in Maui County or other areas?(Top) Collecting data is one of the primary things an appraiser engages in. Data can be classified as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To verify actual sales prices, we look at tax records and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Top) An appraisal is a valuable tool anytime the value of your home 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 also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, you can avoid overpaying by commissioning an independent appraisal. 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. Knowing its true value is essential to making smart financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Top) PMI is an acronym for Private Mortgage Insurance. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Do you need anything from the homeowner in advance?(Top) We begin with an inspection of the home. 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. On the home's interior, make sure it is clutter free and that we can get to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
Define "Market Value"(Top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Top) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 stated otherwise, the home owner can use the appraisal for any purpose.
How can I get the most ROI out of home improvements?(Top) This really depends on where the home is. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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 weren't far behind, 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.