Farmer Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Go to list of questions) An appraisal is an estimation that concludes with an opinion of value. This opinion or estimate is concluded through a formal method that generally utilizes the three main "common approaches to value". One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Another of the approaches is the Sales Comparison Approach - which involves discovering a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a residential property. The Income Approach is primarily used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
Describe what an appraiser does(Go to list of questions) An appraiser produces an unprejudiced and well supported opinion of market value, in the support of real estate exchanges. Appraisers show their professional findings in appraisal reports.
What would cause me to require a real estate appraisal?(Go to list of questions) There are a lot of reasons to purchase an appraisal from Farmer Appraisal Services with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an report include:
What is the difference between an appraisal and a home inspection? (Go to list of questions)The appraiser is not a home inspector nor does he/she do a complete home inspection. A third-party home inspector will judge the structure of the house, from the roof to the bottom. The stereotypical home inspector's report will contain an evaluation of the integrity of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible 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)?(Go to list of questions) Honestly, they have nothing in common. The CMA relies on vague trends in the market. The appraisal is based on similar definite comparable sales. Location and architectural prices are also important in an appraisal. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the largest differentiator is who's behind the report. Real estate agents produce CMA's, and they don't always know the whole market or bear 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. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, who gets a commission based upon the price of the home.
What does the appraisal report contain? (Go to list of questions)The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the appraisal is done, how can I have certainty that the value conclusion is valid?(Go to list of questions) In the documentation of an appraisal, each appraiser must make sure of the following:
Who employs appraisers?(Go to list of questions) Mortgage lenders are an appraiser's most likely customer, needing their services to ensure a home 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 Farmer Appraisal Services get the data used to estimate values in Midland County or other areas?(Go to list of questions) Gathering information is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a many places. To find out about recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office 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 assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Go to list of questions) If you're making any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Farmer Appraisal Services is the best documentation to ensure assets are divided fairly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. It protects the lender in case a borrower defaults on the loan and the value 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.
How do I get ready for the appraiser?(Go to list of questions) The first step in most appraisals is the property 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. Inside, pick up any clutter and make sure we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What is "Market Value?"(Go to list of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Go to list of questions) For mortgage transactions, the lender requests 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 certainly entitled to a copy of the report - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner hires 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 stated otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Go to list of questions) This really depends on where the home is. 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.
As a rule, the most value returned from renovating a home comes in the kitchen. 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%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.