R.M. Conrad & Associates, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The process of creating an appraisal report deals with an estimation which forms an opinion of value. The real estate appraiser will typically use a number of "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the processes that appraisers use to find value; it involves discerning what the improvements would cost without physical depreciation, plus the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which concerns figuring a comparison to comparable houses close by. Being the most commonly used approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a residential property. The Income Approach is generally used for figuring out 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(See list of FAQ's) An appraiser offers an impartial and well supported determination of market value, in the support of real property exchanges. Appraisers summarize their professional investigation in appraisal reports.
Why would I request services from R.M. Conrad & Associates, Inc.?(See list of FAQ's) There are a lot of reasons to obtain an appraisal from R.M. Conrad & Associates, Inc. with the most common reason being real estate and mortgage transactions. Some other reasons for getting an appraisal include:
How is an appraisal different than a home inspection? (See list of FAQ's)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to investigate the structure of the property from basement to attic. The general property 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 visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
My agent performed a CMA for me. Is that the same as an appraisal?(See list of FAQ's) Simply put, it's like comparing opera to country. The CMA uses market trends to conduct most of their business. Appraisals use similar sales which are verifiable resources. The appraisal report will also include neighborhood and building prices. 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 biggest difference is the person creating the report. Real estate agents write 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. Moreover, the appraiser is an unbiased party, with no conditional interest in the value of a home, unlike the agent, whose income is tied to the price of the home.
What's in an appraisal report? (See list of FAQ's)Every report should reflect a supported value opinion and must clearly state the following:
Once the report has been delivered, what assurance is there that the value conclusion is veritable?(See list of FAQ's) In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers?(See list of FAQ's) Typically, appraisers are employed by mortgage lenders to render a value opinion on property involved in a loan transaction - to make sure the real estate is indeed adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Chester County or other areas?(See list of FAQ's) Gathering data is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is collected from a many places. To look up recent sales to be used as "comps", we typically go to the local Multiple Listing Service. To double-check actual sales prices, we research items in the assessor's office and other public documents. Appraisers routinely need to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser assembles 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?(See list of FAQ's) An appraisal is a worthwhile anytime the value of your home is pertinent to a financial decision. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. 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?(See list of FAQ's) PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on 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?(See list of FAQ's) 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 condition of its features. 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 relocate any items that would get in our way while we measure the structure. Indoors, make sure we can easily access items like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
What does "Market Value" mean?(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(See list of FAQ's) 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 engaging the appraiser for things outside securing a mortgage. In these scenarios, 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 do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(See list of FAQ's) A home's location - what city it is in and even what part of that city - is key to this popular question. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 weren't far behind, returning 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.