Jarrett Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) An appraisal is an estimation allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which assists the appraiser arrive at this opinion or valuation. One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the house, minus depreciation and physical deterioration, plus the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which involves making a comparison to similar properties nearby. The Sales Comparison Approach is commonly the most accurate and best indicator of value for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to determine the market value of a property based on what an investor would pay based on the capital produced by the building.
What does an appraiser do?(Top) An appraiser offers a fair and credible opinion of market value, in the support of real property transactions. Appraisers document their professional investigation in appraisal reports.
Why would a person require a real estate appraisal?(Top) There are a lot of reasons to obtain an appraisal from Jarrett Appraisal Services with the usual reason being real estate and mortgage transactions. Some other reasons for getting an appraisal include:
Is an appraisal the same as a home inspection? (Top)Home inspectors do not figure out an opinion of value and are not appraisers. The point of a home inspection is to evaluate the structure of the property from basement to attic. Generally, a home inspection report will explain the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Top) Frankly, it's like comparing Shakespeare to reality TV. The CMA uses market trends to create most of their business. The appraisal is based on specific valid comparable sales. In addition, the appraisal verifies other factors like condition, location and replacement prices. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the largest differentiator is the person doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, state licensed professional who has formed a career on valuing real estate in and around Salem County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - 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 does the appraisal report contain? (Top)The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
After completing the appraisal, how can I have confidence that the final number is valid?(Top) In communicating an appraisal report, each appraiser must ensure the following:
Who hires an appraiser?(Top) Typically, appraisers are hired by mortgage lenders to render a value opinion on a home involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does an appraiser get the information used to estimate values in Salem County or other areas?(Top) One of the most important activities of an appraiser is to gather property data. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is collected from a number of sources. To find out about recently sold homes to be used as "comps", we typically use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers routinely have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Top) An appraisal is a worthwhile whenever your home's value is pertinent to a financial decision. For those selling a home, you'll want to determine 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. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Jarrett Appraisal Services is the best way to ensure assets are split up fairly. Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Top) PMI is the common abbreviation for for Private Mortgage Insurance. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(Top) We start with an inspection of the property. 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, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(Top) In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report?(Top) 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 certainly entitled to a copy of the appraisal - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner engages an appraiser directly. In these cases, the appraiser may state 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.
I want to get more for my house. Where should I spend money renovating?(Top) Like all things real estate, this is dependent on a home's location. 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 best ROI 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%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.