ARV, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraiser performs an estimation that leads to an opinion of value. The appraiser will use a number of "approaches," typically three, to conclude the estimation of market value. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with finding similar homes nearby and figuring out the value based on making a comparison of those houses to the house being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. One of the least common approaches in appraising houses is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(Return to top) An appraiser offers a professional, unbiased opinion of market value, in the support of real property transactions. Appraisers reveal the details of their professional conclusions in appraisal reports.
Why would I require a real estate appraisal?(Return to top) There are a lot of reasons to order an appraisal from ARV, Inc. with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
How is an appraiser different than a home inspector? (Return to top)Appraisers do not do provide house inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the home from basement to attic. The general property inspector's report will include an evaluation of the condition of the house's heating systems, 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.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Frankly, they have nothing in common. The CMA depends on vague local market trends. The appraisal is reliant on similar valid comparable sales. Location and architectural costs are also a priority in an appraisal. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is who's creating the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, state licensed professional who bases their livelihood on valuing homes in and around Wayne County creates 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 flat sum for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (Return to top)The main objective of an appraisal report is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
After completing the report, how can I have a guarantee that the value indicated is veritable?(Return to top) In communicating an appraisal report, each appraiser must ensure the following:
Who do appraisers work for?(Return to top) Typically, appraisers are hired by mortgage lenders to estimate the value of a home involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Wayne County or other areas?(Return to top) Collecting data is one of the primary things an appraiser engages in. Data can be divided into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.
General data is gathered from a variety of sources. To research recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have 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 service.
And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
How can a licensed appraiser help me?(Return to top) An appraisal is a valuable tool whenever the value of your home is pertinent to some financial decision. For those selling a home, you'll want to determine 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 getting an independent appraisal. For people settling an estate or divorce, an appraisal from ARV, Inc. is the best way to ensure assets are split up properly. Simply put, a home 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?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental policy covers the lender if a borrower defaults on the loan and the market price of the house is less than what the borrower still owes 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(Return to top) We begin with an inspection of the home. 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 get to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
What does "Market Value" mean?(Return to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return 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 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 state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Return to top) The added value of a particular amenity truly depends on the local market. 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 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.