Appraisal One of Illinois, Inc has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) The process of creating an appraisal report deals with an inspection which forms an opinion of value. This opinion or estimate is figured by a formal method that typically uses three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the home, less the depreciation and physical dilapidation, adding the land value. Another of the approaches is the Sales Comparison Approach - which deals with discovering a comparison to other similar nearby properties which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. One of the least common approaches in appraising homes is the Income Approach, which is generally used to find 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?(Go to list of questions) An appraiser forumlates a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert investigation in appraisal reports.
What are the reasons someone would need a real estate appraisal?(Go to list of questions) There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
What is the difference between an appraisal and a home inspection? (Go to list of questions)Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. A third-party home inspector will inspect the structure of the home, from the roof to the bottom. The standard home inspector's report will include an evaluation of the condition of the home'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.
My agent performed a CMA for me. Is that the same as an appraisal?(Go to list of questions) To be honest, they have nothing in common. What the CMA relies upon are superficial trends. Appraisals use similar sales which are valid resources. Area and construction values 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.
Who's creating the report is actually the most significant difference between a CMA and an appraisal. A CMA is written 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, Illinois licensed professional who has formed a career on valuing homes in and around Lake County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their outcome.
What does the appraisal report contain? (Go to list of questions)The main objective of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
After completing the report, how can I have assurance that the final number is legitimate?(Go to list of questions) In the documentation of an appraisal, each appraiser must make sure of the following:
Who engages the services of appraisers?(Go to list of questions) Commonly, appraisers are called upon by mortgage lenders to render a value opinion on a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does Appraisal One of Illinois, Inc get the data used to estimate values in Lake County or other areas?(Go to list of questions) Compiling information is one of the primary roles 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 specifics are noted by the appraiser during an inspection.
General data is received from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other public documents verify actual sales prices in a market. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
What can a full appraisal do for me?(Go to list of questions) An appraisal is a worthwhile whenever the value of your home is relevant 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. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Go to list of questions) PMI is short for for Private Mortgage Insurance. PMI covers the lender in the event a borrower defaults on the loan and the market price of the house is lower than the balance of 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 inspection(Go to list of questions) We begin with an inspection of the property. During this process, we 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure we can get to items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(Go to list of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns 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 entitled to a copy of the report - 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 hires an appraiser directly. In these cases, the appraiser may stipulate 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 do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Go to list of questions) The answer to this is different depending upon the location of the home. 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.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.