Appraisal Associates of Algona has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) An appraisal is a thought process allowing the appraiser to come to an opinion of value. This opinion or estimate is discerned by a formal method that commonly utilizes the three main "common approaches to value". One of them 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. Easily the most common approach in finding the likely sales price of a home is the Sales Comparison Approach which concerns making a comparison to comparable properties nearby. Being the most commonly used approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residence. The Income Approach is generally used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
What does an appraiser do?(Back to top) An appraiser produces an unbiased and well supported assessment of market value, to be used in making real estate transactions. Appraisers demonstrate their professional findings in appraisal reports.
What are the reasons I would require services from Appraisal Associates of Algona?(Back to top) There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
How is an appraisal different than a home inspection? (Back to top)Home inspectors do not estimate an opinion of value and are not appraisers. The point of a home inspection is to investigate the structure of the home from basement to attic. Generally, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Back to top) Simply put, it's apples and oranges. The CMA relies on indefinite local market trends. An appraisal is based on comparable sales that can be verified by public record. Location and architectural costs are also important in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The credentials of the person creating the report is frankly 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. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for assignments, regardless of their value conclusion.
What does the appraisal report contain? (Back to top)The main purpose of an appraisal document is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
Upon completion of the report, how can I have certainty that the final number is valid?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(Back to top) Mortgage lenders are an appraiser's typical customer, needing their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the information used to estimate values in Kossuth County or other areas?(Back to top) Gathering information is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is received from a many places. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To double-check actual sales prices, we look at tax records and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Back to top) If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. When selling your house, 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 people settling an estate or divorce, an appraisal from Appraisal Associates of Algona is the best way to ensure assets are divided properly. A home 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?(Back to top) PMI is short for for Private Mortgage Insurance. PMI protects the lender in the event a borrower defaults on the loan and the value of the home is lower 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.
Should I do anything in advance of the appraisal inspection(Back to top) 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 status of its features. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any bushes and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can get to appliances 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:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back 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 report - 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated 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?(Back to top) It really depends on the market. 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 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 are right up there with kitchens, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.