Commercial Resource Group has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(List of questions) An appraisal is a thought process allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or estimate. One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the house, minus depreciation and physical dilapidation, plus the land value. The Sales Comparison Approach deals with finding comparable houses in close proximity and finding value based on comparing those prior sales to the house being appraised. Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residence. One of the least common approaches in appraising houses is the Income Approach, which is generally used to find 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?(List of questions) An appraiser offers a fair and credible opinion of market value, to be used in making real estate transactions. Appraisers demonstrate their expert conclusions in appraisal reports.
Why would someone need a real estate appraisal?(List of questions) There are many reasons to get an appraisal from Commercial Resource Group with the usual reason being real estate and mortgage transactions. Other reasons for getting an appraisal include:
What is the difference between an appraisal and a home inspection? (List of questions)Home inspectors do not figure out an opinion of value and are not appraisers. A third-party home inspector will evaluate the structure of the house, from the roof to the bottom. The standard house inspector's report will include an evaluation of the integrity of the property'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)?(List of questions) Simply put, it's apples and oranges. What the CMA depends on are ill-defined trends. Appraisals use similar sales which are valid resources. The appraisal report will also include area and construction prices. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
Who's behind the report is hands down 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, Indiana licensed professional who made their livelihood on valuing real estate in and around Porter County is behind the appraisal. Further, the appraiser is an unbiased party, with no vested interest in the value of a home, unlike the real estate agent, who gets a commission based upon the value of the home.
What can I expect to see in my appraisal report? (List of questions)The main point 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 appraisal, how can I have confidence that the value conclusion is accurate?(List of questions) In communicating an appraisal report, each appraiser must make sure of the following:
Who hires an appraiser?(List of questions) Commonly, appraisers are employed by lenders to render a value opinion on a home involved in a loan transaction - to make sure the real estate is indeed adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Porter County or other areas?(List of questions) One of the main activities of an appraiser is to collect data. Data can be classified as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is gathered from a many places. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.
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.
Why should I hire a licensed appraiser?(List of questions) If you're making some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to determine the 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 commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from Commercial Resource Group is the best way to ensure assets are divided properly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
What exactly is PMI and how can I get rid of it?(List of questions) PMI is short for for Private Mortgage Insurance. It guards the lender in the event a borrower defaults on the loan and the market price of the house is lower 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 inspection(List of questions) The first step in most appraisals is the property 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 amenities. 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.
To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
What does "Market Value" mean?(List of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(List of questions) 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 bundled with all the other closing documents - but is not entitled 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 scenarios, 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?(List of questions) It really depends on the market. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe investment. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms weren't far behind, returning 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.