M.J. Appraisal has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) An appraisal report is an investigation allowing the appraiser to come to an opinion of value. The real estate appraiser must use a several "approaches," typically three, to arrive at the estimation of market value. One of the methods 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 searching for similar homes in close proximity and finding value based on making a comparison of those homes to the home being appraised. Being the most popular approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a home. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the capital generated by the property.
Describe what an appraiser does(Return to top) An appraiser forumlates a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers present their expert findings in appraisal reports.
What are the reasons a person would require services from M.J. Appraisal?(Return to top) There are a lot of reasons to obtain an appraisal from M.J. Appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal include:
How is an appraiser different than a home inspector? (Return to top)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. The purpose of a home inspection is to investigate the structure of the house from foundation to attic. For the most part, 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) Simply put, it's like comparing opera to country. The CMA depends on indefinite market trends. An appraisal is based on comparable sales that can be verified by public record. The appraisal report will also include area and construction prices. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no vested interest in the value conclusion, unlike the real estate agent, whose income is tied to the value of the home.
What are the contents of an appraisal report? (Return to top)Each appraisal should indicate a credible estimate of value and must identify the following:
Upon completion of the appraisal, what guarantee is there that the value indicated is accurate?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Return to top) Mortgage lenders are an appraiser's most likely client, using their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does M.J. Appraisal get the information used to estimate values in Kane County or other areas?(Return to top) One of the main activities of an appraiser is to collect 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 noted by the appraiser during an inspection.
General data is gathered from a variety 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. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood product.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(Return to top) If you're making some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. For those selling a home, you'll want to figure out 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, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from M.J. Appraisal is the best way to ensure assets are split up fairly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Return to top) PMI stands for Private Mortgage Insurance. It covers the lender if a borrower defaults on the loan and the value of the house is less than what is owed 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 start 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. On the home's interior, pick up any clutter and make sure we can access 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 the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
What is "Market Value?"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Return to 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 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 scenarios, the appraiser may define 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 do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(Return to top) This really depends on where the home is. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
As a rule, the most value returned from renovating a home comes in the kitchen. 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 are right up there with kitchens, yielding 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.