Norman Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(List of questions) An appraisal is an investigation allowing the appraiser to come to an opinion of value. The appraiser must use a number of "approaches," typically three, to arrive at the estimation of market value. One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach involves searching for similar homes in close proximity and finding value based on making a comparison of those prior sales to the house being appraised. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.
What does an appraiser do?(List of questions) An appraiser provides a professional, unbiased determination of market value, in the support of real estate transactions. Appraisers reveal the details of their expert analysis in appraisal reports.
What would cause me to need a real estate appraisal?(List of questions) There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an appraisal include:
How is an appraiser different than a home inspector? (List of questions)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to evaluate the structure of the home from bottom to rooftop. Commonly, a home inspection report will explain the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, 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 other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(List of questions) Simply put, it's night and day. The CMA depends on vague market trends. An appraisal utilizes comparable sales that can be proven by public record. Location and architectural costs are also important in an appraisal. 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.
The person behind the report is frankly the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. A certified, state licensed professional who has formed their livelihood on valuing homes in and around San Bernardino 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 fee for work they perform, regardless of their value conclusion.
What does the appraisal report contain? (List of questions)Each report should indicate a credible estimate of value and will clearly state the following:
After completing the appraisal, what guarantee is there that the value indicated is veritable?(List of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(List of questions) Mortgage lenders are an appraiser's most likely client, requiring 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 data used to estimate values in San Bernardino County or other areas?(List of questions) One of the most important things an appraiser does is to collect data. Data can be classified as either Specific or General. Specific data is gathered 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 variety of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often need 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 product.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(List of questions) An appraisal is a worthwhile whenever the value of your home is pertinent to some financial decision. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Norman Appraisal Services is the best way to ensure assets are divided properly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
What exactly is PMI and how can I get rid of it?(List of questions) PMI stands for Private Mortgage Insurance. It protects the lender in case a borrower doesn't pay on the loan and the value 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.
How do I get ready for the appraiser?(List of questions) We begin with an inspection of the property. 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, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(List of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(List of questions) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may define 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.
Which home renovations add the most to the price?(List of questions) The added value of a particular amenity truly depends on the local 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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.