AC Appraisal Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal" (Return to top)The appraisal process is an estimation that produces an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or estimate. The Cost Approach is one of the approaches that appraisers use to find the value of a house; it involves discerning what the improvements would cost minus physical deterioration, plus the land value. Another of the methods is the Sales Comparison Approach - which concerns finding a comparison to other similar properties within a close vicinity which have recently sold. Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the income generated by the property.
Describe what an appraiser does (Return to top)An appraiser produces a fair and credible opinion of market value, to be used in making real estate transactions. Appraisers present their conclusions in appraisal reports.
How is an appraisal different than a home inspection? (Return to top)Appraisers do not do provide home inspections and are not home inspectors. The purpose of a home inspection is to investigate the structure of the property from basement to attic. Usually, 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 capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)? (Return to top)Frankly, it's like comparing opera to country. The CMA utilizes market trends to create most of their business. The appraisal depends on similar valid comparable sales. In addition, the appraisal looks at other factors like condition, area and construction costs. 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.
But the biggest difference is who's doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. A certified, New York licensed professional who made their livelihood on valuing properties in and around Suffolk 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 accept a flat fee for work they perform, regardless of their value conclusion.
What does the appraisal report contain? (Return to top)Each report must demonstrate a credible value opinion and will identify the following:
Upon completion of the appraisal, what guarantee is there that the final number is veritable? (Return to top)In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers? (Return to top)Most of the time, appraisers are hired by lenders to estimate the value of property 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 information used to estimate values in Suffolk County or other areas? (Return to top)Compiling data is one of the primary things an appraiser engages in. Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is received from a variety of places. To research recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. To double-check actual sales prices, we look at items in the assessor's office and other public documents that are usually online nowadays. Appraisers routinely 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 service.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.
How can a licensed appraiser help me? (Return to top)Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, an appraisal helps you set the most appropriate price. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from AC Appraisal International, Ltd. is the best documentation to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
What exactly is PMI and how can I get rid of it? (Return to top)PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy covers the lender in the event a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Do you need anything from the homeowner in advance? (Return to top)The first step in most appraisals is the home inspection. During this process, the appraiser 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 get to 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.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"? (Return to top)In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report? (Return to top)For mortgage transactions, the lender orders 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may define the purpose of the appraisal; 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? (Return to top)This really depends on where the home is. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, yielding 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.
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