Bumpus Appraisal Service has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The procedure of performing an appraisal report deals with an investigation which leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or valuation. The Cost Approach is one of the processes that appraisers use to find the value of a house; it involves figuring what the improvements would cost minus physical depreciation, adding the land value. Another of the approaches is the Sales Comparison Approach - which involves making 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 the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(See list of FAQ's) An appraiser produces a fair and credible opinion of market value, often in the context of a real estate sale. Appraisers summarize their expert conclusions in appraisal reports.
Why would I require your services?(See list of FAQ's) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an report include:
Is an appraisal the same as a home inspection? (See list of FAQ's)Home inspectors do not produce an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a property, from the top to the foundation. For the most part, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, 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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(See list of FAQ's) Simply put, it's like comparing broadband and dial-up. What the CMA depends on are superficial trends. An appraisal relies on comparable sales that can be validated by public record. Area and construction prices 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.
But the most significant factor is the person creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an unbiased voice, with no conditional 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? (See list of FAQ's)The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
Once the report has been completed, what guarantee is there that the value conclusion is trustworthy?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who are an appraiser's customers?(See list of FAQ's) Most of the time, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction - to make sure the property is indeed adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does Bumpus Appraisal Service get the data used to estimate values in Lampasas County or other areas?(See list of FAQ's) One of the most important tasks an appraiser engages in is to compile data. Data can be divided into Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is collected from a variety of sources. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers routinely 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 service.
And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other properties in the same market.
What can a full appraisal do for me?(See list of FAQ's) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. 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, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI stands for Private Mortgage Insurance. This added policy covers the lender in case a borrower is unable to pay on the loan and the value of the property is lower 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.
How do I get ready for the appraiser?(See list of FAQ's) We start with an inspection of the property. 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, make sure it is clutter free and that we can access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(See list of FAQ's) 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?(See list of FAQ's) 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 report - it's usually included 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 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 do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
As a rule, the most value returned from renovating a home comes in the kitchen. 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 were second, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.