Pinnacle Appraisal Group has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) An appraisal report is an estimation allowing the appraiser to come to an opinion of value. This opinion or estimate is figured by using a formal method that usually uses the three main "common approaches to value". One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the home, less the age and physical deterioration, adding the land value. Another of the processes is the Sales Comparison Approach - which deals with finding a comparable analysis to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a home. 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 produced by the property.
What does an appraiser do?(See list of FAQ's) An appraiser produces a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers document their analysis in appraisal reports.
Why would I require a real estate appraisal?(See list of FAQ's) There are a lot of reasons to get an appraisal from Pinnacle Appraisal Group with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
How is an appraiser different than a home inspector? (See list of FAQ's)The appraiser is not a home inspector and he or she does not do a full home inspection. The point of a home inspection is to evaluate the structure of the home from bottom to rooftop. Commonly, a home inspection report will evaluate the amenities and the requirements of the house: air conditioning (weather permitting), electrical services, 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?(See list of FAQ's) Simply put, it's apples and oranges. What the CMA relies upon are ill-defined trends. The appraisal depends on similar valid comparable sales. Also, the appraisal looks at other factors like condition, neighborhood and building prices. 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.
The person behind the report is actually the biggest 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 bases their livelihood on valuing properties in and around Suffolk County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for work they perform, regardless of their outcome.
What does the appraisal report contain? (See list of FAQ's)Every report must demonstrate a credible value opinion and will document the following:
Upon completion of the appraisal, how can I have assurance that the final number is veritable?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(See list of FAQ's) Typically, appraisers are called upon by mortgage lenders to render a value opinion on a home involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Pinnacle Appraisal Group get the data used to estimate values in Suffolk County or other areas?(See list of FAQ's) Compiling data is one of the primary functions of an appraiser. Data can be described as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a variety of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To double-check actual sales prices, we research items in the assessor's office and other public documents. Appraisers often have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal?(See list of FAQ's) If you're involved in any kind of financial decision and the value of your home is relevant, you'll want a full appraisal. If you're selling your home, an appraisal helps you set the most appropriate price. When buying, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental plan guards the lender if a borrower defaults on the loan and the market price of the property is less 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?(See list of FAQ's) The first step in most appraisals is the home inspection. 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. Indoors, make sure we can get to appliances like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) For mortgage transactions, the lender orders 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 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 situations, the appraiser may stipulate the purpose of the appraisal; 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.
How can I get the most ROI out of home improvements?(See list of FAQ's) It really depends on the market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.