ASK Real Estate Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) An appraiser provides an estimation that generates an opinion of value. This opinion or estimate is discerned by a formal method that typically utilizes the three main "common approaches to value". One of the methods is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the methods is the Sales Comparison Approach - which deals with making a comparable analysis to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. The Income Approach is generally used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
Describe what an appraiser does(Go to list of questions) An appraiser produces a professional, unbiased assessment of market value, often in the context of a real estate sale. Appraisers illustate their conclusions in appraisal reports.
Why would a person require a real estate appraisal?(Go to list of questions) There are a lot of reasons to order an appraisal from ASK Real Estate Services with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
How is an appraiser different than a home inspector? (Go to list of questions)Home inspectors do not provide an opinion of value and are not appraisers. The point of a home inspection is to evaluate the structure of the property from basement to rooftop. For the most part, a home inspection report will explain the amenities and the requirements of the home: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Go to list of questions) Frankly, it's like comparing Shakespeare to reality TV. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are valid resources. Also, the appraisal verifies other factors like condition, neighborhood and building costs. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is who's creating the report. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Illinois licensed professional who bases their livelihood on valuing homes in and around Cook 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 accept a flat sum for work they perform, regardless of their value conclusion.
What are the contents of an appraisal report? (Go to list of questions)Each report should indicate a believable estimate of value and must document the following:
After completing the appraisal, what guarantee is there that the final number is trustworthy?(Go to list of questions) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Go to list of questions) Typically, appraisers are employed by lenders to render a value opinion on property involved in a loan transaction - to make sure the subject is truly adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Cook County or other areas?(Go to list of questions) Collecting information is one of the primary functions of an appraiser. Data can be divided into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often need 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 most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
How can a licensed appraiser help me?(Go to list of questions) 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 a 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, you can avoid overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from ASK Real Estate Services is the best documentation to ensure assets are split up evenly. 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?(Go to list of questions) PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy covers the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the loan balance. 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 inspection(Go to list of questions) The first step in most appraisals is the home inspection. 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 status of its amenities. On the home's interior, pick up any clutter and make sure 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 outside walls.
To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
What does "Market Value" mean?(Go to list of questions) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(Go to list of questions) 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 certainly 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.
The exception to this rule is when a home owner hires an appraiser directly. 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 noted otherwise, the home owner can use the appraisal for any purpose.
I want to get more for my house. Where should I spend money renovating?(Go to list of questions) Like all things real estate, this is dependent on a home's location. 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
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.