Neil Gordon, Real Estate Appraiser has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) An appraisal is an estimation leading to an opinion of value. This opinion or estimate is figured through the use of a formal process that commonly utilizes the three main "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, minus depreciation and physical deterioration, plus the land value. The most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which concerns concluding a comparison to comparable properties close by. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to determine the value of a property based on what an investor would pay based on the income produced by the property.
Describe what an appraiser does(Return to top) An appraiser provides an unbiased and well supported determination of market value, to be used in making real estate transactions. Appraisers illustate their expert findings in appraisal reports.
What would cause me to request a real estate appraisal?(Return to top) There are many reasons to obtain an appraisal from Neil Gordon, Real Estate Appraiser with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
Is an appraisal the same as a home inspection? (Return to top)The appraiser is not a home inspector and does not do a full home inspection. A third-party home inspector will inspect the structure of the house, from the roof to the foundation. For the most part, a home inspection report will evaluate 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 capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) To be honest, they have nothing in common. The CMA uses market trends to conduct most of their business. Appraisals use similar sales which are valid resources. Also, the appraisal looks at other factors like condition, area and replacement costs. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person behind the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, Maryland licensed professional who made a career on valuing properties in and around Anne Arundel 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 accept a previously agreed upon sum for assignments, regardless of their outcome.
What are the contents of an appraisal report? (Return to top)Every report should indicate a supported value opinion and will identify the following:
After completing the report, how can I have a guarantee that the value conclusion is veritable?(Return to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(Return to top) Most of the time, appraisers are hired by lenders to estimate the value of a house involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does Neil Gordon, Real Estate Appraiser get the data used to estimate values in Anne Arundel County or other areas?(Return to top) Collecting information is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is collected from a many sources. To look up recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser?(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. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Neil Gordon, Real Estate Appraiser is the best documentation to ensure assets are split up evenly. Simply put, 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?(Return to top) PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary plan takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home 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.
Should I do anything in advance of the appraisal inspection(Return to top) 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 condition of its amenities. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access items 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:
What is "Market Value?"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Return to top) 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 appraisal - 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.
This rule doesn't apply when a home owner hires an appraiser directly. In these situations, the appraiser may define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Return to top) A home's location - what city it is in and even what part of that city - is key to this popular question. 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 were second, returning 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.