The Hohman Appraisal Company has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The appraisal process is an evaluation that produces 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 methods that real estate appraisers use to find value; it involves figuring what the improvements would cost without physical deterioration, adding the land value. The Sales Comparison Approach involves searching for similar houses in close proximity and discerning value based on comparing those homes to the property in question. The Sales Comparison Approach is normally the most definitive and best indicator of a liklely sales price for a residence. One of the least common approaches in appraising homes is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the capital produced by the building.
What does an appraiser do?(See list of FAQ's) An appraiser produces a professional, unbiased assessment of market value, to be used in making real estate transactions. Appraisers summarize their professional findings in appraisal reports.
What would cause me to require a real estate appraisal?(See list of FAQ's) There are a lot of reasons to purchase an appraisal from The Hohman Appraisal Company with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal report include:
How is an appraiser different than a home inspector? (See list of FAQ's)Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the accessible structure and mechanical systems of a home, from the top to the bottom. For the most part, a home inspection report will evaluate the amenities and the requirements of the house: 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, 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) Honestly, they have nothing in common. What the CMA relies upon are ill-defined trends. Appraisals use comparable sales which are verifiable resources. Area and construction values are also important in an appraisal. All a CMA does is generate a "ball park 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 doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, state licensed professional who made their livelihood on valuing real estate in and around Polk County is behind the appraisal. Further, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the real estate agent, who gets a commission based upon the value of the home.
What does the appraisal report contain? (See list of FAQ's)Every report should reflect a believable estimate of value and should clearly state the following:
Once the appraisal has been completed, what assurance is there that the value conclusion is legitimate?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who hires The Hohman Appraisal Company(See list of FAQ's) Most of the time, appraisers are employed by lenders to render a value opinion on a home involved in a loan transaction - to make sure the subject is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does The Hohman Appraisal Company get the data used to estimate values in Polk County or other areas?(See list of FAQ's) One of the most important things an appraiser does is to compile property data. Data can be classified as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(See list of FAQ's) An appraisal is a valuable tool anytime your home's value is pertinent to some financial decision. When selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making 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. PMI guards the lender if a borrower defaults on the loan and the market price of the house is lower than the balance of 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?(See list of FAQ's) We begin with an inspection of the home. 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. 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 landscaping and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to appliances like furnaces and water heaters.
You can make our visit go faster and improve the quality of the appraisal report by having the following things on hand:
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:
Once complete, who actually owns the appraisal report?(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 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 situations, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated 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) A home's location - what city it is in and even what part of that city - is key to this popular question. 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. 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, returning 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.