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Real Estate Appraisal FAQ

1. Define an appraisal.

An appraisal is an evaluation that forms an opinion of value of a property. The appraiser may use methods like Cost Approach, Sales Comparison Approach or Income Approach to reach a final value.

2. What is an appraiser’s work?

Appraisers provide a professional and unbiased house analysis report of a property’s market value that is used for finalizing real estate sales.

3. Why is home appraisal necessary?

There are various reasons to conduct a home appraisal like:

  • Real estate and mortgage transactions
  • For a loan application
  • Tax reduction
  • Protect rights in a condemnation case
  • Estate dealings
  • To challenge high property taxes
  • To find out the replacement cost for insurance
  • To get the right rate to sell or buy real estate
  • Government agencies need appraisals for all properties
  • For those involved in lawsuits
4. How are home appraisals and inspections different?
 

Home inspectors inspect and evaluate the house structure and its integrity. Appraisers do not conduct property inspections.

5. How are an appraisal and Comparative Market Analysis (CMA) different?

They are quite different.
 
i. CMA relies on vague market trends while appraisals use comparable sales that are verified by records.
 
ii. While CMA provides a vague figure, appraisals provide a documented opinion of value.
 
iii. Real estate agents create a CMA while appraisals are created by licensed and certified professionals.
 
iv. An appraiser’s income is not affected by the home value while the real estate agent’s income depends on it.

6. What is included in the appraisal report?

 

The report gives a credible estimate of value while identifying the:

  • Report’s intended use
  • Purpose of assignment
  • Client and other users
  • Type and definition of the value reported
  • Date of appraiser’s opinions and conclusions
  • Relevant property features and information
  • All known restrictions, ordinances, leases and other similar items
  • Division of interest like partial holding and fractional interest
  • Type of work used for completing the assignment
7. How do we know the value in the report is valid?
 
Appraisers are usually state licensed and certified, and ensure:
  • The information used in the appraisal was appropriate
  • The appraisal wasn’t done carelessly and communicated credibly
  • The significant errors of commission and omission weren’t done individually or collectively
8. How do appraisers get certification?
 
While Real Estate Appraisers’ licensing and certification rules differ among states, they usually involve a number of hours of coursework, tests and practical experience. Licensed appraisers have to keep updated with the latest developments to keep the license current.

9. Who employs appraisers?

While lenders generally employ appraisers, appraisers may also have to provide opinions in litigation cases and in tax and investment matters.

10. How do appraisers get information to estimate value?

They gather data from the home and surroundings that is divided into specific categories, and general data gathered from various sources like tax records, flood zone data, and other public documents.

11. When is a professional appraisal needed?

It helps while making a significant financial decision when selling or buying a house and during estate or divorce settlements.

12. What is a PMI and how do I eliminate it?

PMI is Private Mortgage Insurance that insures lenders against loss on homes with a less than 20% down-payment. It can be eliminated when the home equity reaches 20%.

13. What should I do before an appraisal?

Make sure the appraiser has easy access to the house exterior by trimming bushes and moving items that make taking measurements difficult. They should also have easy access to interior items like furnaces and water heaters.
 
Documents like the recent tax bill, a title deed, house and property survey, original plans copies and list of property to be sold with the house help the appraiser give a quick and more accurate appraisal.

14. Define market value

It is the most probable price a property can bring in an open market to generate a fair sale to both the buyer and seller.

15. Who is the actual owner of the appraisal report?

It is usually ordered by the lender during real estate transactions. The home buyer pays for the report as part of the closing costs and is entitled to a copy, which is included with other closing documents.
 
The buyer cannot use it for other reasons without the lender’s permission. The homeowner can engage an appraiser directly so it can be used for PMI removal, tax challenges or estate planning.

16. Which home upgrade adds most to the value?

This depends on the property location because different markets value amenities differently. Generally, the most valued upgrade is a kitchen remodeling, which gives about 88% return on the investment. Bathrooms come second in line.