| What does an appraiser do? |
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An appraiser provides a professional, unbiased opinion of market value, as of an effective date, to be used in making real estate decisions. Appraisers present their formal analysis in an appraisal report.
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| What is the difference between an appraisal and a home inspection? |
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The difference between an appraisal and a home inspection is, an appraiser’s primary function is to determine market value of a property. A home inspectors primarily function is to do a technical evaluation of the condition of the different systems in a property i.e.: plumbing, electrical, foundation, structural, heating/ cooling systems, roof, doors, windows, pests, etc. and inform the client of any defects, potential issues or hazards.
Although the appraiser does check on most of the major components in the home as part of this evaluation of the condition of the home as it relates to value, it is not technically exhaustive. The appraiser does not give any warranty as to the remaining life.
It is always a good idea to get a home inspection if there are any concerns with the property.
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| What is the difference between an appraisal and a comparative market analysis? |
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Simply put, the difference is night and day. The CMA relies on vague market trends based on active and sold homes in the general area. They are typically provided by a real estate agent, who has a vested interest in the outcome as their commission is tied to the value of the home. Also the real estate agent job is to get the most possible for their potential client. The realtor may list the property above or below the market value of the home in order to suit the needs of their client. In short a CMA delivers a “ball park figure” for the purpose of listing a home.
An appraisal is based on statistical analysis of the market and the use of closed verifiable sales in the subject’s immediate market area. Market reactions to differences in the amenities between the subject property and comparables are determined thru market extraction and applied in the report to come to a specific opinion of market value.
In short an appraisal is an accurate, unbiased opinion of the market value as of a specific date in time.
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| Why do I need a professional appraisal? |
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Anytime the value of your home or other real estate property is being used to make a significant financial decision, an appraisal helps. If you’re selling your home, an appraisal helps you set the most appropriate value. 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. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
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| What exactly is PMI and how can I get rid of it? |
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PMI stands for Private Mortgage Insurance. It insures a lender against loss on homes purchased with a down payment of less than 20%. Once equity in the home reaches 20% you can eliminate the PMI and start saving immediately. PMI can add from $40.00 to $100.00 dollars or more to your mortgage payment. So removing it can save thousand of the term of your loan. For more information on PMI and the Homeowners Protection Act, try one of these links:
- Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
- Private Mortgage Insurance (PMI): Law Requires Lenders to Cancel PMI
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| How do I get ready for an appraisal? |
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The first step, prior to the arrival of an appraiser the homeowner should make a list of improvements that they have made to the home over the years. This will assist the appraiser especially if some of the items are not apparent. The homeowner should be aware that the appraiser will be taking photos of the home. Anything they can do to make the home more presentable will assist them in obtaining the best value possible. Any remodeling projects underway should be completed if possible before the appraiser arrives. Large remodel projects underway or remodeling that can’t be completed before the appraiser arrives should be discussed with the appraiser before engaging in an appraisal, as some items can hinder the client from obtaining a loan. The homeowner should also make sure that the appraiser could easily access all areas in the home like furnaces, water heaters, attic and crawl space areas. They should also unlock gates, contain unfriendly animals, etc.
When the appraiser arrives at the property he/she will conduct the inspection. During this process, the appraiser will come to your home and draft the interior layout of the rooms, record the special features of the property, confirm all aspects of the home’s general condition, measure the exterior and take photos of your house for inclusion in the report. The inspection process generally takes roughly 30 minutes to one hour depending on the home.
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| Who Actually Owns the Appraisal Report? |
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The client who ordered it from the appraisal company owns the appraisal report. In most real estate transactions, the client is the lender. While the homebuyer 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 homebuyer is entitled by law to a copy of the report – it’s usually included with all of 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 homeowner engages an appraiser directly. In these cases, the homeowner must disclose the intended purpose of the report; i.e. private mortgage insurance removal, listing purposes, estate planning or tax challenges. Current real estate law prevents the appraisal from being reassigned to a new client. So it is important to identify the purpose/scope of the report before it is ordered.
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| How long is an appraisal good for? |
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In most cases an appraisal is good for six months. Most lenders will require an update for appraisals over six months old. Appraisals over one year old are typically not accepted by lending institutions. This is because in some markets values can change drastically in six months to one year. For instance, if a major employer in the area closes, the property value could decline rapidly or if there is a shortage of homes in the market there could be inflation in the market.
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| Appraisal Type – Which do I need? |
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Today there are many different types of specialized appraisal reports. In most real estate transactions the lender will determine the type of appraisal report that is required to complete the loan. Private individuals ordering appraisals should consult with the appraiser to determine the scope of the appraisal and which report would best suite their needs.
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| FHA Appraisals- Common Issues |
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Homes being financed by FHA are subject to guidelines established by HUD (Department of Housing and Urban Development). These guidelines are in place because HUD is insuring the loan. The guidelines are specifically related to general safety and health issues with the home to be financed and in most cases are easy to comply with. Some of the most common issues are listed below.
- Chipping and pealing paint on the inside/outside of the home or anywhere on the property for homes built before 1978.
- Working smoke detectors on all floors of the home.
- Handrails on stairs over three steps.
- Pressure relief values on hot water tanks.
- Exposed electrical in living areas. i.e. Missing outlet/light switch covers open junction boxes etc.
- No earth to wood contact on the home or any accessory building on the property.
- No broken windows.
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