Hancock Appraisal Services, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraiser provides an evaluation that generates an opinion of value. This opinion or estimate is figured by a formal process that usually uses three "common approaches to value". The Cost Approach is one of the processes that appraisers use to find the value of a home; it involves finding what the improvements would cost without physical deterioration, plus the land value. Another of the methods is the Sales Comparison Approach - which concerns discovering a comparable analysis to other similar nearby properties which have recently sold. Being the most commonly used approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a property. One of the least common approaches in appraising houses is the Income Approach, which is generally used to figure the market value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(Return to top) An appraiser provides an unprejudiced and well substantiated assessment of market value, often in the context of a real estate sale. Appraisers document their findings in appraisal reports.
What are the reasons someone would request your services?(Return to top) There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal report include:
Is an appraisal the same as a home inspection? (Return to top)Appraisers do not do provide residential property inspections and are not home inspectors. An inspection is a third-party investigation of the accessible structure and appliances of a home, from the top to the foundation. Generally, a home inspection report will evaluate the amenities and the necessities of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible 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 blunt, it's like comparing broadband and dial-up. The CMA utilizes market trends to create most of their business. Appraisals use similar sales which are verifiable resources. The appraisal report will also contain neighborhood and building prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is who's behind the report. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, state licensed professional who made a career on valuing properties in and around Porter County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (Return to top)The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the assignment has been completed, what assurance is there that the final number is accurate?(Return to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who hires Hancock Appraisal Services, Inc.(Return to top) Mortgage lenders are an appraiser's most likely customer, requiring their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Hancock Appraisal Services, Inc. get the data used to estimate values in Porter County or other areas?(Return to top) One of the most important activities of an appraiser is to collect property data. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a numerous places. To research recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To double-check actual sales prices, we look at items in the assessor's office and other public documents. Appraisers often have to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why should I hire a licensed appraiser?(Return to top) An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. When selling your home, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Hancock Appraisal Services, Inc. is the best way to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI stands for Private Mortgage Insurance. It takes care of the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Do you need anything from me in advance?(Return to top) We begin with an inspection of the home. During this process, we 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 we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to 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:
Define "Market Value"(Return to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(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 bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Return to top) It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.