Appraisal FAQs
When would a person need a home appraisal?
The most common reason for getting an appraisal is for a real estate and mortgage transactions. Other reasons for ordering an appraisal include:
- To obtain a loan.
- To lower your tax burden.
- To establish the replacement cost of insurance.
- To contest high property taxes.
- To settle an estate.
- To provide a negotiating tool when purchasing real estate.
- To determine a reasonable price when selling real estate.
- To protect your rights in a condemnation case.
- It is required by a government agency.
- If you are involved in a lawsuit.
What is the difference between an appraisal and a home inspection?
THE APPRAISER IS NOT A HOME INSPECTOR, THEREFORE IS NOT QUALIFIED TO DETERMINE THE DETAILED CONDITION OF THE VARIOUS ITEMS ASKED TO EVALUATE. THE APPRAISER ONLY OBSERVES THE VISIBLE AND APPARENT CONDITIONS. THE APPRAISER DOES NOT ATTEST TO THE STRUCTURAL OR OPERATIONAL WORTHINESS OF THE ITEMS. THE APPRAISER ONLY STATES THAT THE ITEM APPEARS TO BE IN THE CONDITION REPORTED.
The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a house, from the roof to the foundation. The standard home inspector’s report will include an evaluation of the condition of the home’s heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.
What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?
A CMA is a listing of sales activity in the Subject’s market area. It does not take into account the condition, location, external influences, etc. The appraisal relies on specific, verifiable comparable sales. A CMA delivers a ”ball park” figure. An appraisal delivers a defensible and carefully documented opinion of value.
What is PMI and how can I get rid of it?
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.
How do I prepare for the appraiser?
An appraisal, in part, consists of inspecting your home and measuring it, determining the layout of the rooms, confirming all aspects of the home’s general condition and taking photos of your house for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house. Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure that the appraiser 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:
- A survey of the house and property.
- A deed or title report showing the legal description.
- A recent tax bill.
- A list of personal property to be sold with the house if applicable.
- A copy of the original plans.
What is ”Market Value”?
Market value, or fair market value, is the most probable price that a property should bring (sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by any undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Who Actually Owns the Appraisal Report?
In most real estate transactions, the appraisal is ordered by the Lender. While the home buyer 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 home buyer is entitled to a copy of the report, 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 engages an appraiser directly. In this cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, etc. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
