What is the purpose of hiring a real estate appraiser ?
A real estate appraiser can be hired for many reasons, financing, estate purposes, tax appeal, divorce, private mortgage insurance removal, buying or selling a home, etc.
Financing: When you want to obtain a home loan to purchase a property, refinance an existing loan, get an equity line of credit the lender will require that you have adequate collateral to secure the loan. An appraiser will typically be hired to evaluate the property to ensure the property is worth enough to cover the loan amount to enable the lender to sell the property in case the borrower defaults on the loan.
Estate Purposes: Settling an estate is an important, complex and sometimes stressful job. An estate usually requires a real estate appraisal to establish the "market value" for the real estate involved on the date of death. Due to this an estate appraisal is different than the typical appraisal assignment as there different requirements and procedures to follow to complete a retroactive appraisal with an effective date that matches the date of death.
Property Tax Appeals: Property tax appeals differ by state, county and cities. To appeal their property taxes a property owner will need to prove the value of their property is less than the property appraiser's office indicates. If a property owner believes their property was over assessed they should hire an experienced certified real estate appraiser to complete a real estate appraisal to help them determine the value of their property before they appeal their property taxes.
Divorce: Divorce appraisals require a well supported appraisal that is defensible in court. An appraiser who completes a divorce appraisal should be experienced and able to support a defensible opinion of value and are willing to go to court, if necessary. Typically a divorce appraisal should be completed as of the date of separation
Private Mortgage Insurance (PMI): Once an owner has 20% equity in their home by any means, improvements, paying down the balance of the loan or appreciation, the borrower can have the lender to cancel the private mortgage insurance policy. Typically a borrower can prove the amount of equity they have with a real estate appraisal completed by a state certified real estate appraiser.
Buying Real Estate: When buying real estate it is highly recommended that you hire a real estate appraiser either prior to making an offer or have the offer contingent on an appraisal. Do not rely on a real estate agent to help you determine the value of the property as most agents work for the seller and are obligated to attain the highest price. Also, real estate agents are not trained to value properties. A real estate appraiser could possibly save you thousands of dollars on the purchase of a home.
Selling Real Estate: When you decide to sell your home a real estate appraiser can help you greatly. A real estate appraiser can provide you with an unbiased opinion of value to help you price your home correctly and get it sold. Don't rely on a real estate agent to help you determine the value, they are not trained to value properties and they are biased as they want to get your listing, therefore many agents will embellish the value to try to obtain your listing.
How long does an appraisal take ?
The entire process typically takes 4 to 5 hours depending on the complexity of the assignment.
Typically the inspection takes fifteen minutes to an hour depending on the size of the dwelling as the appraiser will measure the dwelling to determine the gross living area. The exterior of homes are measured as the appraiser can measure the length of exterior walls, condominiums and most townhomes are measure inside.
At the time of the inspection the appraiser will take photos and notes which include construction material, amenities, upgrades, interior materials such as flooring and wall surfaces, condition of the property is also determined.
After the inspection the appraiser will analyze printouts from public records and the Multiple Listing Service (MLS) to determine which comparables in the area that recently sold are the most similar to the subject. The appraiser will then drive by each comparable and take notes and photograph the property. (typically 1 hour)
After the appraiser returns to the office the comparable sales data will be verified through a party to the sale, typically the listing or selling agent, sometimes the buyer or seller. Typically a "Summary" appraisal report is then completed which will include the information the appraiser noted at the subject property, information from public records, the county property appraisers office and real estate market statistics. Then the comparables will be analyzed and compared to the subject property and adjusted for the differences (sales comparison approach). The cost approach may also be included in the dwelling is new or newer and the income approach will be used if it is an investment property. After analyzing all this data an estimated value is determined for a specific date. (2 - 3 hours are usually needed to type the report).
Where does the information for an appraisal come from ?
The appraiser gets their information from various sources, county property appraisers office, public records, tax assessors maps, multiple listing service (MLS), real estate agents, interviews with buyers and sellers.
Can I order an appraisal to help me price my property to sell and then give it to the buyer to use for a loan ?
No, an appraisal can only be used by the client that hired them and cannot be readdressed to somebody else.
Can I use a real estate agent to complete an appraisal ?
If you are selling or buying a property you could use a comparative market analysis from a real estate agent, however I don't advise you to do this for a few reasons. (1) Real estate agents are not licensed to perform appraisals, (2) Real estate agents are salespeople, they are not trained to value real estate, (3) Real estate agents have a biased opinion as they are either trying to get an owner to list a property with them or have a buyer purchase a property through them. A potential commission can affect a real estate agent's opinion of value (just look at all the homes for sale that are listed at inflated prices).
A real estate appraiser is trained to value real estate and is an unbiased individual who is paid a flat fee and has no reason to inflate the appraised value.
If you are getting a loan the lender will typically require an appraisal by a state certified appraiser, if you are using the appraisal for legal reasons, divorce or estate purposes an appraisal by a certified appraiser will typically be required.
Can I use a computer generated appraisal ?
Typically you won't be able to use it for lending purposes, however some lenders do have their own systems that they will use and rely on. If you are selling or buying a property you could use a computer generated analysis from Zillow or Yahoo Real Estate to get an overall look at market prices, but this is not reliable. A computer does not know where neighborhoods end and many times they will use sales from surrounding inferior or superior areas which can greatly affect the value. Hiring a local real estate appraiser is the best way to get a true opinion of value.
Does an appraisal include a home inspection ?
No, the appraiser does view the interior and exterior of the subject property in most cases, except drive by appraisals, however as they do note any visible repairs or potential problems an appraiser is not a home inspector and typically does not have the knowledge or background to perform a home inspection. The appraiser will indicate a cost to cure for repairs they note in the appraisal and indicate its impact on value in the condition area of the appraisal grid. This is not a home inspection and should not be considered one. It is highly recommended to hire a home inspector to perform a full home inspection if your are purchasing a property.
Are my furnishings and window treatments considered in the appraisal ?
No, these are considered personal property and are not included. Above ground pools, hot tubs, removable storage buildings, etc. are all personal property and will not be included in the appraisal report or given any value. Only real property is included in the valuation of the subject property.
What helps increase a home's value the most ?
In my opinion the way to increase your homes value the most is also the cheapest, paint, cleanliness, the removal of clutter and clean cut landscaping. It's as simple as that. Many homeowners spend thousands of dollars on new kitchens, additional rooms, pools, etc. and not get their money back, however a nice clean property can help you the most and give you the greatest return on your investment.
What is "Market Value" ?
The most probable price which a property should bring 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 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 advised, and each acting in what he considers his own best interest: (3) a reasonable time is allowed for exposure in 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* by anyone associated with the sale.
What is meant by "Highest & Best Use" ?
The most probable use of land or improved property that is legally possible, physically possible, financially feasible (and appropriately supportable) from the market, and which results in maximum profitability.
