Neu Real Estate has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraisal report is an investigation leading to an opinion of value. The real estate appraiser must use a few "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the approaches that appraisers use to find the value of a home; it involves discerning what the improvements would cost minus physical deterioration, adding the land value. Easily the most common approach in finding the value of a house is the Sales Comparison Approach which deals with making a comparison to similar homes nearby. Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property. One of the least common approaches in appraising houses is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the income produced by the property.
Describe what an appraiser does(Return to top) An appraiser offers a professional, unbiased determination of market value, often in the context of a real estate sale. Appraisers reveal the details of their expert findings in appraisal reports.
What are the reasons a person would request a real estate appraisal?(Return to top) There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) Simply put, it's like comparing Shakespeare to reality TV. What the CMA depends on are vague trends. Appraisals use similar sales which are valid resources. The appraisal report will also contain area and construction prices. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The person creating the report is actually the biggest difference between a CMA and an appraisal. 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. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. 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 previously agreed upon sum for assignments, regardless of their outcome.
What does the appraisal report contain? (Return to top)Each report must demonstrate a supported estimate of value and must identify the following:
After completing the report, how can I have a guarantee that the final number is valid?(Return to top) In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers?(Return to top) Mortgage lenders are an appraiser's most likely client, needing their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Big Stone County or other areas?(Return to top) One of the main activities of an appraiser is to assimilate property data. Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a variety of places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To verify actual sales prices, we use items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
What can a full appraisal do for me?(Return to top) If you're making some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Neu Real Estate is the best way to ensure assets are divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.
What exactly is PMI and how can I get rid of it?(Return to top) PMI is short for for Private Mortgage Insurance. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance. 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.
Should I do anything in advance of the appraisal inspection(Return to top) The first step in most appraisals is the home inspection. 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to appliances like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
What is "Market Value?"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(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 entitled to a copy of the report - 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 hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(Return to top) This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
As a rule, the most value returned from renovating a home comes in the kitchen. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms weren't far behind, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.