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South Mountain Appraisals, Inc. has answers to "Frequently Asked Questions"

South Mountain Appraisals, Inc. is always ready to address any inquiries you might have about appraisals or real estate in Essex County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
What are the reasons a person would need services from South Mountain Appraisals, Inc.?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
Once the assignment is done, what guarantee is there that the final number is veritable?
What are the requirements to be a certified appraiser?
Who hires an appraiser?
Where does South Mountain Appraisals, Inc. get the data used to estimate values in Essex County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Does the appraiser need anything from me in advance?
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?



What is an appraisal?   (See list of FAQ's)

The method of performing an appraisal report deals with an inspection which leads to an opinion of value. The appraiser will use a few "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the processes that appraisers use to find the value of a home; it involves discerning what the improvements would cost less physical degradation, plus the land value. The Sales Comparison Approach deals with finding comparable homes nearby and finding value based on comparing those properties to the home being appraised. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the capital produced by the property.

Describe what an appraiser does   (See list of FAQ's)

An appraiser generates a fair and credible determination of market value, in the support of real property transactions. Appraisers illustate their expert analysis in appraisal reports.


What are the reasons a person would need services from South Mountain Appraisals, Inc.?   (See list of FAQ's)

There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for obtaining an report include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax obligations.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To challenge inflated property taxes.
  • To handle an estate.
  • To give you an edge when purchasing a home.
  • To figure out the most probable property value when putting your home on the market.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will help.
For a more extensive description of the appraisal process click here.


What is the difference between an appraisal and a home inspection?   (See list of FAQ's)

The appraiser is not a home inspector and does not do a complete home inspection. The purpose of a home inspection is to evaluate the structure of the house from foundation to rooftop. Usually, a home inspection report will explain the amenities and the necessities of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (See list of FAQ's)

To be blunt, it's apples and oranges. The CMA utilizes market trends to create most of their business. An appraisal is based on comparable sales that can be proven by records. The appraisal report will also include neighborhood and building costs. 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.

Who's creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the agent, whose income is tied to the price of the home.

What are the contents of an appraisal report?   (See list of FAQ's)

Each report should reflect a credible value opinion and will document the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible considerations.
  • Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work used to complete the job.
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report


Once the assignment is done, what guarantee is there that the final number is veritable?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal used analysis of the information.

  • That substantial errors of omission or commission were not committed individually or collectively.

  • That appraisal services were not executed in a careless or negligent manner.

  • The final appraisal report was easy to explain, credible and defensible.
There are rigorous classroom and practical experience requirements that must be adhered to in order to get an appraisal license in New Jersey. In addition, appraisers must obey a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (See list of FAQ's) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification typically translates to many hours of classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he or she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who hires an appraiser?   (See list of FAQ's)

Typically, appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.

Where does South Mountain Appraisals, Inc. get the data used to estimate values in Essex County or other areas?   (See list of FAQ's)

Collecting data is one of the main tasks an appraiser performs. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is gathered from a number of places. To look up recent sales to be used as "comps", an appraiser will often go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood product.

And last but not least, the appraiser assembles 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?   (See list of FAQ's)

If you're involved in some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. When selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from South Mountain Appraisals, Inc. is the best way to ensure assets are divided 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?   (See list of FAQ's)

PMI stands for Private Mortgage Insurance. This additional policy protects the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the balance of the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

The savings from cancelling your PMI will make up for the cost of the appraisal in a matter of months. Nobody is more qualified than South Mountain Appraisals, Inc. when it comes to analyzing real estate appreciation in Maplewood and Essex County. Contact us today.

Does the appraiser need anything from me in advance?   (See list of FAQ's)

We start with an inspection of the home. What this entails is the appraiser, after setting up an appointment, personally going through the home - recording the layout of the rooms, taking photos and documenting the general status of its amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. Indoors, make sure we can easily access 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:
  • Any records on the purchase of the property for the last three years.
  • Written property agreements, such as a maintenance agreement for a shared driveway.
  • Most recent real estate tax bill and or legal description of the property.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • A list of "proposed" improvements when the property is being appraised "as complete".

What does "Market Value" mean?   (See list of FAQ's)

In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:

"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and 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: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and 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."



Once complete, who actually owns the appraisal report?   (See list of FAQ's)

In most real estate transactions, the appraisal is ordered by the lender. While the 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 buyer is certainly entitled to a copy of the appraisal - it's usually included 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 cases, the appraiser may state 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 use the appraisal for any purpose.


Which home renovations add the most to the price?   (See list of FAQ's)

This really depends on where the home is. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want

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 were second, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.