South Mountain Appraisals, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
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:
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:
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:
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.
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:
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:
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.