CMH Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal? (Return to top)An appraisal report is an investigation allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. The Cost Approach is one of the processes that appraisers use to find the value of a property; it involves finding what the improvements would cost without physical depreciation, adding the land value. The Sales Comparison Approach deals with searching for similar homes in the vicinity and discovering the value based on making a comparison of those prior sales to the house being appraised. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. One of the least common approaches in appraising houses is the Income Approach, which is mainly used to figure the value of a property based on what an investor would pay based on the capital produced by the property.
What does an appraiser do? (Return to top)An appraiser generates a professional, unbiased assessment of market value, in the support of real estate transactions. Appraisers document their expert analysis in appraisal reports.
Why would I request services from CMH Appraisals Llc? (Return to top)There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
How is an appraisal different than a home inspection? (Return to top)Appraisers do not do complete home inspections and are not home inspectors. A third-party home inspector will inspect the structure of the property, from the top to the foundation. The stereotypical property inspector's report will contain an evaluation of the condition of the house's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible 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)? (Return to top)To be honest, they share nothing in common. The CMA uses market trends to create most of their business. The appraisal relies on specific verifiable comparable sales. Also, the appraisal verifies other factors like condition, area and replacement costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person behind the report is hands down the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. A certified, state licensed professional who bases a career on valuing properties in and around Genesee County is behind the appraisal. Moreover, the appraiser is an unbiased voice, with no conditional interest in the value conclusion, unlike the agent, who gets a commission based upon the price of the home.
What does the appraisal report contain? (Return to top)Every appraisal must reflect a believable value opinion and should document the following:
Once the report has been delivered, what guarantee is there that the final number is valid? (Return to top)In communicating an appraisal report, each appraiser must make sure of the following:
Who do appraisers work for? (Return to top)Typically, appraisers are employed by mortgage lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does CMH Appraisals Llc get the data used to estimate values in Genesee County or other areas? (Return to top)One of the most important tasks an appraiser must accomplish is to assimilate data. Data can be described as either Specific or General. Specific data is collected from the home 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 sources. To research recent sales to be used as "comps", an appraiser will often go to the local Multiple Listing Service boards which we are members with 3 different MLS boards to acquire the most comparables. To double-check actual sales prices, we use tax records, assessing data and other public documents. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why should I hire a licensed appraiser? (Return to top)Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house 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 stands for Private Mortgage Insurance. It guards the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan. 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.
Do you need anything from the homeowner in advance? (Return to top)The first step in most appraisals is the home inspection. 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 condition of its amenities. 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 landscaping and move any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can get to 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:
Define "Market Value" (Return to top)In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer? (Return to top)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 bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price? (Return to top)It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe investment. One recent study revealed that putting $20,000 into a kitchen remodel would add about $10,000 to the value of the home depending on quality of improvements and market - or about an 50% return on investment. Bathrooms were second, returning also at 50%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating. There is no dollar for dollar upgrades within our market.