Christopher Greco Appraisal Services, Inc has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal" (See list of FAQ's)An appraisal is an evaluation that concludes with an opinion of value. The real estate appraiser will typically use a few "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the processes that appraisers use to find value; it involves figuring what the improvements would cost without physical depreciation, adding the land value. The most common approach in finding the value of a house is the Sales Comparison Approach which deals with figuring a comparison to comparable homes nearby. Being the most popular approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a property. The Income Approach is mainly used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
What does an appraiser do? (See list of FAQ's)An appraiser provides a professional, unbiased determination of market value, often in the context of a real estate sale. Appraisers document their professional conclusions in appraisal reports.
Why would someone request your services? (See list of FAQ's)There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
Is an appraisal the same as a home inspection? (See list of FAQ's)Home inspectors do not figure out an opinion of value and do not do appraisal reports. A third-party home inspector will evaluate the structure of the home, from the top to the bottom. The standard property inspector's report will contain an evaluation of the integrity of the house's heating systems, 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)? (See list of FAQ's)Frankly, it's like comparing Shakespeare to reality TV. The CMA uses market trends to generate most of their business. An appraisal relies on comparable sales that can be validated by records. Area and building values are also a priority in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is the person creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, state licensed professional who bases a career on valuing homes in and around Westchester County is behind the appraisal. 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 accept a flat sum for assignments, regardless of their outcome.
What does the appraisal report contain? (See list of FAQ's)The main point of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
Once the appraisal is done, how can I have assurance that the value indicated is trustworthy? (See list of FAQ's)In communicating an appraisal report, each appraiser must ensure the following:
Who engages the services of appraisers? (See list of FAQ's)Commonly, appraisers are called upon by lenders to estimate the value of a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Westchester County or other areas? (See list of FAQ's)One of the primary tasks an appraiser engages in is to assimilate property data. Data can be split into Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
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. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me? (See list of FAQ's)Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
What exactly is PMI and how can I get rid of it? (See list of FAQ's)PMI stands for Private Mortgage Insurance. This added policy guards the lender if a borrower doesn't pay on the loan and the value of the house is less 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 (See list of FAQ's)We start with an inspection of the property. 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 features. Is there anything you can do to help? Yes there is! First, be sure we have 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 plus ensure a more accurate report, try if possible to have the following items:
How does an appraiser define "Market Value"? (See list of FAQ's)In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report? (See list of FAQ's)For mortgage transactions, the lender orders the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. 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.
The exception to this rule is when a home owner engages an appraiser directly. In these situations, 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.
Which home renovations add the most to the price? (See list of FAQ's)This really depends on where the home is. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
As a rule, the best ROI from renovating a home comes in the kitchen. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms are right up there with kitchens, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.