James Make & Associates has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal" (List of questions)The procedure of producing an appraisal report deals with an evaluation which leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or estimate. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which deals with figuring a comparison to similar homes close by. Being the most common approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residence. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property.
What does an appraiser do? (List of questions)An appraiser offers a professional, unbiased assessment of market value, often in the context of a real estate purchase. Appraisers present their expert investigation in appraisal reports.
What would cause me to require your services? (List of questions)There are many reasons to obtain an appraisal from James Make & Associates with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal include:
How is an appraiser different than a home inspector? (List of questions)Appraisers do not do provide house inspections and are not home inspectors. A third-party home inspector will judge the structure of the house, from the roof to the bottom. The general property inspector's report will contain an evaluation of the condition of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible 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)? (List of questions)Frankly, it's like comparing sugar and saccharin. The CMA relies on indefinite market trends. The appraisal is based on specific valid comparable sales. Location and architectural values are also a priority in an appraisal. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is who's behind the report. 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. A certified, Texas licensed professional who made a career on valuing properties in and around Dallas 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 collect only a flat sum for assignments, regardless of their outcome.
What's in an appraisal report? (List of questions)Every report should demonstrate a credible estimate of value and should document the following:
Once the assignment has been delivered, what assurance is there that the final number is accurate? (List of questions)In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers? (List of questions)Mortgage lenders are an appraiser's most likely client, using their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Dallas County or other areas? (List of questions)One of the primary activities of an appraiser is to collect property 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 noted by the appraiser while on site.
General data is gathered from a many places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other public documents verify actual sales prices in a market. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates 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? (List of questions)Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, an appraisal will help you determine the most appropriate price. 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 means you can make the right financial decisions.
What exactly is PMI and how can I get rid of it? (List of questions)PMI is short for for Private Mortgage Insurance. It takes care of the lender in the event a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on 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.
Do you need anything from me in advance? (List of questions)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. On the home's interior, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What is "Market Value?" (List of questions)In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report? (List of questions)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 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 engaging the appraiser for things outside securing a mortgage. In these situations, 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 use the appraisal for any purpose.
Are some home improvements more worthwhile than others? (List of questions)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.
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 $17,500 to the value of the home - or about an 88% return on investment. Bathrooms weren't far behind, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.