Slater Real Estate Services, llc has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(List of questions) An appraisal report is an investigation leading to an opinion of value. This opinion or estimate is arrived at by using a formal method that typically uses the three main "common approaches to value". One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The Sales Comparison Approach involves finding similar houses nearby and figuring out the value based on comparing those homes to the home in question. The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a residential property. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the capital produced by the building.
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 sale. Appraisers illustate their expert findings in appraisal reports.
Why would someone need your services?(List of questions) There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
Is an appraisal the same as a home inspection? (List of questions)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 basement to top. For the most part, a home inspection report will explain the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity 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)?(List of questions) Frankly, they have nothing in common. The CMA utilizes market trends to generate most of their business. Appraisals use comparable sales which are verifiable resources. Area and building values are also important 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 largest differentiator is who's creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. A certified, Colorado licensed professional who has formed their livelihood on valuing homes in and around Weld County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their value conclusion.
What does the appraisal report contain? (List of questions)The main objective of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Upon completion of the appraisal, how can I have confidence that the value conclusion is trustworthy?(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 typical customer, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Weld County or other areas?(List of questions) Gathering data is one of the primary occupations of an appraiser. Data can be described as either Specific or General. Specific data is gathered 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 places. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal?(List of questions) An appraisal is a worthwhile whenever your home's value is relevant to some financial decision. When selling your home, an appraisal will help you determine the most appropriate price. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Slater Real Estate Services, llc is the best way to ensure assets are divided evenly. 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?(List of questions) PMI stands for Private Mortgage Insurance. PMI protects the lender in case a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on 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.
How do I get ready for the appraiser?(List of questions) The first step in most appraisals is the property inspection. During this process, the appraiser 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. 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. On the inside, make sure the appraiser can get to appliances like furnaces and water heaters.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
How does an appraiser define "Market Value"?(List of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(List of questions) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 report - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner engages an appraiser directly. In these scenarios, the appraiser may define 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?(List of questions) It really depends on the market. 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 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 were second, yielding 85%. Adding bedrooms and baths can also increase the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.