Suttles & Associates, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Go to list of questions) The appraisal process is an estimation that produces an opinion of value. The real estate appraiser will use a several "approaches," typically three, to draw up the estimation of market value. One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the processes is the Sales Comparison Approach - which deals with discovering a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is normally the most definitive and clearest indicator of a liklely sales price for a residence. The Income Approach is generally used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.
Describe what an appraiser does(Go to list of questions) An appraiser offers a fair and credible determination of market value, to be used in making real estate transactions. Appraisers demonstrate their professional findings in appraisal reports.
What would cause me to need a real estate appraisal?(Go to list of questions) There are many reasons to order an appraisal from Suttles & Associates, Inc. with the usual reason being real estate and mortgage transactions. A few other reasons for getting an appraisal report include:
Is an appraisal the same as a home inspection? (Go to list of questions)Appraisers do not do perform house inspections and are not home inspectors. The purpose of a home inspection is to evaluate the structure of the house from foundation to top. Generally, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Go to list of questions) Frankly, it's like comparing Shakespeare to reality TV. The CMA uses market trends to conduct most of their business. The appraisal relies on similar definite comparable sales. In addition, the appraisal looks at other factors like condition, location and construction prices. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is who's creating the report. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, Georgia licensed professional who made their livelihood on valuing properties in and around Rabun County is behind the appraisal. Moreover, the appraiser is an independent party, with no vested interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.
What's in an appraisal report? (Go to list of questions)Each report should indicate a supported estimate of value and will document the following:
Once the appraisal has been delivered, what assurance is there that the value indicated is accurate?(Go to list of questions) In communicating an appraisal report, each appraiser must make sure of the following:
Who are an appraiser's customers?(Go to list of questions) Mortgage lenders are an appraiser's typical customer, using their services to ensure property 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 information used to estimate values in Rabun County or other areas?(Go to list of questions) One of the main things an appraiser does is to collect data. Data can be classified 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 numerous sources. Local Multiple Listing Services (MLS) have 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 routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other properties in the same market.
How can a licensed appraiser help me?(Go to 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. 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. 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. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. This supplemental policy guards the lender if a borrower doesn't pay on the loan and the value of the house is less than what is owed 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.
Should I do anything in advance of the appraisal inspection(Go to list of questions) 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 status of its features. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any bushes and relocate any items that would get in our way while we measure the structure. Indoors, make sure we can get to appliances 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:
What is "Market Value?"(Go to list of questions) 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?(Go to list of questions) 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 hires an appraiser directly. In these scenarios, 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 do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Go to list of questions) Like all things real estate, this is dependent on a home's location. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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%. On the contrary, work that may not add value would be painting just for the sake of redecorating.