Brehm Appraisal Service has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) The process of creating an appraisal report deals with an investigation which leads to an opinion of value. The real estate appraiser must use a number of "approaches," typically three, to draw up the estimation of market value. One of the processes is the Cost Approach - which is what it would cost to replace the improvements, minus 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 concerns making a comparison to comparable homes close by. Being the most popular approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money produced by the property.
What does an appraiser do?(See list of FAQ's) An appraiser produces a professional, unbiased determination of market value, often in the context of a real estate exchange. Appraisers summarize their professional investigation in appraisal reports.
What are the reasons a person would need your services?(See list of FAQ's) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for getting an report include:
Is an appraisal the same as a home inspection? (See list of FAQ's)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. A third-party home inspector will judge the structure of the house, from the top to the foundation. The standard property inspector's report will include an evaluation of the condition of the property'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.
My agent performed a CMA for me. Is that the same as an appraisal?(See list of FAQ's) To be blunt, it's like comparing sugar and saccharin. What the CMA relies upon are vague trends. An appraisal is based on comparable sales that can be validated by records. The appraisal report will also include location and building values. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is who's doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. A certified, Ohio licensed professional who bases their livelihood on valuing homes in and around Franklin County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon fee for work they perform, regardless of their outcome.
What's in an appraisal report? (See list of FAQ's)Every appraisal should reflect a supported estimate of value and must identify the following:
Upon completion of the report, what guarantee is there that the value indicated is valid?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who engages the services of appraisers?(See list of FAQ's) Mortgage lenders are an appraiser's most likely customer, needing 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 retain the services of appraisers for divorce and estate settlements.
Where does Brehm Appraisal Service get the data used to estimate values in Franklin County or other areas?(See list of FAQ's) Compiling data is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is received from a number of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Appraisers routinely have to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why should I hire a licensed appraiser?(See list of FAQ's) An appraisal is a worthwhile anytime the value of your home is pertinent to some financial decision. If you're selling your house, an appraisal assists you in setting the most appropriate price. When buying, be sure you're not overpaying by getting 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. Knowing its true value means you can make informed financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. It guards the lender if a borrower defaults on the loan and the market price of the home 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.
Do you need anything from me in advance?(See list of FAQ's) We begin with an inspection of the property. 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 get 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.
You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
Define "Market Value"(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(See list of FAQ's) 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 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.
The exception to this rule is when a home owner engages an appraiser directly. In these cases, 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 use the appraisal for any purpose.
Which home renovations add the most to the price?(See list of FAQ's) 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, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.