Active Appraisal Services, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal? (See list of FAQ's)The appraisal process is an estimation that produces an opinion of value. There are three "common approaches to value" which assists the appraiser conclude this opinion or estimate. One of the methods in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the property, less the depreciation and physical deterioration, plus the land value. Another of the methods is the Sales Comparison Approach - which deals with finding a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a home. One of the least common approaches in appraising homes is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do? (See list of FAQ's)An appraiser offers a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers document their professional findings in appraisal reports.
What are the reasons I would request services from Active Appraisal Services, Inc.? (See list of FAQ's)There are many reasons to obtain an appraisal from Active Appraisal Services, Inc. with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)The appraiser is not a home inspector nor does he/she do a full home inspection. A third-party home inspector will inspect the structure of the property, from the roof to the bottom. The general house 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.
Is an appraisal the same as a comparative market analysis(CMA)? (See list of FAQ's)To be blunt, it's like comparing broadband and dial-up. The CMA depends on vague local market trends. Appraisals use comparable sales which are valid resources. Area and building costs are also a priority in an appraisal. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person creating the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. 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 fee for work they perform, regardless of their value conclusion.
What does the appraisal report contain? (See list of FAQ's)Every appraisal must demonstrate a believable value opinion and will identify the following:
After completing the report, how can I have confidence that the value conclusion is trustworthy? (See list of FAQ's)In communicating an appraisal report, each appraiser must make sure of the following:
Who hires an appraiser? (See list of FAQ's)Mortgage lenders are an appraiser's most likely client, needing their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Active Appraisal Services, Inc. get the information used to estimate values in southeastern Wisconsin or other areas? (See list of FAQ's)Compiling information is one of the primary functions 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 noted by the appraiser during an inspection.
General data is received from a many sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often need 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 product.
And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser? (See list of FAQ's)If you're involved in some sort of financial decision and the value of your home matters, you'll want a full appraisal. For those selling a home, you'll want to figure out a 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, you can avoid overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Active Appraisal Services, Inc. is the best documentation to ensure assets are split up evenly. Simply put, a house 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? (See list of FAQ's)PMI is an acronym for Private Mortgage Insurance. This additional plan guards the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than what is owed 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? (See list of FAQ's)We start with an inspection of the home. 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. 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 shrubs 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 speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
What does "Market Value" mean? (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)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 report - 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 cases, 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 do whatever they want with the appraisal.
Which home renovations add the most to the price? (See list of FAQ's)The added value of a particular amenity truly depends on the local market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the most value returned 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%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.