Daniel J. Smith Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The appraisal process is an evaluation that generates an opinion of value. The appraiser must use a few "approaches," typically three, to draw up the estimation of market value. The Cost Approach is one of the processes that real estate appraisers use to find value; it involves concluding what the improvements would cost without physical degradation, 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 vicinity which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. The third approach is the Income Approach, which is the best method 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?(Top) An appraiser forumlates a professional, unbiased determination of market value, in the support of real property exchanges. Appraisers show their expert investigation in appraisal reports.
Why would I need your services?(Top) There are many reasons to obtain an appraisal from Daniel J. Smith Appraisals with the most common reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) To be blunt, it's apples and oranges. The CMA depends on indefinite market trends. Appraisals use similar sales which are valid resources. The appraisal report will also include neighborhood and building costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person behind the report is hands down the biggest difference between a CMA and an appraisal. 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, state licensed professional who made a career on valuing properties in and around Allegheny County creates the appraisal. Moreover, the appraiser is an unbiased party, with no vested interest in the value conclusion, unlike the real estate agent, whose income is tied to the value of the home.
Once the appraisal has been delivered, what assurance is there that the value indicated is valid?(Top) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Top) Mortgage lenders are an appraiser's most likely customer, requiring 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 Allegheny County or other areas?(Top) One of the most important tasks an appraiser engages in is to gather property data. Data can be split into Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. To double-check actual sales prices, we use tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.
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 do I need a professional appraisal?(Top) An appraisal is a valuable tool whenever your home's value is pertinent to a financial decision. If you're selling your house, an appraisal will help you determine the most appropriate price. When buying, be sure you're not overpaying by commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from Daniel J. Smith Appraisals is the best documentation to ensure assets are divided properly. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Top) PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy protects 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 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.
Should I do anything in advance of the appraisal inspection(Top) 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 amenities. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure we can get to items 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:
How does an appraiser define "Market Value"?(Top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Top) 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 entitled to a copy of the report - 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.
The exception to this rule is when a home owner engages an appraiser directly. In these situations, 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?(Top) It really depends on the market. 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 move. 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, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.