Commonwealth Appraisals and Consulting Inc. has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) An appraisal is an estimation leading to an opinion of value. There are three "common approaches to value" which assists the appraiser conclude this opinion or valuation. The Cost Approach is one of the methods that real estate appraisers use to find the value of a home; it involves concluding what the improvements would cost minus physical degradation, plus the land value. The Sales Comparison Approach involves searching for comparable homes in close proximity and discerning value based on comparing those prior sales to the home in question. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is generally used for determining 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(Return to top) An appraiser forumlates an unbiased and well justified assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their professional findings in appraisal reports.
What are the reasons someone would need services from Commonwealth Appraisals and Consulting Inc.?(Return to top) There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
How is an appraisal different than a home inspection? (Return to top)Home inspectors do not come to an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to investigate the structure of the home from basement to top. The general property inspector's report will contain an evaluation of the condition of the house'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.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Simply put, it's like comparing sugar and saccharin. The CMA relies on vague market trends. An appraisal is based on comparable sales that can be verified by public record. Also, the appraisal looks at other factors like condition, location and construction costs. 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 largest differentiator is who's behind the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent party, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
What can I expect to see in my appraisal report? (Return to top)Every appraisal must indicate a supported estimate of value and will clearly state the following:
Once the assignment has been delivered, what assurance is there that the value indicated is veritable?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who hires Commonwealth Appraisals and Consulting Inc.(Return to top) Commonly, appraisers are employed by mortgage lenders to render a value opinion on a house involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Commonwealth Appraisals and Consulting Inc. get the information used to estimate values in Loudoun County or other areas?(Return to top) Gathering information is one of the primary activities of an appraiser. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is gathered from a number of sources. To find out about recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need 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 product.
And most importantly, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.
What can a full appraisal do for me?(Return to top) If you're involved in any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your house, an appraisal helps you set a price that maximizes profit and reduces time on the market. When buying, you can avoid 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. 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?(Return to top) PMI is an acronym for Private Mortgage Insurance. This added policy takes care of the lender if a borrower is unable to pay on the loan and the value of the home is less than the balance of 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.
Does the appraiser need anything from me in advance?(Return to top) The first step in most appraisals is the property 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 condition of its amenities. 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 bushes and relocate any items that would get in our way while we 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:
What does "Market Value" mean?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Return to top) For mortgage transactions, the lender requests 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 situations, the appraiser may stipulate the purpose of the appraisal; 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.
Which home renovations add the most to the price?(Return to top) The added value of a particular amenity truly depends on the local 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. 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 weren't far behind, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.