Bloom Appraisers, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) An appraiser performs an estimation that leads to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. One of the methods in use is the Cost Approach, which is what it would cost to replace the improvements to the home, less the depreciation and physical dilapidation, adding the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which deals with figuring a comparison to similar houses close by. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is primarily 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.
What does an appraiser do?(Back to top) An appraiser provides a fair and credible determination of market value, in the support of real property transactions. Appraisers summarize their expert conclusions in appraisal reports.
What would cause me to require a real estate appraisal?(Back to top) There are a lot of reasons to obtain an appraisal from Bloom Appraisers, Inc. with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) To be blunt, it's night and day. The CMA depends on vague market trends. Appraisals use comparable sales which are valid resources. Location and architectural prices are also a priority in an appraisal. 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.
Who's creating the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their outcome.
What's in an appraisal report? (Back to top)Each appraisal should demonstrate a credible value opinion and must clearly state the following:
After completing the report, what assurance is there that the final number is trustworthy?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who engages the services of appraisers?(Back to top) Commonly, appraisers are hired by mortgage lenders to render a value opinion on property involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Hawaii County or other areas?(Back to top) One of the most important activities of an appraiser is to gather data. Data can be categorized as either Specific or General. Specific data is collected 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 number of places. To look up recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To double-check actual sales prices, we research tax records and other public documents that are usually online nowadays. 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 product.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
How can a licensed appraiser help me?(Back to top) An appraisal is a worthwhile whenever the value of your home is relevant to a financial decision. If you're selling your home, an appraisal will help you determine a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home 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?(Back to top) PMI is short for for Private Mortgage Insurance. It guards the lender if a borrower defaults on the loan and the value of the house is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal appointment(Back to top) The first step in most appraisals is the home inspection. During this process, the appraiser 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 landscaping so we can be free to get an accurate measurement of exterior walls.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
Define "Market Value"(Back to top) In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. 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 included with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Back to top) It really depends on the market. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI from renovating a home comes in the kitchen. 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 were second, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.