Ballew & Company has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The process of performing an appraisal report deals with an estimation which forms an opinion of value. The appraiser will use a few "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the processes that appraisers use to find the value of a home; it involves concluding what the improvements would cost less physical depreciation, plus the land value. Another of the approaches is the Sales Comparison Approach - which deals with making a comparison to other similar properties within a close vicinity which have recently sold. Being the most commonly used approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a property. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to find the value of a property based on what an investor would pay based on the income produced by the property.
Describe what an appraiser does(Top) An appraiser provides an unbiased and well justified determination of market value, often in the context of a real estate exchange. Appraisers document their expert conclusions in appraisal reports.
What would cause me to request services from Ballew & Company?(Top) There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal report include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) To be blunt, it's like comparing broadband and dial-up. What the CMA relies upon are vague trends. Appraisals use comparable sales which are verifiable resources. Also, the appraisal looks at other factors like condition, location and construction costs. 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.
The person behind the report is hands down the biggest difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in 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 assignments, regardless of their outcome.
Once the report has been delivered, what guarantee is there that the value indicated is veritable?(Top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Top) Typically, appraisers are hired by mortgage lenders to render a value opinion on real estate involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Sacramento County or other areas?(Top) Gathering information is one of the primary things an appraiser engages in. Data can be classified as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is collected from a many sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often have 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 service.
And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, an appraisal assists you in setting 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. Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Top) PMI stands for Private Mortgage Insurance. PMI covers the lender in the event a borrower defaults on the loan and the market price of the property is less than the balance of the loan. 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 inspection(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, make sure it is clutter free and that we can access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(Top) In real estate appraising, Market Value (as opposed to Fair 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 certainly entitled to a copy of the appraisal - 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.
This rule doesn't apply when a home owner hires an appraiser directly. In these scenarios, the appraiser may stipulate how the appraisal can be used; 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) Like all things real estate, this is dependent on a home's location. 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
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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.