Bearing Commercial Appraisal has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraisal is an inspection allowing the appraiser to come to an opinion of value. This opinion or estimate is figured by using a formal process that usually utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the house, minus depreciation and physical dilapidation, plus the land value. The Sales Comparison Approach deals with finding similar houses in the vicinity and discovering the value based on making a comparison of those prior sales to the property being investigated. The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a house. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(Return to top) An appraiser forumlates a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers exhibit their professional findings in appraisal reports.
What would cause me to require a real estate appraisal?(Return to top) There are a lot of reasons to purchase an appraisal from Bearing Commercial Appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) To be honest, they have nothing in common. The CMA relies on vague market trends. Appraisals use comparable sales which are valid resources. Also, the appraisal verifies other factors like condition, area and replacement prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person behind the report is frankly 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, Colorado licensed professional who made their livelihood on valuing properties in and around El Paso County creates the appraisal. Moreover, the appraiser is an independent party, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.
What does the appraisal report contain? (Return to top)The main purpose of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
After completing the appraisal, how can I have confidence that the value indicated is valid?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who are an appraiser's customers?(Return to top) Mortgage lenders are an appraiser's most likely client, needing their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Bearing Commercial Appraisal get the data used to estimate values in El Paso County or other areas?(Return to top) One of the most important things an appraiser does is to assimilate property data. Data can be split into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is gathered from a numerous sources. To look up recently sold homes to be used as "comps", an appraiser will typically use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
How can a licensed appraiser help me?(Return to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Bearing Commercial Appraisal is the best documentation to ensure assets are split up fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI stands for Private Mortgage Insurance. It guards the lender if a borrower is unable to pay on the loan and the value of the house is lower than the loan balance. 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?(Return to top) We start with an inspection of the property. 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 features. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any shrubs and move any items that would get in our way while we measure the structure. Indoors, make sure we can easily access items like furnaces and water heaters.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
What is "Market Value?"(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) 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 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.
The exception to this rule is when a home owner hires 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 noted otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Return to top) 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 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 weren't far behind, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.