Rossebo & Associates Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The appraisal process is an estimation that generates an opinion of value. This opinion or estimate is figured using a formal process that generally uses three "common approaches to value". One of the methods in use is the Cost Approach, which finds what it would cost to replace the improvements to the property, minus depreciation and physical dilapidation, adding the land value. Another of the methods is the Sales Comparison Approach - which deals with making 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 house. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does(Top) An appraiser offers a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers present their professional investigation in appraisal reports.
Why would someone request services from Rossebo & Associates Inc.?(Top) There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal report include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Honestly, they have nothing in common. What the CMA relies upon are vague trends. An appraisal relies on comparable sales that can be proven by records. Area and architectural costs are also important in an appraisal. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person behind the report is actually the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp 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 something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon fee for work they perform, regardless of their value conclusion.
Upon completion of the report, what assurance is there that the value conclusion is valid?(Top) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(Top) Typically, appraisers are hired by mortgage lenders to estimate the value of 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 Hennepin County or other areas?(Top) Compiling information is one of the primary tasks an appraiser engages in. Data can be described as either Specific or General. Specific data is taken 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 places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.
And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
Why do I need a professional appraisal?(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 home, an appraisal will help you determine the most appropriate price. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Rossebo & Associates Inc. is the best way to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(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 home is less than what is owed on 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) We begin 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. Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
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) In most real estate transactions, the appraisal is ordered by the lender. 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 report - it's usually bundled 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 cases, the appraiser may state 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 use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Top) This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.