Dowd Associates Appraisal Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(List of questions) The appraisal process is an estimation that generates an opinion of value. The real estate appraiser will use a few "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves finding what the improvements would cost less physical depreciation, plus the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which involves making a comparison to similar houses nearby. Being the most common approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a residence. The third approach is the Income Approach, which is the best method in appraising income producing properties - it deals with estimating what an investor would pay based on the income produced by the property.
Describe what an appraiser does(List of questions) An appraiser produces an unprejudiced and well substantiated opinion of market value, in the support of real estate exchanges. Appraisers demonstrate their expert findings in appraisal reports.
Why would someone need services from Dowd Associates Appraisal Services?(List of questions) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal report include:
How is an appraisal different than a home inspection? (List of questions)Appraisers do not do perform house inspections and are not home inspectors. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a property, from the roof to the bottom. Generally, a home inspection report will explain the amenities and the requirements of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(List of questions) To be honest, they have nothing in common. What the CMA depends on are ill-defined trends. The appraisal depends on similar definite comparable sales. Area and architectural costs are also a priority in an appraisal. 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 credentials of the person behind the report is frankly the biggest difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is created by a licensed, certified professional who makes a living 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 outcome.
What's in an appraisal report? (List of questions)The main purpose of an appraisal report is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
Once the report has been delivered, what assurance is there that the value indicated is accurate?(List of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(List of questions) Mortgage lenders are an appraiser's most likely customer, needing their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Dowd Associates Appraisal Services get the information used to estimate values in Orange County or other areas?(List of questions) Compiling information is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is collected from a variety of sources. To research recent sales to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Flood zone data is available 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 past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal?(List of questions) An appraisal is a worthwhile anytime the value of your home is pertinent to some financial decision. When selling your home, an appraisal helps you set a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Dowd Associates Appraisal Services is the best way to ensure assets are split up evenly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(List of questions) PMI is an acronym for Private Mortgage Insurance. This supplemental policy guards the lender if a borrower is unable to pay on the loan and the market price of the house is lower 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.
Do you need anything from the homeowner in advance?(List of questions) We begin with an inspection of the home. 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 features. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can get to appliances like furnaces and water heaters.
To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
How does an appraiser define "Market Value"?(List of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(List of questions) 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 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.
The exception to this rule is when a home owner engages an appraiser directly. 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 noted otherwise, the home owner can do whatever they want with the appraisal.
Are some home improvements more worthwhile than others?(List of questions) A home's location - what city it is in and even what part of that city - is key to this popular question. 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.
As a rule, the best ROI from renovating a home comes in the kitchen. 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%. On the contrary, work that may not add value would be painting just for the sake of redecorating.