C.S. Heaton Appraisals Inc has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Go to list of questions) The method of creating an appraisal report consists of an evaluation which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or estimate. One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the house, less the depreciation and physical dilapidation, adding the land value. Another of the methods is the Sales Comparison Approach - which concerns making a comparison to other similar nearby properties which have recently sold. Being the most common approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a house. One of the least common approaches in appraising houses 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(Go to list of questions) An appraiser offers a professional, unbiased opinion of market value, often in the context of a real estate sale. Appraisers present their conclusions in appraisal reports.
What would cause me to request your services?(Go to list of questions) There are a lot of reasons to purchase an appraisal from C.S. Heaton Appraisals Inc with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an report include:
How is an appraiser different than a home inspector? (Go to list of questions)Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to evaluate the structure of the house from foundation to top. Usually, a home inspection report will explain the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Go to list of questions) Simply, they have nothing in common. The CMA relies on vague trends in the market. An appraisal is based on comparable sales that can be validated by public record. Also, the appraisal checks other factors like condition, neighborhood and construction costs. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is who's creating the report. 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. 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 collect only a previously agreed upon sum for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (Go to 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:
After completing the report, what assurance is there that the value conclusion is trustworthy?(Go to list of questions) In communicating an appraisal report, each appraiser must make sure of the following:
Who are an appraiser's customers?(Go to list of questions) Mortgage lenders are an appraiser's typical customer, needing their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does an appraiser get the data used to estimate values in Maricopa County or other areas?(Go to list of questions) Collecting information is one of the primary things an appraiser does. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is gathered from a variety of sources. To look up recently sold homes to be used as "comps", we typically use the local Multiple Listing Service. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
How can a licensed appraiser help me?(Go to list of questions) 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 determine a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, 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?(Go to list of questions) PMI is short for for Private Mortgage Insurance. PMI guards the lender if a borrower defaults on the loan and the market price of the house 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.
How do I get ready for the appraiser?(Go to list of questions) The first step in most appraisals is the home inspection. 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 amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What does "Market Value" mean?(Go to list of questions) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Go to list of questions) For mortgage transactions, the lender orders 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 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.
This rule doesn't apply when a home owner engages an appraiser directly. In these situations, the appraiser may stipulate how the appraisal can be used; 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.
I want to get more for my house. Where should I spend money renovating?(Go to list of questions) The added value of a particular amenity truly depends on the local market. 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 weren't far behind, 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 overbuilt for your neighborhood in terms of size.