ADCOCK & ASSOCIATES has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) An appraisal is a thought process that concludes with an opinion of value. This opinion or estimate is arrived at by a formal process that generally uses the three main "common approaches to value". One of them is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach involves finding comparable houses nearby and discovering the value based on making a comparison of those prior sales to the house in question. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the money produced by the property.
What does an appraiser do?(Back to top) An appraiser forumlates a professional, unbiased assessment of market value, in the support of real property exchanges. Appraisers exhibit their findings in appraisal reports.
What would cause me to request services from ADCOCK & ASSOCIATES?(Back to top) There are a lot of reasons to get an appraisal from ADCOCK & ASSOCIATES 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 home inspection? (Back to top)The appraiser is not a home inspector and he or she does not do a full home inspection. A third-party home inspector will evaluate the structure of the property, from the roof to the bottom. For the most part, a home inspection report will explain the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Honestly, they share nothing in common. The CMA relies on indefinite local market trends. Appraisals use similar sales which are verifiable resources. Also, the appraisal looks at other factors like condition, area and construction costs. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person creating the report is hands down 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 bear 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 a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their value conclusion.
What does the appraisal report contain? (Back to top)Each report should demonstrate a supported value opinion and should identify the following:
After completing the appraisal, what guarantee is there that the value indicated is valid?(Back to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who do appraisers work for?(Back to top) Commonly, appraisers are hired by mortgage lenders to render a value opinion on property involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Santa Barbara County or other areas?(Back to top) One of the primary activities of an appraiser is to assimilate data. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is received from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To verify actual sales prices, we research tax records and other public documents. Appraisers often need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And last but not least, the appraiser assembles 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?(Back to top) If you're making any kind of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. For those selling a home, you'll want to figure out 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. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from ADCOCK & ASSOCIATES is the best documentation to ensure assets are split up evenly. Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Back to top) PMI stands for Private Mortgage Insurance. This added policy covers the lender if a borrower is unable to pay on the loan and the value of the property is lower than the balance of the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Does the appraiser need anything from the homeowner in advance?(Back to top) We begin with an inspection of the property. During this process, we 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 find our way to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
Define "Market Value"(Back 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?(Back 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 entitled to a copy of the appraisal - 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 the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Back to top) Like all things real estate, this is dependent on a home's location. 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 most value returned 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%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.