K & T Appraisals, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The method of producing an appraisal deals with an investigation which forms an opinion of value. This opinion or estimate is discerned through a formal method that generally utilizes the three main "common approaches to value". One of the methods in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, minus depreciation and physical dilapidation, adding the land value. The most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which involves concluding a comparison to similar properties nearby. The Sales Comparison Approach is commonly the most definitive and clearest indicator of value for a residential property. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to figure the value of a property based on what an investor would pay based on the capital produced by the building.
What does an appraiser do?(Back to top) An appraiser offers a professional, unbiased opinion of market value, in the support of real estate exchanges. Appraisers present their expert analysis in appraisal reports.
What are the reasons I would require services from K & T Appraisals, Inc.?(Back to top) There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal 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 comprehensive home inspection. The point of a home inspection is to evaluate the structure of the property from bottom to top. The stereotypical property inspector's report will contain an evaluation of the condition of the home's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) To be blunt, it's like comparing opera to country. The CMA utilizes market trends to conduct most of their business. The appraisal depends on similar verifiable comparable sales. In addition, the appraisal looks at other factors like condition, area and construction prices. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is the person 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. A certified, state licensed professional who made their livelihood on valuing real estate in and around Maricopa County is behind the appraisal. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for work they perform, regardless of their value conclusion.
What can I expect to see in my appraisal report? (Back to top)The main point 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, how can I have a guarantee that the value conclusion is accurate?(Back to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers?(Back to top) Most of the time, appraisers are hired by lenders to estimate the value of real estate involved in a loan transaction. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does K & T Appraisals, Inc. get the data used to estimate values in Maricopa County or other areas?(Back to top) Gathering data is one of the primary tasks an appraiser does. Data can be classified 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 during an inspection.
General data is received from a variety of sources. To find out about recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To double-check actual sales prices, we research 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 product.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal?(Back to top) An appraisal is a worthwhile whenever your home's value is pertinent to some financial decision. For those selling a home, you'll want to determine a 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. 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. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental policy protects the lender in case a borrower is unable to pay on the loan and the market price of the property is less 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.
Does the appraiser need anything from the homeowner in advance?(Back to top) We start 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 amenities. Inside, pick up any clutter and make sure we can get to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside walls.
You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
What does "Market Value" mean?(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back to 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 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may stipulate 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?(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.
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, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.