Homestead Appraisals, Ltd. has answers to "Frequently Asked Questions"


	Homestead Appraisals, Ltd. is always ready to answer any questions you might have about appraisals in Jo Daviess County. Contact us today to talk about how we can help you with your specific valuation problems.

What is an appraisal?
What does an appraiser do?
Why would a person request your services?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What are the contents of an appraisal report?
After completing the appraisal, how can I have certainty that the value conclusion is accurate?
How are appraisers certified?
Who engages the services of appraisers?
Where does Homestead Appraisals, Ltd. get the data used to estimate values in Jo Daviess County or other areas?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
Define "Market Value"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?

What is an appraisal? (List of questions)

An appraisal report is a thought process allowing the appraiser to come to an opinion of value. The real estate appraiser will typically use a several "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the approaches that appraisers use to find the value of a home; it involves concluding what the improvements would cost minus physical degradation, plus the land value. The Sales Comparison Approach involves finding similar properties in the vicinity and discovering the value based on making a comparison of those homes to the home being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. 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 capital generated by the property.

What does an appraiser do? (List of questions)

An appraiser produces a professional, unbiased opinion of market value, in the support of real estate transactions. Appraisers show their expert conclusions in appraisal reports.

Why would a person request your services? (List of questions)

There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an report include:

If you are applying for a loan.
If you would like to lower your property tax obligations.
To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
To contest high property taxes.
To handle an estate.
To provide you a leg-up when purchasing a home.
To determine the most probable price when putting your home on the market.
To ensure parties are provided just compensation in eminient domain cases.
Because an official agency such as the IRS requires it.
It's possible you could be involved in a lawsuit - an appraisal will help.

If you need more information about the appraisal process, please click here.

What is the difference between an appraisal and a home inspection? (List of questions)

The appraiser is not a home inspector and does not do a full home inspection. The purpose of a home inspection is to investigate the structure of the property from foundation to top. The general home inspector's report will include an evaluation of the condition of the house'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? (List of questions)

To be blunt, it's like comparing sugar and saccharin. What the CMA relies upon are ill-defined trends. Appraisals use similar sales which are valid resources. Location and architectural prices are also a priority in an appraisal. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an unbiased party, with no vested interest in the value conclusion, unlike the agent, who gets a commission based upon the value of the home.

What are the contents of an appraisal report? (List of questions)

The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:

The client and whose purposes the appraisal is to serve.
The intended use of the report.
The reason for the appraisal.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible considerations.
Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
Division of interest, such as fractional interest, physical segment and partial holding.
What was included in the process of completing the job.

For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report

After completing the appraisal, how can I have certainty that the value conclusion is accurate? (List of questions)

In communicating an appraisal report, each appraiser must ensure the following:

The appraisal contained analysis of the data.

Whether individually or collectively, there were no substantial errors contained in the report, nor any material details left out.

That appraisal services were done in a careful and cognizant manner.

The final appraisal report was easy to explain, legitimate and defensible.

To become a state licensed appraiser, there are education requirements as well as real world experience that must be attained. In addition, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(List of questions) Regulations regarding licensing and certification vary from state to state. In general, licensing and certification is commonly associated with many hours of classroom study, tests and practical experience. Once licensed, he or she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who engages the services of appraisers? (List of questions)

Most of the time, appraisers are called upon by lenders to estimate the value of a home involved in a loan transaction - to make sure the real estate is indeed adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does Homestead Appraisals, Ltd. get the data used to estimate values in Jo Daviess County or other areas? (List of questions)

One of the primary things an appraiser does is to assimilate property data. Data can be categorized as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.

General data is gathered from a variety of sources. To find out about recently sold homes to be used as "comps", we often use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is retrieved 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 creating appraisals for other properties in the same market.

What can a full appraisal do for me? (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, you can avoid 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 house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that? (List of questions)

PMI is short for for Private Mortgage Insurance. This supplementary plan protects the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on 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.


	Did you secure your mortgage with less than 20% down? Call Homestead Appraisals, Ltd. today at 815-777-9112. You may be able to save money by removing your Private Mortgage Insurance payment.

How do I get ready for the appraiser? (List of questions)

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. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would get in our way while we 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, try if possible to have the following items:

Information on any written private easements, such as a shared driveway with a neighbor.
Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
A list of "proposed" improvements when the property is being appraised "as complete".

Define "Market Value" (List of questions)

In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:

"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

Who has rights to the appraisal report? (List of questions)

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 entitled to use the report for any other purpose without permission from the lender.

It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. 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)

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!

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 are right up there with kitchens, 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.