Homestead Appraisals, Ltd. has answers to "Frequently Asked Questions"
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What is an appraisal?
Describe what an appraiser does
What would cause me to require a real estate appraisal?
Is an appraisal the same as a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What can I expect to see in my appraisal report?
Once the assignment is done, what guarantee is there that the final number is valid?
What goes into an appraiser's certification?
Who are an appraiser's customers?
Where does an appraiser 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?
Should I do anything in advance of the appraisal appointment
How does an appraiser define "Market Value"?
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?
What is an appraisal? (Top)
The method of producing an appraisal report deals with an inspection which forms an opinion of value.
The real estate appraiser will typically use a few "approaches," typically three, to conclude the estimation of market value.
The Cost Approach is one of the approaches that appraisers use to find value; it involves discerning what the improvements would cost without physical deterioration, adding the land value.
The Sales Comparison Approach deals with finding similar homes in the vicinity and figuring out the value based on making a comparison of those houses to the property being investigated.
Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residential property.
The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
Describe what an appraiser does (Top)
An appraiser produces an unprejudiced and well substantiated opinion of market value, in the support of real property transactions.
Appraisers demonstrate their professional investigation in appraisal reports.
What would cause me to require a real estate appraisal? (Top)
There are many reasons to order an appraisal from Homestead Appraisals, Ltd. with the most common reason being real estate and mortgage transactions.
Some other reasons for purchasing an appraisal include:
If you need a more detailed explanation of the appraisal process, please click here.
- To get a loan.
- To reduce your tax burden.
- To show a homeowner has 30% equity and remove insurance.
- To fight improperly assessed property taxes.
- To settle an estate.
- To provide you a negotiating tool when purchasing real estate.
- To figure out a reasonable price when putting your home on the market.
- To ensure parties are provided just compensation in eminient domain cases.
- Government agencies such as the IRS need an appraisal on every property.
- It's possible you could be involved in a lawsuit - an appraisal will definitely help.
Home inspectors do not generate an opinion of value and are not appraisers.
The point of a home inspection is to evaluate the structure of the property from bottom to top.
For the most part, a home inspection report will explain the amenities and the requirements of the house: 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? (Top)
To be blunt, it's apples and oranges.
The CMA uses market trends to conduct most of their business.
The appraisal depends on specific proven comparable sales.
Area and construction prices are also a priority in an appraisal.
All a CMA does is generate a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
The person behind the report is hands down the biggest difference between a CMA and an appraisal.
Real estate agents, who may not have a true grasp 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.
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 flat sum for work they perform, regardless of their outcome.
The main point of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report
- Who engaged the appraiser and whose purposes the appraisal is to serve.
- The intended use of the report.
- The appraisal's purpose.
- The type of value contained and a definition of the value reported.
- The effective date of the value opinion.
- Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic factors, 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.
- All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
- Division of interest, such as fractional interest, physical segment and partial holding.
- What was included in the activity of completing the job.
Once the assignment is done, what guarantee is there that the final number is valid? (Top)
In the documentation of an appraisal, each appraiser must ensure the following:
There are rigorous classroom and practical experience requirements that must be satisfied in order to get an appraisal license in Illinois.
In addition, appraisers must stick to a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis contained in the appraisal was appropriate.
- That major errors of omission or commission were not committed individually or collectively.
- That appraisal services were rendered in a careful and cognizant fashion.
- The final appraisal report was easy to explain, credible and not easily discredited.
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience.
Once an appraiser is licensed, he or she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.
Who are an appraiser's customers? (Top)
Mortgage lenders are an appraiser's typical client, requesting 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 hire appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Jo Daviess County or other areas? (Top)
Collecting information is one of the primary occupations of an appraiser.
Data can be described as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is received from a variety of sources.
Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables.
Tax records and other courthouse documents reveal actual sales prices in a market.
Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles 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? (Top)
If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal.
If you're selling your house, an appraisal assists you in setting the most appropriate price.
When buying, you can avoid overpaying by commissioning an independent appraisal.
For parties settling an estate or divorce, an appraisal from Homestead Appraisals, Ltd. is the best documentation to ensure assets are split up properly.
A house 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? (Top)
PMI is an acronym for Private Mortgage Insurance.
PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Does your monthly house payment include a fee for PMI?Call Homestead Appraisals, Ltd. today at 815-777-9112 or send us an e-mail. Documentation of your home's present value could save you thousands.
Should I do anything in advance of the appraisal appointment (Top)
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 condition of its amenities.
Inside, pick up any clutter and make sure we can access 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.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
- A survey or plot map of the property and building (if readily available).
- Written property agreements, such as a maintenance agreement for a shared driveway.
- Most recent real estate tax bill and or legal description of the property.
- Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
- A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
How does an appraiser define "Market Value"? (Top)
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."
Once complete, who actually owns the appraisal report? (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 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 engaging the appraiser for things outside securing a mortgage.
In these cases, the appraiser may define 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.
Which home renovations add the most to the price? (Top)
It really depends on the market.
if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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%.
On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.
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Homestead Appraisals, Ltd. 201 S High St P.O. Box 6333 Galena, IL 61036-6333
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