Appraisal Associates has answers to "Frequently Asked Questions"


	Appraisal Associates is prepared to elaborate on any concerns you might have about appraisals in Jefferson County. Don't hesitate to contact us today.

What is an appraisal?
Describe what an appraiser does
Why would someone request your services?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Upon completion of the appraisal, what guarantee is there that the final number is legitimate?
How are appraisers certified?
Who employs appraisers?
Where does Appraisal Associates get the data used to estimate values in Jefferson County or other areas?
Why do I need a professional appraisal?
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"?
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 an evaluation allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser come to this opinion or estimate. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with finding similar homes in the vicinity and discovering the value based on comparing those homes to the property in question. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. The Income Approach is generally used for finding the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.

Describe what an appraiser does (List of questions)

An appraiser generates a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers document their analysis in appraisal reports.

Why would someone request your services? (List of questions)

There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal include:

To receive a loan.
If you would like to reduce your property tax burden.
To build a case for a homeowner's equity and remove PMI.
To contest high property taxes.
To settle an estate.
To give you a leg-up when purchasing real estate.
To determine a likely sales price when selling your home.
To ensure parties are provided just compensation in eminient domain cases.
Government agencies such as the IRS need an appraisal on every home.
It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.

For a more detailed description of the appraisal process click here.

How is an appraiser different than a home inspector? (List of questions)

Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the available structure and appliances of a property, from the roof to the bottom. For the most part, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, 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 other visible structures.

My agent performed a CMA for me. Is that the same as an appraisal? (List of questions)

To be blunt, it's apples and oranges. What the CMA depends on are vague trends. The appraisal is based on specific verifiable comparable sales. The appraisal report will also include location and building prices. 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 true grasp of valuation methods or the entire market, generate CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. 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 flat fee for work they perform, regardless of their value conclusion.

What does the appraisal report contain? (List of questions)

Every report should indicate a supported estimate of value and must document the following:

Who engaged the appraiser and whose purposes the appraisal is to serve.
The intended use of the report.
The appraisal's purpose.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the value opinion.
Pertinent property characteristics, including: location, physical attributes, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible factors.
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.
The scope of work used while working up the job.

For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the appraisal, what guarantee is there that the final number is legitimate? (List of questions)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:

That the information analysis implemented in the appraisal was suitable.

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

That appraisal services were not rendered in a careless or negligent fashion.

The final appraisal report was transparent, sound and conclusive.

To become a state licensed appraiser, we must meet extensive education and experience requirements that enable us to formulate an unbiased opinion. Likewise, appraisers must follow a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for working up an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(List of questions) Licensing and certification is achieved through coursework, tests and practical experience. Once an appraiser is licensed, he/she is required to take continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who employs appraisers? (List of questions)

Mortgage lenders are an appraiser's typical client, requiring their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does Appraisal Associates get the data used to estimate values in Jefferson County or other areas? (List of questions)

One of the most important things an appraiser does is to collect data. Data can be split into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is gathered from a variety of sources. To research recently sold homes to be used as "comps", we often go to the local Multiple Listing Service. Tax records and other courthouse 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 most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.

Why do I need a professional appraisal? (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 the 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. A home 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. It covers the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	Has your home value appreciated since you first purchased? Call Appraisal Associates today at (205) 985-8817. You may be able to save money by removing your Private Mortgage Insurance payment.

Should I do anything in advance of the appraisal appointment (List of questions)

The first step in most appraisals is the home inspection. During this process, the appraiser 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can get to appliances like furnaces and water heaters.

You can make things go faster and improve the quality of the appraisal report by having the following things on hand:

Any information on the purchase of the property for the last three years.
Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
Information on "Homeowners Associations" or condominium covenants and fees.
Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
A list of "suggested" improvements if the property is to be appraised "as complete".

How does an appraiser 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. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the report - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.

This rule doesn't apply when a home owner hires an appraiser directly. In these situations, the appraiser may state 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 use the appraisal for any purpose.

Are some home improvements more worthwhile than others? (List of questions)

It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

No matter where you go, however, renovating a kitchen is almost always a safe investment. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms weren't far behind, yielding 85%. Adding bedrooms and baths can also increase 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.