William C. Harvey & Associates, Inc. has answers to "Frequently Asked Questions"
||William C. Harvey & Associates, Inc. is always willing to address any concerns you might have about appraisals.
Contact us today to learn how we can help you with your valuation problems.
Define the term "Appraisal"
What does an appraiser do?
What are the reasons someone would need your services?
Is an appraisal the same as a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Once the appraisal has been delivered, what assurance is there that the final number is trustworthy?
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 Fairfax County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?
An appraisal report is an estimation that concludes with an opinion of value.
The appraiser must use a number of "approaches," typically three, to draw up the estimation of market value.
One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the home, less the depreciation and physical dilapidation, plus the land value.
Another of the methods is the Sales Comparison Approach - which concerns finding a comparable analysis to other similar nearby properties which have recently sold.
Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home.
One of the least common approaches in appraising houses is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the building.
An appraiser offers an objective and well justified determination of market value, to be used in making real estate transactions.
Appraisers present their expert investigation in appraisal reports.
There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions.
Some other reasons for ordering an report include:
For a more detailed explanation of the appraisal process click here.
- If you are applying for a loan.
- To lower your tax burden.
- To build a case for a homeowner's equity and remove insurance.
- To fight improperly assessed property taxes.
- To deal with an estate.
- To give you an edge when purchasing a home.
- To find the most probable price when selling your home.
- To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
- 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.
The appraiser is not a home inspector nor does he/she do a complete home inspection.
The purpose of a home inspection is to evaluate the structure of the house from bottom to attic.
Commonly, a home inspection report will evaluate the amenities and the necessities 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Simply put, it's night and day.
The CMA uses market trends to create most of their business.
An appraisal utilizes comparable sales that can be verified by public record.
The appraisal report will also contain area and construction 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 biggest difference is the person doing the report.
Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation.
A certified, Virginia licensed professional who has formed their livelihood on valuing real estate in and around Fairfax County is behind the appraisal.
Moreover, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
Each report must indicate a believable estimate of value and should identify the following:
For a more in depth look at what goes into an appraisal report click here: Sample Appraisal Report
- The client and whose purposes the appraisal is to serve.
- The intended use of the appraisal.
- The appraisal's purpose.
- Precisely what "value" attribute is being reported and what that value means.
- The effective date of the appraisal.
- Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible items.
- All 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 activity of completing the assignment.
In communicating an appraisal report, each appraiser must make sure of the following:
There are intense classroom and real world experience requirements that must be met in order to become a licensed appraiser in Virginia.
Plus, appraisers must follow a strict industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- The appraisal contained analysis of the information.
- That crucial errors of omission or commission were not committed individually or collectively.
- That appraisal services were not executed in a careless or negligent fashion.
- That a trustworthy, substantiated appraisal report was conferred.
Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification is most often associated with many hours of classroom study, tests and real world experience.
Once an appraiser is licensed, he/she must then engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.
Mortgage lenders are an appraiser's typical client, needing their services to ensure a home 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.
Collecting information is one of the primary activities of an appraiser.
Data can be split into Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is collected from a number of places.
To find out about recently sold homes to be used as "comps", we often go to the local Multiple Listing Service.
To verify actual sales prices, we research tax records and other public documents that are usually online nowadays.
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 doing assignments for other houses in the same market.
Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps.
When selling your home, an appraisal assists you in setting the most appropriate price.
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.
A home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
PMI is short for for Private Mortgage Insurance.
This additional plan covers the lender in the event a borrower defaults on the loan and the value of the property is lower than the loan balance.
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.
The savings from cancelling your PMI will make up for the price of the appraisal in no time. Nobody is more qualified than William C. Harvey & Associates, Inc. when it comes to analyzing real estate appreciation in Great Falls and Fairfax County. Contact us today.
The first step in most appraisals is the property 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 status of its amenities.
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 . Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can get to items like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
- Written property agreements, such as a maintenance agreement for a shared driveway.
- Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
- Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
- A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
- A bill for your most recent real estate taxes which should also contain a legal description of the property.
In real estate appraising, 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."
For mortgage transactions, the lender requests the appraisal, either directly or through a third party.
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 situations, 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 use the appraisal for any purpose.
The added value of a particular amenity truly depends on the local market.
installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe move.
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 were second, yielding 85%.
Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.