Luzier Quality Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The process of creating an appraisal deals with an investigation which leads to an opinion of value. This opinion or estimate is concluded by a formal process that usually uses the three main "common approaches to value". One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Easily the most common approach in finding the value of a house is the Sales Comparison Approach which involves making a comparison to comparable houses close by. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the income generated by the property.
Describe what an appraiser does(Return to top) An appraiser offers a professional, unbiased determination of market value, in the support of real estate transactions. Appraisers present their analysis in appraisal reports.
Why would someone request your services?(Return to top) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
Is an appraisal the same as a home inspection? (Return to top)The appraiser is not a home inspector and he or she does not do a full home inspection. An inspection is a third-party evaluation of the available structure and systems of a property, from the top to the bottom. The stereotypical house inspector's report will include an evaluation of the condition of the property's heating system, 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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Frankly, it's apples and oranges. The CMA uses market trends to generate most of their business. Appraisals use comparable sales which are valid resources. Location and construction prices are also a priority in an appraisal. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
Who's creating the report is hands down the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. A certified, Pennsylvania licensed professional who bases their livelihood on valuing real estate in and around Clearfield County is behind the appraisal. 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 previously agreed upon sum for work they perform, regardless of their value conclusion.
What does the appraisal report contain? (Return to top)The main objective 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, one will customarily see the following:
Once the appraisal has been delivered, what assurance is there that the value conclusion is legitimate?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who do appraisers work for?(Return to top) Commonly, appraisers are hired by mortgage 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 Luzier Quality Services get the information used to estimate values in Clearfield County or other areas?(Return to top) One of the primary activities of an appraiser is to collect property data. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often have to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Return to top) An appraisal is a worthwhile anytime your home's value is relevant 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. Knowing its true value is essential to making smart financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. This added plan covers the lender if a borrower defaults on the loan and the market price of the home is less than the balance of 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 the appraiser need anything from me in advance?(Return to top) 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 condition of its features. On the home's interior, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
Define "Market Value"(Return to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Return to top) 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 report - 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 hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price?(Return to top) This really depends on where the home is. For example, putting in 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 weren't far behind, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.