Frank Tomecek Real Estate Services has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) An appraisal report is an estimation leading to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or estimate. The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves finding what the improvements would cost without physical deterioration, adding the land value. The Sales Comparison Approach involves searching for similar homes in the vicinity and finding value based on making a comparison of those houses to the house in question. 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 residential properties is the Income Approach, which is mainly used to find the value of a property based on what an investor would pay based on the income produced by the building.
Describe what an appraiser does(Return to top) An appraiser generates a fair and credible determination of market value, in the support of real estate exchanges. Appraisers reveal the details of their professional conclusions in appraisal reports.
What are the reasons someone would request a real estate appraisal?(Return to top) There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
What is the difference between an appraisal and a home inspection? (Return to top)The appraiser is not a home inspector and he or she does not do a complete home inspection. The point of a home inspection is to investigate the structure of the home from foundation to rooftop. Usually, 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) To be blunt, it's like comparing Shakespeare to reality TV. The CMA uses market trends to generate most of their business. An appraisal relies on comparable sales that can be verified by records. In addition, the appraisal looks at other factors like condition, neighborhood and construction prices. A CMA delivers a "ball park 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. A certified, state licensed professional who made their livelihood on valuing real estate in and around Lebanon County is behind the appraisal. Further, the appraiser is an unbiased voice, with no conditional interest in the value conclusion, unlike the real estate agent, whose income is tied to the price of the home.
What are the contents of an appraisal report? (Return to top)The main purpose of an appraisal report 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, how can I have assurance that the value indicated is valid?(Return to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Return to top) Most of the time, appraisers are employed by lenders to estimate the value of property involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Lebanon County or other areas?(Return to top) One of the main activities of an appraiser is to assimilate data. Data can be classified 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 received from a many sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal?(Return to top) An appraisal is a worthwhile anytime the value of your home is relevant to a financial decision. If you're selling your home, an appraisal will help you determine 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 Frank Tomecek Real Estate Services is the best documentation to ensure assets are divided properly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
What exactly is PMI and how can I get rid of it?(Return to top) PMI is an acronym for Private Mortgage Insurance. This supplemental plan covers the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes 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.
Should I do anything in advance of the appraisal appointment(Return to top) We start with an inspection of the home. 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. On the home's interior, make sure it is clutter free and that 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 plus ensure a more accurate report, try if possible to have the following items:
What is "Market Value?"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Return to 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 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, 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 do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(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 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, 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 overbuilt for your neighborhood in terms of size.