1. What does an appraiser do?
2. What is the difference between an Appraisal and a Home Inspection?
3. What is the difference between an Appraisal and a Comparative Market Analysis (CMA)?
4. What does the appraisal report contain?
5. After completing the report, what assurance is there that the value indicated is valid?
6. How are appraisers certified?
7. Who do appraisers work for?
8. Where does an appraiser get the information used to estimate value?
9. Why do I need a professional appraisal?
10. How do I get ready for the appraiser?
11. What is "Market Value?"
12. Who actually owns the appraisal report?
13. Which home renovations add the most to the price?

What does an appraiser do? Back to Top

An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports.

What is the difference between an Appraisal and a Home Inspection? Back to Top

The appraiser is not a home inspector nor does he/she do a complete home inspection. An appraisal is a third-party evaluation of the accessible structure and mechanical systems of a house, from the roof to the foundation. The standard home inspector's report will include an evaluation of the condition of the home'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)? Back to Top

Simply put, the difference is night and day. The CMA relies on vague market trends. The appraisal relies on specific, verifiable comparable sales. In addition, the appraisal looks at other factors like condition, location and construction costs. A CMA delivers a ''ball park figure.'' An appraisal delivers a defensible and carefully documented opinion of value.

But the biggest difference is the person creating the report. A real estate agent who may or may not have a true grasp of the market or valuation concepts creates a CMA. The appraisal is created by a licensed, certified professional who has made a career of valuing properties. Further, 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 value of the home.

What does the appraisal report contain? Back to Top

Each report must reflect a credible estimate of value and must identify the following:

• The client and other intended users,
• The intended use of the report,
• The purpose of the assignment,
• The type of value reported and the definition of the value reported,
• The effective date of the appraiser's opinions and conclusions,
• Relevant property characteristics, including location attributes, physical attributes, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and 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,
• The scope of work used to complete the assignment.

After completing the report, what assurance is there that the value indicated is valid? Back to Top

In communicating an appraisal report, each appraiser must ensure the following:

• The information analysis utilized in the appraisal was appropriate,
• Significant errors of omission or commission were not committed individually or collectively,
• Appraisal services were not rendered in a careless or negligent manner,
• A credible, supportable appraisal report was communicated.

Most states require that real estate appraisers are state licensed or certified. The state licensed or certified appraiser is trained to render an unbiased opinion based upon extensive education and experience requirements. To become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

How are appraisers certified? Back to Top

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 take continuing education courses in order to keep the license current.

Who do appraisers work for? Back to Top

Typically, appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does an appraiser get the information used to estimate value? Back to Top

Gathering data is one of the primary roles of an appraiser. Data can be divided into specific and general. Specific data is gathered from the home itself. The appraiser gathers location, condition, amenities, size and other specific data during an inspection.

General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood product. And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.

Why do I need a professional appraisal? Back to Top

Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your home, an appraisal helps you set the most appropriate value. If you're buying, it makes certain 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 anyone owns. Knowing its true value means you can make the right financial decisions.

How do I get ready for the appraiser? Back to Top

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 home for inclusion in the report. The best thing you can do to help is make certain the appraiser has easy access to the exterior of the house. Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make certain that the appraiser can easily access items such as furnace and water heater.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:

• A survey of the house and property,
• A deed or title report showing the legal description,
• A recent tax bill,
• A list of personal property to be sold with the house, if applicable,
• A copy of the original plans.

What is "Market Value?" Back to Top

Market value or fair market value is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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:

1. Buyer and seller are typically motivated,
2. Both parties are well informed or well advised,
3. A reasonable time is allowed for exposure to the open market,
4. Payment is made in terms of financial arrangements comparable thereto,
5. 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 Actually Owns the Appraisal Report? Back to Top

In most real estate transactions, the appraisal is ordered by the lender. While the home 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 home buyer is entitled to a copy of the report - it is usually included with all of the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.

The exception to this rule is when a home owner engages an appraiser directly. In this case, the appraiser may stipulate 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? Back to Top

The answer to this is different depending upon the location of the home. Different markets value amenities differently. Adding a central air conditioner in Houston, Texas may add significant value, while putting one in a home located in Buffalo, New York might not have much impact.

As a rule, the most value returned from renovating a home comes in the kitchen. 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, returning 85%.