Frequently Asked Questions
Thornycroft Appraisals Inc. is always prepared to reply to any questions you might have about appraisals in Moscow, Idaho and Latah County. Don’t hesitate to contact us today.
Define the term “Appraisal”
What does an appraiser do?
What are the reasons a person would request a real estate appraisal?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
Once the appraisal has been delivered, what assurance is there that the value indicated is trustworthy?
What does it mean for an appraiser to be licensed?
Who employs appraisers?
Where does Thornycroft Appraisals Inc. get the data used to estimate values in Moscow, Idaho, Latah County or other areas?
Why should I hire a licensed appraiser?
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?
What is “Market Value?”
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?
The appraisal process is an evaluation that generates an opinion of value. The appraiser must use a few “approaches,” typically three, to arrive at the estimation of market value. The Cost Approach is one of the methods that appraisers use to find the value of a property; it involves figuring what the improvements would cost without physical deterioration, plus the land value. The Sales Comparison Approach deals with searching for similar properties in the vicinity and finding value based on making a comparison of those properties to the home being appraised. Being the most common approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties – it involves estimating what an investor would pay based on the money produced by the property.
An appraiser generates a professional, unbiased assessment of market value, in the support of real property transactions. Appraisers document their expert findings in appraisal reports.
What are the reasons a person would request a real estate appraisal?
There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
- To receive a loan.
- To reduce your tax burden.
- To demonstrate a homeowner’s acquired equity and remove insurance.
- To contest inflated property taxes.
- If you need to take care of an estate.
- To provide you a negotiating tool when purchasing real estate.
- To find the most probable sales price when listing your home.
- To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
- Because an official agency such as the IRS requires it.
- If you ever find yourself in a civil case.
What is the difference between an appraisal and a home inspection?
The appraiser is not a home inspector nor does he/she do a complete home inspection. A third-party home inspector will evaluate the structure of the home, from the top to the foundation. For the most part, a home inspection report will explain the amenities and the requirements of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?
To be honest, they have nothing in common. The CMA uses market trends to conduct most of their business. Appraisals use comparable sales which are valid resources. Also, the appraisal looks at other factors like condition, area and construction costs. 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 doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA’s. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent party, with no vested interest in the value conclusion, unlike the real estate agent, who gets a commission based upon the price of the home.
What are the contents of an appraisal report?
The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
- Who engaged the appraiser and other intended users.
- The intended use of the report.
- The reason for the assignment.
- Precisely what “value” attribute is being reported and what that value means.
- The effective date of the value opinion.
- Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights in question, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible factors.
- 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 job.
In the documentation of an appraisal, each appraiser must ensure the following:
- The appraisal contained an apropos analysis of the information.
- Whether individually or collectively, there were no major errors contained in the appraisal, nor any relevant details left out.
- That appraisal services were delivered in a careful and judicious fashion.
- The final appraisal report was transparent, legitimate and not easily discredited.
What does it mean for an appraiser to be licensed?
To become a state licensed appraiser, there are intense education requirements as well as on the job experience that must be logged – all with the end goal of gaining the skills required to render unbiased value opinions. Likewise, appraisers must obey a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
Licensing and certification requires classroom study, tests and practical experience. Once licensed, he/she is required to 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 customer, requiring their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Collecting data is one of the primary functions of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is received from a many sources. To research recent sales to be used as “comps”, we typically go to the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser?
If you’re making any kind of financial decision and the value of your home matters, you’ll want an appraisal. For those selling a home, you’ll want to determine the 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 house 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?
PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental policy covers the lender in the event a borrower doesn’t pay on the loan and the value of the home 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.
Does your monthly mortgage payment include a fee for PMI? Call Thornycroft Appraisals Inc. today at 208-882-2377 or send us an e-mail. A current appraisal could save you thousands.
Should I do anything in advance of the appraisal appointment?
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 features. On the home’s interior, make sure it is clutter free and that we can get to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
- A plot plan or survey of the house and land (if available).
- List of personal property to be sold with the building.
- A bill for your most recent real estate taxes which should also contain a legal description of the property.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
- Find copies of the current listing agreement, broker’s data sheet and, in the event of a pending sale.
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.”
Once complete, who actually owns the appraisal report?
For mortgage transactions, the lender orders the appraisal, either directly or through a third party. Even though it’s the buyer that eventually pays for the report, the lender is the intended user. The buyer is entitled to a copy of the report – it’s usually bundled with all 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 hires an appraiser directly. In these scenarios, the appraiser may stipulate the purpose of the appraisal; 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?
A home’s location – what city it is in and even what part of that city – is key to this popular question. For example, if you live in a cold region, insulated windows can be a real plus. But they aren’t as attractive in a warm-weather climate.
As a rule, the best ROI 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, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.