Maroun Bechara-MB Appraisal Services, Inc has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) An appraisal is an investigation allowing the appraiser to come to an opinion of value. The appraiser must use a few "approaches," typically three, to draw up the estimation of market value. The Cost Approach is one of the processes that real estate appraisers use to find value; it involves concluding what the improvements would cost without physical depreciation, plus the land value. Easily the most common approach in finding the value of a home is the Sales Comparison Approach which deals with concluding a comparison to comparable homes nearby. Being the most common approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a property. The Income Approach is generally used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.
Describe what an appraiser does(Back to top) An appraiser produces an unprejudiced and well justified assessment of market value, often in the context of a real estate purchase. Appraisers document their professional investigation in appraisal reports.
Why would a person need a real estate appraisal?(Back to top) There are a lot of reasons to order an appraisal from Maroun Bechara-MB Appraisal Services, Inc with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
How is an appraisal different than a home inspection? (Back to top)Home inspectors do not generate an opinion of value and do not do appraisal reports. The purpose of a home inspection is to evaluate the structure of the property from foundation to top. The stereotypical property inspector's report will contain an evaluation of the integrity of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) To be blunt, it's apples and oranges. What the CMA relies upon are superficial trends. Appraisals use comparable sales which are verifiable resources. In addition, the appraisal verifies other factors like condition, neighborhood and building costs. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the biggest difference is who's behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. A certified, Massachusetts licensed professional who bases a career on valuing properties in and around Essex County creates the appraisal. Further, the appraiser is an unbiased 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 are the contents of an appraisal report? (Back to top)The main point 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 report has been completed, how can I have certainty that the value indicated is veritable?(Back to top) In communicating an appraisal report, each appraiser must ensure the following:
Who employs appraisers?(Back to top) Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Maroun Bechara-MB Appraisal Services, Inc get the information used to estimate values in Essex County or other areas?(Back to top) Collecting information is one of the main things an appraiser engages in. Data can be classified as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is collected from a many sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Back to top) Any time 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 a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house 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?(Back to top) PMI is the common abbreviation for for Private Mortgage Insurance. It protects the lender if a borrower doesn't pay on the loan and the market price of the property is lower than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Does the appraiser need anything from me in advance?(Back to top) We begin with an inspection of the home. During this process, we 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can get to appliances like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(Back 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 entitled to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner engages an appraiser directly. In these scenarios, the appraiser may stipulate 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?(Back to top) It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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.