Dale Andersen has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(See list of FAQ's) An appraisal report is an evaluation that concludes with an opinion of value. There are three "common approaches to value" which assists the appraiser arrive at this opinion or valuation. One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the home, minus depreciation and physical dilapidation, adding the land value. Another of the approaches is the Sales Comparison Approach - which deals with making a comparison to other similar properties within a close proximity which have recently sold. Being the most commonly used approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a house. The Income Approach is generally used for finding 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(See list of FAQ's) An appraiser generates a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers demonstrate their professional findings in appraisal reports.
What are the reasons someone would need a real estate appraisal?(See list of FAQ's) There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
How is an appraiser different than a home inspector? (See list of FAQ's)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the accessible structure and appliances of a property, from the roof to the bottom. The stereotypical property inspector's report will contain an evaluation of the condition of the property's heating systems, 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.
Is an appraisal the same as a comparative market analysis(CMA)?(See list of FAQ's) To be honest, they share nothing in common. The CMA utilizes market trends to create most of their business. The appraisal is reliant on similar verifiable comparable sales. The appraisal report will also include neighborhood and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is the person behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an unbiased party, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.
What are the contents of an appraisal report? (See list of FAQ's)Every report must indicate a believable value opinion and should identify the following:
After completing the report, how can I have certainty that the value conclusion is veritable?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who are an appraiser's customers?(See list of FAQ's) Most of the time, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Dale Andersen get the information used to estimate values in Orange County or other areas?(See list of FAQ's) One of the most important things an appraiser does is to collect property data. Data can be split into Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is gathered from a many places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
What can a full appraisal do for me?(See list of FAQ's) An appraisal is a worthwhile whenever your home's value is pertinent to a financial decision. If you're selling your home, an appraisal helps you set the most appropriate price. 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. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. It guards the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal appointment(See list of FAQ's) We begin with an inspection of the home. 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house . Trim any shrubs and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can easily access appliances like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What is "Market Value?"(See list of FAQ's) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the report - it's usually bundled 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 situations, 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.
I want to get more for my house. Where should I spend money renovating?(See list of FAQ's) The added value of a particular amenity truly depends on the local market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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 increase 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.