Cambridge Valuation has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal? (Back to top)The method of producing an appraisal report deals with an evaluation which forms an opinion of value. The appraiser will typically use a few "approaches," typically three, to conclude the estimation of market value. One of the processes is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach deals with searching for similar homes in the vicinity and discovering the value based on making a comparison of those prior sales to the property in question. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a home. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.
Describe what an appraiser does (Back to top)An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers show their analysis in appraisal reports.
How is an appraisal different than a home inspection? (Back to top)The appraiser is not a home inspector nor does he/she do a full home inspection. An inspection is a third-party evaluation of the accessible structure and electrical and mechanical systems of a home, from the roof to the foundation. Usually, a home inspection report will discuss the amenities and the necessities of the home: 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, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
But the most significant factor is who's behind the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an independent party, with no vested interest in the property's value, unlike the agent, whose income is tied to the price of the home.
What does the appraisal report contain? (Back to top)Every report should reflect a supported value opinion and will identify the following:
Once the assignment is done, what assurance is there that the final number is trustworthy? (Back to top)In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers? (Back to top)Commonly, appraisers are hired by lenders to estimate the value of property involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Cambridge Valuation get the data used to estimate values in Bronx County or other areas? (Back to top)Gathering information is one of the main things an appraiser does. Data can be divided into Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.
And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
Why do I need a professional appraisal? (Back to top)An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. If you're selling your house, an appraisal helps you set the most appropriate price. When buying, be sure you're not overpaying by getting 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. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it? (Back to top)PMI stands for Private Mortgage Insurance. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value" (Back 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? (Back to top)For mortgage transactions, the lender requests 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 certainly entitled to a copy of the appraisal - 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may define the purpose of the appraisal; 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.
Are some home improvements more worthwhile than others? (Back to top)Like all things real estate, this is dependent on a home's location. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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 are right up there with kitchens, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.