FAQ

What is an appraisal? (Return to top)

The appraisal process is an evaluation that produces an opinion of value. There are three "common approaches to value" which assists the appraiser conclude this opinion or valuation. One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the home, minus depreciation and physical dilapidation, plus the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which deals with figuring a comparison to similar properties nearby. The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a residence. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the money produced by the property.

What does an appraiser do? (Return to top)

An appraiser provides a professional, unbiased determination of market value, in the support of real property exchanges. Appraisers present their professional conclusions in appraisal reports.

What are the reasons a person would require services from Apex Valuation? (Return to top)

There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an report include:

• If you are applying for a loan.
• To reduce your tax burden.
• To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
• To contest high property taxes.
• To deal with an estate.
• To give you a leg-up when purchasing real estate.
• To determine a likely property value when listing your home.
• To ensure parties are provided just compensation in eminient domain cases.
• Because a government agency such as the IRS requires it.
• If you are ever involved in a lawsuit.

Click here for a more detailed explanation of the process involved in getting an appraisal.

Is an appraisal the same as a home inspection? (Return to top)

Home inspectors do not estimate an opinion of value and do not do appraisal reports. The purpose of a home inspection is to investigate the structure of the property from basement to top. The general home 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)? (Return to top)

To be honest, they share nothing in common. What the CMA relies upon are vague trends. Appraisals use comparable sales which are valid resources. Also, the appraisal verifies other factors like condition, neighborhood and replacement prices. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the most significant factor is the person doing 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 created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no vested interest in the value of a home, unlike the real estate agent, who gets a commission based upon the value of the home.

What can I expect to see in my appraisal report? (Return to top)

The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:

• Who engaged the appraiser and whose purposes the appraisal is to serve.
• How the appraisal is supposed to be used.
• The purpose of the appraisal.
• The type of value contained and a definition of the value reported.
• The effective date of the appraisal.
• Relevant property characteristics, including: location, physical description, legal attributes, economic factors, the property rights in question, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible considerations.
• All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
• Division of interest, such as fractional interest, physical segment and partial holding.
• The scope of work used when completing the assignment.

For a more in depth view of what goes into an appraisal report click here: Sample Appraisal Report

Once the assignment has been completed, what guarantee is there that the final number is legitimate? (Return to top)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:

• The appraisal contained analysis of the information.
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• Whether individually or collectively, there were no critical errors contained in the appraisal, nor any material details left out.
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• That appraisal services were provided in a careful and cognizant manner.
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• That a believable, defensible appraisal report was imparted.

There are rigorous education and real world experience requirements that must be adhered to in order to get an appraisal license in Indiana. In addition, appraisers must obey a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Expert Appraisal Practice (USPAP).

(Return to top) Licensing and certification requires classroom study, tests and real world experience. Once an appraiser is licensed, he/she is required to complete continuing education courses so the license remains current. To see the specific requirements for any state click here.

Who hires an appraiser? (Return to top)

Most of the time, appraisers are hired by lenders to estimate the value of real estate involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does Apex Valuation get the data used to estimate values in Northeast Indiana or other areas? (Return to top)

One of the primary activities of an appraiser is to compile property data. Data can be categorized as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.

General data is gathered from a number of places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other public documents reveal 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 assimilates general data from his or her past experience in creating appraisals for other houses in the same market.

Why should I hire a licensed appraiser? (Return to top)

If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to figure out a 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. For people settling an estate or divorce, an appraisal from Apex Valuation is the best documentation to ensure assets are divided evenly. A home 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? (Return to top)

PMI stands for Private Mortgage Insurance. This additional plan covers the lender if a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan. 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 loan payment include a fee for PMI?Call Apex Valuation today at 260-918-2901 or send us an e-mail. Documentation of your home's present value could save you thousands.

Should I do anything in advance of the appraisal inspection (Return to top)

The first step in most appraisals is the property inspection. 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 . Trim any shrubs and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.

You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:

• A plot plan or survey of the house and land (if readily available).
• Information on any written private agreements, such as a shared driveway with a neighbor.
• Title policy that lists encroachments or easements.
• Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
• A list of "suggested" improvements when the property is being appraised "as complete".

What is "Market Value?" (Return to top)

In real estate appraising, 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."

Who actually owns the appraisal report? (Return 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 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.

It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.

Which home renovations add the most to the price? (Return to top)

The answer to this is different depending upon the location of the home. 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 are right up there with kitchens, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.

Apex Valuation 8304 Norwood Ct Fort Wayne, IN 46835

Phone: 260-918-2901 Fax: 260-247-2852 E-mail: Dave@ApexValuationLLC.com