James M. Hanson Associates, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) An appraisal report is an inspection that concludes with an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or valuation. One of the three 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. Easily the most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which concerns concluding a comparison to similar houses nearby. Usually, the Sales Comparison Approach is the most definite indicator of market value of a home. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to determine the market value of a property based on what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(See list of FAQ's) An appraiser generates a professional, unbiased opinion of market value, in the support of real estate transactions. Appraisers demonstrate their expert analysis in appraisal reports.
What would cause me to require a real estate appraisal?(See list of FAQ's) There are many reasons to purchase an appraisal from James M. Hanson Associates, Inc. with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an 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 do appraisal reports. The purpose of a home inspection is to investigate the structure of the property from basement to attic. The general property inspector's report will include an evaluation of the condition of the home's heating systems, 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)?(See list of FAQ's) Simply put, it's like comparing sugar and saccharin. The CMA utilizes market trends to create most of their business. Appraisals use similar sales which are valid resources. Also, the appraisal checks other factors like condition, neighborhood and construction costs. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person behind the report is actually the most significant difference between a CMA and an appraisal. 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 has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for work they perform, regardless of their outcome.
What can I expect to see in my appraisal report? (See list of FAQ's)Every appraisal should indicate a supported estimate of value and should document the following:
After completing the report, what guarantee is there that the final number is veritable?(See list of FAQ's) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(See list of FAQ's) Mortgage lenders are an appraiser's most likely customer, using their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does James M. Hanson Associates, Inc. get the information used to estimate values in Cape May County or other areas?(See list of FAQ's) Gathering data is one of the primary things an appraiser engages in. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is received from a variety of places. To look up recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. To double-check actual sales prices, we look at tax records and other public documents. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.
Why should I hire a licensed appraiser?(See list of FAQ's) 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 house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. 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 home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is short for for Private Mortgage Insurance. This added policy takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Should I do anything in advance of the appraisal appointment(See list of FAQ's) The first step in most appraisals is the home inspection. During this process, the appraiser 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. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any landscaping and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access items 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:
Define "Market Value"(See list of FAQ's) In real estate appraising, 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 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 cases, 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.
How can I get the most ROI out of home improvements?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. 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.
No matter where you go, however, renovating a kitchen is almost always a safe move. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms are right up there with kitchens, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.