First Priority Services has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) An appraisal is a thought process 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 estimate. The Cost Approach is one of the methods that real estate appraisers use to find the value of a house; it involves figuring what the improvements would cost minus physical degradation, plus the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which concerns making a comparison to similar homes close by. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. 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 capital a property produce.
What does an appraiser do?(Back to top) An appraiser offers a fair and credible determination of market value, to be used in making real estate transactions. Appraisers demonstrate their professional investigation in appraisal reports.
What are the reasons someone would require a real estate appraisal?(Back to top) There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an appraisal report include:
How is an appraisal different than a home inspection? (Back to top)The appraiser is not a home inspector and does not do a comprehensive home inspection. The point of a home inspection is to evaluate the structure of the home from basement to top. Generally, a home inspection report will evaluate the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Honestly, they share nothing in common. The CMA depends on indistinct market trends. An appraisal utilizes comparable sales that can be verified by public record. Area and building values are also precedent in an appraisal. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The credentials of the person behind the report is hands down the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, California licensed professional who made a career on valuing real estate in and around Alameda County is behind the appraisal. 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 previously agreed upon sum for assignments, regardless of their outcome.
What's in an appraisal report? (Back to top)Every report must reflect a believable value opinion and must document the following:
After completing the appraisal, how can I have a guarantee that the final number is legitimate?(Back to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who hires First Priority Services(Back to top) Most of the time, appraisers are hired by mortgage lenders to render a value opinion on property involved in a loan transaction - to make sure the subject is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does First Priority Services get the information used to estimate values in Alameda County or other areas?(Back 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 property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is collected from a numerous places. To research recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other public documents verify 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 gathers general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Back to top) An appraisal is a valuable tool whenever the value of your home is pertinent to a financial decision. When selling your home, an appraisal will help you determine the most appropriate price. When buying, you can avoid overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from First Priority Services is the best way to ensure assets are split up fairly. Simply put, 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. It covers the lender in the event a borrower is unable to pay on the loan and the value of the property is less 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.
Does the appraiser need anything from me in advance?(Back 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. On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside walls.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
Define "Market Value"(Back to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(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 certainly entitled to a copy of the appraisal - it's usually included with all the other closing documents - but is not allowed 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 define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Back to top) It really depends on the market. 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 investment. 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, returning 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.