Gary Brown, Inc. has answers to "Frequently Asked Questions"
||Gary Brown, Inc. is willing to answer any inquiries you might have about appraisals or real estate in Titus County. Contact Gary Brown, Inc. today to see how we can help you with your specific valuation problems.
Define the term "Appraisal"
What does an appraiser do?
Why would someone need a real estate appraisal?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
Once the appraisal is done, what assurance is there that the value conclusion is veritable?
What does it mean for an appraiser to be licensed?
Who hires an appraiser?
Where does an appraiser get the information used to estimate values in Titus County or other areas?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Do you need anything from me in advance?
What is "Market Value?"
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?
Define the term "Appraisal" (Return to top)An appraiser provides an estimation that produces an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or estimate. 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 most common approach in finding the likely sales price of a home is the Sales Comparison Approach which deals with concluding a comparison to comparable properties nearby. Being the most common approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.
What does an appraiser do? (Return to top)An appraiser offers an impartial and well justified determination of market value, often in the context of a real estate purchase. Appraisers exhibit their findings in appraisal reports.
Why would someone need a real estate appraisal? (Return to top)There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
Click here for a more extensive explanation of the process about getting an appraisal.
- To obtain a loan.
- To reduce your tax burden.
- To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
- To fight inflated property taxes.
- If you need to settle an estate.
- To offer you a negotiating tool when purchasing real estate.
- To find a reasonable property value when putting your home on the market.
- To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
- Government agencies such as the IRS need an appraisal on every home.
- It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
Home inspectors do not estimate an opinion of value and do not do appraisal reports. An inspection is a third-party investigation of the accessible structure and systems of a home, from the top to the foundation. The standard home inspector's report will include an evaluation of the integrity of the house'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.
What is the difference between an appraisal and a comparative market analysis (CMA)? (Return to top)Frankly, it's like comparing opera to country. The CMA depends on indefinite local market trends. The appraisal is based on similar definite comparable sales. The appraisal report will also contain area and building costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent party, with no vested interest in the property's value, unlike the real estate agent, who gets a commission based upon the value of the home.
The main point of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report
- The client and other intended users.
- The intended use of the appraisal.
- The appraisal's purpose.
- Precisely what "value" attribute is being reported and what that value means.
- The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
- Pertinent property characteristics, including: location, physical characteristics, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible factors.
- Any 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.
- What was included in the activity of completing the assignment.
Once the appraisal is done, what assurance is there that the value conclusion is veritable? (Return to top)In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
There are intense classroom and real world experience requirements that must be met in order to become a licensed/certified appraiser in Texas. Likewise, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for developing an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis implemented in the appraisal was suitable.
- That major errors of omission or commission were not committed individually or collectively.
- That appraisal services were rendered in a careful and judicious fashion.
- The final appraisal report was transparent, credible and defensible.
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Licensing and certification takes classroom study, tests and real world experience. Once an appraiser is licensed, he/she must then engage in continuing education courses in order to keep the license current. To see the specific requirements for any state click here.
Who hires an appraiser? (Return to top)Mortgage lenders are an appraiser's most likely client, requiring their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does an appraiser get the information used to estimate values in Titus County or other areas? (Return to top)One of the most important things an appraiser does is to collect data. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is received from a number of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often have to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet 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.
What can a full appraisal do for me? (Return to top)An appraisal is a valuable tool anytime your home's value is pertinent to some financial decision. For those selling a home, you'll want to figure out the 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. 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? (Return to top)PMI is the common abbreviation for 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. 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.
||Is PMI something increasing your monthly house payment?Call Gary Brown, Inc. today at 9035737679 or send us an e-mail. A current appraisal could save you thousands.
Do you need anything from me in advance? (Return to top)We begin with an inspection of the property. 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 condition of its features. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would get in our way while we measure the structure. Indoors, make sure we can get to appliances like furnaces and water heaters.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
- Information on the latest purchase of the property in the last three years.
- Written property agreements, such as a maintenance agreement for a shared driveway.
- Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
- Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
- Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
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."
Does the appraisal belong to the bank or the consumer? (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 entitled to a copy of the report - 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 hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state how the appraisal can be used; 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.
Are some home improvements more worthwhile than others? (Return to top)The added value of a particular amenity truly depends on the local market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
As a rule, the most value returned from renovating a home comes in the kitchen. 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, returning 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.
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