Courtright & Associates, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) The procedure of performing an appraisal report consists of an estimation which leads to an opinion of value. The real estate appraiser will use a several "approaches," typically three, to draw up the estimation of market value. One of the methods is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Easily the most common approach in finding the value of a home is the Sales Comparison Approach which concerns figuring a comparison to similar properties nearby. Being the most commonly used approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a home. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the capital generated by the property.
Describe what an appraiser does(Top) An appraiser produces a professional, unbiased assessment of market value, often in the context of a real estate purchase. Appraisers reveal the details of their professional analysis in appraisal reports.
Why would a person need a real estate appraisal?(Top) There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Simply put, it's like comparing opera to country. What the CMA relies upon are ill-defined trends. An appraisal utilizes comparable sales that can be proven by public record. Location and construction prices are also precedent in an appraisal. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
Who's creating the report is actually the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, Texas licensed professional who made a career on valuing properties in and around El Paso County creates the appraisal. Further, the appraiser is an independent voice, with no vested interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.
Once the report has been completed, what assurance is there that the final number is accurate?(Top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who do appraisers work for?(Top) Typically, appraisers are employed by lenders to render a value opinion on a house involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in El Paso County or other areas?(Top) Collecting data is one of the primary occupations of an appraiser. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is received from a many sources. To research recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why should I hire a licensed appraiser?(Top) An appraisal is a valuable tool anytime your home's value is relevant to some financial decision. When selling your home, an appraisal will help you determine a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Courtright & Associates, Inc. is the best documentation to ensure assets are split up properly. 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?(Top) PMI stands for Private Mortgage Insurance. This supplemental plan guards the lender in case a borrower defaults on the loan and the market price of the home is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Does the appraiser need anything from the homeowner in advance?(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, pick up any clutter and make sure we can access 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.
To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
What does "Market Value" mean?(Top) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(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 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 situations, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Top) This really depends on where the home is. 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.
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 weren't far behind, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.