Cochran Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The procedure of creating an appraisal report consists of an evaluation which forms an opinion of value. The real estate appraiser will typically use a several "approaches," typically three, to come to the estimation of market value. One of the methods in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the home, less the depreciation and physical dilapidation, plus the land value. Easily the most common approach in finding the likely sales price of a home is the Sales Comparison Approach which involves figuring a comparison to comparable properties nearby. Being the most popular approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a house. The Income Approach is primarily used for determining 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 generates an unprejudiced and well justified determination of market value, often in the context of a real estate purchase. Appraisers exhibit their investigation in appraisal reports.
Why would someone need your services?(Back to top) There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
What is the difference between an appraisal and a comparative market analysis (CMA)?(Back to top) Simply, they share nothing in common. The CMA depends on indefinite market trends. The appraisal relies on similar valid comparable sales. In addition, the appraisal checks other factors like condition, location and building prices. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the largest differentiator is the person behind the report. 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. The appraisal is created by a licensed, certified professional who makes a living 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 previously agreed upon sum for assignments, regardless of their outcome.
What's in an appraisal report? (Back to top)The main objective of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
After completing the report, how can I have certainty that the final number is veritable?(Back to top) In communicating an appraisal report, each appraiser must ensure the following:
Who engages the services of appraisers?(Back to top) Typically, appraisers are hired by mortgage lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Gallia County or other areas?(Back to top) One of the primary tasks an appraiser performs is to compile data. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is collected from a variety of places. To research recent sales to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.
And last but not least, the appraiser gathers general data from his or her past experience in 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 anytime the value of your home is pertinent to some financial decision. For those selling a home, you'll want to determine 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. For those settling an estate or divorce, an appraisal from Cochran Appraisal Service is the best documentation to ensure assets are split up properly. 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 is the common abbreviation for for Private Mortgage Insurance. This supplemental plan protects the lender if a borrower defaults on the loan and the market price of the property is less than what is owed 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.
Do you need anything from the homeowner 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. Inside, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(Back to 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 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 hires an appraiser directly. In these cases, the appraiser may define 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.
How can I get the most ROI out of home improvements?(Back to top) This really depends on where the home is. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.