McCormick Real Estate Services of Tennessee has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) An appraiser provides an estimation that produces an opinion of value. There are three "common approaches to value" which assists the real estate appraiser arrive at this opinion or valuation. One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the house, less the depreciation and physical dilapidation, adding the land value. The Sales Comparison Approach involves searching for comparable homes nearby and figuring out the value based on making a comparison of those homes to the home being appraised. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to figure the market value of a property based on what an investor would pay based on the capital produced by the property.
What does an appraiser do?(Go to list of questions) An appraiser produces a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers reveal the details of their expert analysis in appraisal reports.
What are the reasons a person would require services from McCormick Real Estate Services of Tennessee?(Go to list of questions) There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal include:
Is an appraisal the same as a home inspection? (Go to list of questions)Appraisers do not do provide residential property inspections and are not home inspectors. An inspection is a third-party investigation of the available structure and mechanical systems of a property, from the roof to the foundation. The general home inspector's report will contain an evaluation of the condition of the house'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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Go to list of questions) To be blunt, it's like comparing opera to country. The CMA utilizes market trends to generate most of their business. The appraisal is reliant on similar proven comparable sales. Also, the appraisal verifies other factors like condition, neighborhood and building prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is the person doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the value of the home.
What can I expect to see in my appraisal report? (Go to list of questions)The main purpose of an appraisal document 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:
Upon completion of the appraisal, how can I have assurance that the value indicated is legitimate?(Go to list of questions) In the documentation of an appraisal, each appraiser must make sure of the following:
Who are an appraiser's customers?(Go to list of questions) Most of the time, appraisers are employed by lenders to estimate the value of a home involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does McCormick Real Estate Services of Tennessee get the data used to estimate values in Tipton County or other areas?(Go to list of questions) One of the main activities of an appraiser is to collect property data. Data can be described as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a numerous places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To double-check actual sales prices, we research tax records and other public documents that are usually online nowadays. Appraisers routinely need to report when a property is 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 gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Go to list of questions) An appraisal is a worthwhile whenever the value of your home is pertinent to a financial decision. If you're selling your house, an appraisal helps you set the most appropriate price. When buying, be sure you're not overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from McCormick Real Estate Services of Tennessee is the best way to ensure assets are split up properly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
What exactly is PMI and how can I get rid of it?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Do you need anything from the homeowner in advance?(Go to list of questions) The first step in most appraisals is the home inspection. 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 status of its amenities. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any bushes and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access appliances 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:
What does "Market Value" mean?(Go to list of questions) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Go to list of questions) 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 appraisal - 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, 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 do whatever they want with the appraisal.
Which home renovations add the most to the price?(Go to list of questions) Like all things real estate, this is dependent on a home's location. 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.