Brad Doerle has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Return to top) The method of writing an appraisal consists of an inspection which forms an opinion of value. This opinion or estimate is discerned by a formal method that commonly utilizes the three main "common approaches to value". The Cost Approach is one of the methods that real estate appraisers use to find value; it involves finding what the improvements would cost less physical deterioration, plus the land value. The Sales Comparison Approach involves searching for comparable properties in close proximity and finding value based on comparing those houses to the house in question. The Sales Comparison Approach is normally the most accurate and clearest indicator of a liklely sales price for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the building.
Describe what an appraiser does(Return to top) An appraiser forumlates a professional, unbiased determination of market value, often in the context of a real estate exchange. Appraisers reveal the details of their professional conclusions in appraisal reports.
What are the reasons someone would need your services?(Return to top) There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
Is an appraisal the same as a home inspection? (Return to top)The appraiser is not a home inspector and he or she does not do a complete home inspection. A third-party home inspector will evaluate the structure of the home, from the top to the foundation. Commonly, a home inspection report will explain 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Simply, they have nothing in common. The CMA relies on indefinite trends in the market. Appraisals use comparable sales which are verifiable resources. The appraisal report will also include area and construction values. 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.
Who's behind the report is frankly the most significant difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, state licensed professional who has formed a career on valuing real estate in and around Berkshire County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for assignments, regardless of their outcome.
What's in an appraisal report? (Return to top)Every appraisal must demonstrate a supported estimate of value and must clearly state the following:
Once the appraisal is done, what guarantee is there that the value indicated is trustworthy?(Return to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who do appraisers work for?(Return to top) Mortgage lenders are an appraiser's most likely client, using their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Brad Doerle get the data used to estimate values in Berkshire County or other areas?(Return to top) Gathering data is one of the main tasks an appraiser does. 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 collected from a many places. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To double-check actual sales prices, we use tax records and other public documents. Appraisers routinely have 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 service.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Return to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your home, an appraisal helps you set 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 Brad Doerle is the best way to ensure assets are divided fairly. A home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI stands for Private Mortgage Insurance. This supplementary policy guards the lender if a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan. 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.
How do I get ready for the appraiser?(Return to top) The first step in most appraisals is the home 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. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would get in our way while we measure the structure. Indoors, make sure we can get to items like furnaces and water heaters.
To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
What is "Market Value?"(Return to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return to top) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 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 engaging 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 stated otherwise, the home owner can use the appraisal for any purpose.
How can I get the most ROI out of home improvements?(Return to top) It really depends on the 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 best ROI 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 were second, yielding 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.