Gallagher Appraisals has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The appraisal process is an evaluation that generates an opinion of value. There are three "common approaches to value" which helps the appraiser arrive at this opinion or valuation. One of the methods in use is the Cost Approach, which finds what it would cost to replace the improvements to the home, less the age and physical deterioration, plus the land value. Another of the processes is the Sales Comparison Approach - which involves discovering a comparison to other similar properties within a close vicinity which have recently sold. Being the most popular approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a home. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to find the market value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do?(Back to top) An appraiser provides a fair and credible assessment of market value, often in the context of a real estate purchase. Appraisers show their analysis in appraisal reports.
What are the reasons a person would need your services?(Back to top) There are many reasons to order an appraisal from Gallagher Appraisals with the most common reason being real estate and mortgage transactions. A few other reasons for purchasing an report include:
How is an appraiser different than a home inspector? (Back to top)Home inspectors do not produce an opinion of value and do not do appraisal reports. A third-party home inspector will evaluate the structure of the house, from the roof to the foundation. The general house inspector's report will contain an evaluation of the integrity of the home'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.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) To be blunt, it's like comparing Shakespeare to reality TV. The CMA depends on vague local market trends. An appraisal relies on comparable sales that can be validated by public record. Also, the appraisal looks at other factors like condition, neighborhood and construction costs. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is who's doing the report. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, Ohio licensed professional who made a career on valuing real estate in and around Delaware County creates the appraisal. Further, the appraiser is an unbiased voice, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.
What does the appraisal report contain? (Back to top)Each appraisal should indicate a credible value opinion and will clearly state the following:
Upon completion of the appraisal, what assurance is there that the final number is accurate?(Back to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who hires Gallagher Appraisals(Back to top) Typically, appraisers are called upon by lenders to render a value opinion on a house involved in a loan transaction. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Delaware County or other areas?(Back to top) Collecting information is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.
General data is gathered from a variety of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To verify actual sales prices, we use tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.
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.
How can a licensed appraiser help me?(Back 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 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is short for for Private Mortgage Insurance. This added plan protects the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal appointment(Back 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. On the home's interior, make sure it is clutter free and that we can get to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
What is "Market Value?"(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. 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 allowed 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 define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Back to top) The added value of a particular amenity truly depends on the local market. 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%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.