Frank Fulbright has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The appraisal process is an estimation that leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or valuation. One of the three is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves searching for similar houses nearby and discovering the value based on making a comparison of those houses to the house in question. Being the most common approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residence. 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 would bring in.
What does an appraiser do?(Return to top) An appraiser generates a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers document their professional findings in appraisal reports.
What are the reasons I would request your services?(Return to top) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an report include:
How is an appraiser different than a home inspector? (Return to top)Appraisers do not do provide residential property inspections and are not home inspectors. A third-party home inspector will investigate the structure of the property, from the top to the foundation. The standard house 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 visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Frankly, it's night and day. The CMA utilizes market trends to conduct most of their business. An appraisal utilizes comparable sales that can be verified by public record. Location and building costs are also precedent in an appraisal. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The person creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Georgia licensed professional who has formed a career on valuing real estate in and around Cherokee County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (Return to top)The main point 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, one will customarily see the following:
After completing the report, what guarantee is there that the final number is valid?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Return to top) Typically, appraisers are called upon by mortgage lenders to render a value opinion on a house involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does an appraiser get the information used to estimate values in Cherokee County or other areas?(Return to top) Gathering information is one of the main tasks an appraiser engages in. Data can be split into Specific or General. Specific data is collected 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 number of sources. To find out about recently sold homes to be used as "comps", we often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Return to top) If you're making any kind of financial decision and the value of your home matters, you'll want an appraisal. For those selling a home, you'll want to figure out a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by commissioning an independent appraisal. For people settling an estate or divorce, an appraisal from Frank Fulbright is the best documentation to ensure assets are divided evenly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is an acronym for Private Mortgage Insurance. This supplementary plan covers the lender in case a borrower defaults on the loan and the value of the property is lower than the balance of 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.
Do you need anything from me in advance?(Return to top) 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 features. On the home's interior, pick up any clutter and make sure we can get to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
What does "Market Value" mean?(Return to top) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(Return 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 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 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 do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Return to top) The added value of a particular amenity truly depends on the local market. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 were second, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.