Bob Gibson & Associates has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) An appraisal is an evaluation allowing the appraiser to come to an opinion of value. This opinion or estimate is arrived at by using a formal process that commonly utilizes the three main "common approaches to value". The Cost Approach is one of the processes that real estate appraisers use to find value; it involves concluding what the improvements would cost less physical deterioration, adding the land value. The Sales Comparison Approach involves searching for similar homes in close proximity and discovering the value based on comparing those prior sales to the home in question. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a residential property. 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.
Describe what an appraiser does(See list of FAQ's) An appraiser generates a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers document their professional findings in appraisal reports.
Why would a person need services from Bob Gibson & Associates?(See list of FAQ's) There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)The appraiser is not a home inspector nor does he/she do a full home inspection. A third-party home inspector will inspect the structure of the home, from the top to the bottom. The archetypal property 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 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)?(See list of FAQ's) Frankly, it's like comparing Shakespeare to reality TV. What the CMA relies upon are ill-defined trends. The appraisal is based on similar valid comparable sales. Location and construction values are also precedent in an appraisal. 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 creating the report. 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, Arkansas licensed professional who made their livelihood on valuing real estate in and around Craighead County creates the appraisal. Moreover, the appraiser is an independent party, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the price of the home.
What can I expect to see in my appraisal report? (See list of FAQ's)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, one will customarily see the following:
After completing the report, what guarantee is there that the value conclusion is accurate?(See list of FAQ's) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(See list of FAQ's) Typically, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Bob Gibson & Associates get the information used to estimate values in Craighead County or other areas?(See list of FAQ's) Gathering data is one of the main things an appraiser does. Data can be described as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is received from a many sources. To look up recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service. To double-check actual sales prices, we use tax records and other public documents that are usually online nowadays. Appraisers routinely have to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, 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?(See list of FAQ's) An appraisal is a worthwhile whenever your home's value is relevant to some financial decision. 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. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Bob Gibson & Associates is the best way to ensure assets are divided properly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(See list of FAQ's) PMI is an acronym for Private Mortgage Insurance. This supplemental plan takes care of the lender if a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(See list of FAQ's) We begin with an inspection of the home. 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 condition of its features. Inside, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
Define "Market Value"(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) 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 report - 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 hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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, returning 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.