Diamondback Appraisal Services has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The process of performing an appraisal report consists of an estimation which leads to an opinion of value. The appraiser will typically use a several "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the processes that appraisers use to find value; it involves figuring what the improvements would cost minus physical deterioration, plus the land value. The Sales Comparison Approach deals with searching for comparable properties in close proximity and discerning value based on comparing those properties to the house being appraised. The Sales Comparison Approach is normally the most definitive and clearest indicator of a liklely sales price for a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the income produced by the property.
What does an appraiser do?(Return to top) An appraiser provides a professional, unbiased assessment of market value, to be used in making real estate transactions. Appraisers exhibit their analysis in appraisal reports.
Why would a person request your services?(Return to top) There are a lot of reasons to purchase an appraisal from Diamondback Appraisal Services with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
How is an appraisal different than a home inspection? (Return to top)Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to investigate the structure of the home from foundation to rooftop. The usual property inspector's report will contain an evaluation of the condition of the home's heating system, 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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Frankly, it's night and day. The CMA relies on indefinite local market trends. The appraisal is based on similar definite comparable sales. Area and architectural values are also a priority in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is who's creating the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, Arizona licensed professional who bases a career on valuing properties in and around Maricopa County is behind the appraisal. Moreover, the appraiser is an unbiased party, with no vested interest in the property's value, unlike the real estate agent, who gets a commission based upon the price of the home.
What does the appraisal report contain? (Return to top)The main point of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the appraisal is done, how can I have a guarantee that the final number is accurate?(Return to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Return to top) Mortgage lenders are an appraiser's typical customer, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Diamondback Appraisal Services get the information used to estimate values in Maricopa County or other areas?(Return to top) One of the primary tasks an appraiser engages in is to compile property data. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is collected from a number of places. To research recently sold homes to be used as "comps", an appraiser will typically use the local Multiple Listing Service. Tax records and other public 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 collective knowledge gained from doing assignments for other properties in the same market.
How can a licensed appraiser help me?(Return to top) An appraisal is a worthwhile whenever the value of your home is relevant to a 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 people settling an estate or divorce, an appraisal from Diamondback Appraisal Services is the best documentation to ensure assets are split up fairly. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it?(Return to top) PMI stands for Private Mortgage Insurance. This added policy takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Does the appraiser 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 amenities. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can easily access items 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:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Return to top) For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 entitled to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner engages an appraiser directly. In these scenarios, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated 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) Like all things real estate, this is dependent on a home's location. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 are right up there with kitchens, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.