Brennan's Valuation Service has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(See list of FAQ's) An appraisal report is an evaluation that concludes with an opinion of value. The appraiser will typically use a few "approaches," typically three, to arrive at the estimation of market value. One of the processes is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. Another of the approaches is the Sales Comparison Approach - which concerns finding a comparable analysis to other similar properties within a close vicinity which have recently sold. The Sales Comparison Approach is commonly the most accurate and best indicator of value for a residential property. One of the least common approaches in appraising homes is the Income Approach, which is generally used to figure the market value of a property based on what an investor would pay based on the capital produced by the property.
What does an appraiser do?(See list of FAQ's) An appraiser provides a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers show their professional findings in appraisal reports.
Why would I need your services?(See list of FAQ's) There are many reasons to get an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal report include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)Appraisers do not do provide home inspections and are not home inspectors. An inspection is a third-party investigation of the accessible structure and electrical and mechanical systems of a property, from the roof to the bottom. Generally, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(See list of FAQ's) To be blunt, it's like comparing opera to country. The CMA uses market trends to generate most of their business. The appraisal depends on similar verifiable comparable sales. The appraisal report will also contain area and building prices. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the largest differentiator is the person doing the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their outcome.
What does the appraisal report contain? (See list of FAQ's)Every appraisal should indicate a credible estimate of value and must document the following:
Upon completion of the appraisal, what assurance is there that the value indicated is veritable?(See list of FAQ's) In the documentation of an appraisal, each appraiser must ensure the following:
Who do appraisers work for?(See list of FAQ's) Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure a home 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 Brennan's Valuation Service get the data used to estimate values in Atlantic County or other areas?(See list of FAQ's) Gathering information is one of the primary tasks an appraiser engages in. Data can be classified as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is received from a number of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Appraisers often need 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 service.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
How can a licensed appraiser help me?(See list of FAQ's) If you're involved in some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. For those selling a home, you'll want to determine a price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Brennan's Valuation Service is the best documentation to ensure assets are divided evenly. 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?(See list of FAQ's) PMI stands for Private Mortgage Insurance. This supplemental plan protects the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than the loan balance. 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.
Does the appraiser need anything from me in advance?(See list of FAQ's) 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 . Trim any bushes and relocate any items that would get in our way while we measure the structure. On the inside, make sure we 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:
What is "Market Value?"(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(See list of FAQ's) 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 included 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 cases, the appraiser may state the purpose of the appraisal; 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?(See list of FAQ's) Like all things real estate, this is dependent on a home's location. 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 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 weren't far behind, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.