LYNCH & COMPANY Appraisers & Consultants has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) An appraiser performs an evaluation that leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or valuation. The Cost Approach is one of the processes that appraisers use to find the value of a house; it involves figuring what the improvements would cost minus physical deterioration, adding the land value. The most common approach in figuring the value of a house is the Sales Comparison Approach which involves making a comparison to similar homes close by. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. One of the least common approaches in appraising residential properties 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 income produced by the property.
What does an appraiser do?(See list of FAQ's) An appraiser provides a professional, unbiased opinion of market value, often in the context of a real estate sale. Appraisers demonstrate their findings in appraisal reports.
What are the reasons a person would need your services?(See list of FAQ's) There are a lot of reasons to get an appraisal from LYNCH & COMPANY Appraisers & Consultants with the usual reason being real estate and mortgage transactions. Some other reasons for getting an appraisal include:
How is an appraiser different than a home inspector? (See list of FAQ's)Appraisers do not do complete home inspections and are not home inspectors. An inspection is a third-party evaluation of the available structure and electrical and mechanical systems of a home, from the roof to the foundation. Commonly, a home inspection report will explain the amenities and the necessities of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(See list of FAQ's) Simply, they have nothing in common. The CMA relies on indistinct local market trends. The appraisal is based on similar verifiable comparable sales. Also, the appraisal looks at other factors like condition, neighborhood and construction prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
Who's behind the report is hands down the biggest difference between a CMA and an appraisal. 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. The appraisal is created 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 previously agreed upon fee for work they perform, regardless of their outcome.
What's in an appraisal report? (See list of FAQ's)Every appraisal must demonstrate a supported value opinion and must identify the following:
After completing the appraisal, how can I have confidence that the final number is trustworthy?(See list of FAQ's) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(See list of FAQ's) Mortgage lenders are an appraiser's typical client, requiring their services to ensure a home involved in a mortgage transaction is adequate collateral for a 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 Cuyahoga County or other areas?(See list of FAQ's) Collecting information is one of the primary tasks an appraiser does. Data can be classified as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is gathered from a many sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To double-check actual sales prices, we look at tax records and other public documents. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why do I need a professional appraisal?(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. When selling your house, an appraisal helps you set the most appropriate price. When buying, be sure you're not overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from LYNCH & COMPANY Appraisers & Consultants is the best documentation to ensure assets are divided fairly. A house 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 is short for for Private Mortgage Insurance. It protects the lender if a borrower doesn't pay on the loan and the market price of the property 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.
Should I do anything in advance of the appraisal appointment(See list of FAQ's) We start 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 amenities. On the home's interior, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. On the outside, 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:
How does an appraiser define "Market Value"?(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Who actually owns 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 certainly 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.
The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price?(See list of FAQ's) A home's location - what city it is in and even what part of that city - is key to this popular question. 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 are right up there with kitchens, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.