George N. Nogatch & Associates has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The procedure of writing an appraisal deals with an investigation which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or valuation. One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the home, minus age and physical dilapidation, plus the land value. The most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which concerns figuring a comparison to similar homes nearby. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money produced by the property.
What does an appraiser do?(Return to top) An appraiser generates a professional, unbiased opinion of market value, in the support of real property transactions. Appraisers demonstrate their expert analysis in appraisal reports.
What are the reasons I would need services from George N. Nogatch & Associates?(Return to top) There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:
Is an appraisal the same as a home inspection? (Return to top)Appraisers do not do complete home inspections and are not home inspectors. The purpose of a home inspection is to evaluate the structure of the home from foundation to rooftop. For the most part, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, 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 other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Simply put, it's like comparing broadband and dial-up. The CMA depends on indistinct market trends. An appraisal is based on comparable sales that can be verified by public record. The appraisal report will also contain location and construction prices. 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 actually 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 produce by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an unbiased party, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.
What's in an appraisal report? (Return to top)Each appraisal should reflect a believable estimate of value and must identify the following:
Once the assignment has been delivered, how can I have a guarantee that the value conclusion 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 do appraisers work for?(Return to top) Most of the time, appraisers are called upon by lenders to estimate the value of real estate involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does George N. Nogatch & Associates get the information used to estimate values in King County or other areas?(Return to top) Gathering information is one of the primary occupations of an appraiser. 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 documented by the appraiser while on site.
General data is collected from a numerous sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To verify actual sales prices, we research tax records and other public documents. Appraisers often have to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And last but not least, the appraiser gathers 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) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your house, an appraisal assists you in setting the most appropriate price. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. This additional plan covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan. 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.
Should I do anything in advance of the appraisal appointment(Return to top) We begin with an inspection of the home. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. On the home's interior, make sure it is clutter free and that 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 our visit go faster and improve the quality of the appraisal report by having the following things on hand:
Define "Market Value"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report?(Return to top) In most real estate transactions, the appraisal is ordered by the lender. 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 bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner engages an appraiser directly. In these cases, 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 use the appraisal for any purpose.
Are some home improvements more worthwhile than others?(Return to top) This really depends on where the home is. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.