Cullinan Appraisal & Realty has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) The process of producing an appraisal consists of an investigation which forms an opinion of value. This opinion or estimate is figured using a formal process that usually utilizes the three main "common approaches to value". One of the methods is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The Sales Comparison Approach deals with searching for comparable properties in the vicinity and discerning value based on comparing those properties to the property being investigated. Being the most commonly used approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for 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 capital produced by the property.
Describe what an appraiser does(Return to top) An appraiser provides an impartial and well supported opinion of market value, in the support of real estate transactions. Appraisers present their expert investigation in appraisal reports.
What are the reasons a person would need a real estate appraisal?(Return to top) There are many reasons to obtain an appraisal from Cullinan Appraisal & Realty with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
Is an appraisal the same as a home inspection? (Return to top)The appraiser is not a home inspector and he or she does not do a complete home inspection. An inspection is a third-party investigation of the available structure and systems of a house, from the top to the foundation. The stereotypical house inspector's report will include an evaluation of the integrity of the property'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.
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) To be blunt, it's like comparing opera to country. The CMA utilizes market trends to conduct most of their business. An appraisal is based on comparable sales that can be proven by public record. In addition, the appraisal verifies other factors like condition, area and replacement prices. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The person creating the report is hands down the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon fee for assignments, regardless of their value conclusion.
What are the contents of an appraisal report? (Return to top)Every appraisal should demonstrate a supported estimate of value and must clearly state the following:
After completing the report, what guarantee is there that the final number is legitimate?(Return to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who employs appraisers?(Return to top) Commonly, appraisers are hired by mortgage lenders to estimate the value of real estate involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does Cullinan Appraisal & Realty get the information used to estimate values in San Benito County or other areas?(Return to top) One of the primary activities of an appraiser is to collect property data. Data can be described as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.
General data is gathered from a variety of places. To research recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely 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 product.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(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 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. For people settling an estate or divorce, an appraisal from Cullinan Appraisal & Realty is the best documentation to ensure assets are divided evenly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI stands for Private Mortgage Insurance. This supplementary policy covers the lender if a borrower doesn't pay on the loan and the market price of the home is lower 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.
Should I do anything in advance of the appraisal appointment(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 condition of its features. Inside, make sure it is clutter free and that we can access 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.
To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
What is "Market Value?"(Return to top) In real estate appraising, Market Value is commonly defined as:
Once complete, 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 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 stipulate 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.
Which home renovations add the most to the price?(Return to top) Like all things real estate, this is dependent on a home's location. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
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, an improvement that may not add value would be painting just for the sake of redecorating.