Big Sky Appraisal Services, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) The method of producing an appraisal consists of an inspection which forms an opinion of value. There are three "common approaches to value" which helps the appraiser arrive at this opinion or valuation. The Cost Approach is one of the approaches that real estate appraisers use to find the value of a property; it involves concluding what the improvements would cost without physical degradation, plus the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which involves concluding a comparison to comparable homes nearby. Being the most popular approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a home. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to find the market value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Go to list of questions) An appraiser produces a professional, unbiased assessment of market value, in the support of real property transactions. Appraisers illustate their conclusions in appraisal reports.
Why would a person require services from Big Sky Appraisal Services, Inc.?(Go to list of questions) There are a lot of reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal report include:
Is an appraisal the same as a home inspection? (Go to list of questions)Home inspectors do not produce an opinion of value and are not appraisers. The point of a home inspection is to investigate the structure of the house from bottom to top. The usual home inspector's report will include an evaluation of the integrity of the property's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
Is an appraisal the same as a comparative market analysis(CMA)?(Go to list of questions) Honestly, they share nothing in common. The CMA depends on vague market trends. The appraisal is reliant on similar verifiable comparable sales. Location and construction prices are also precedent in an appraisal. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
The credentials of the person creating the report is actually the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Montana licensed professional who has formed a career on valuing homes in and around Gallatin County creates the appraisal. Further, the appraiser is an unbiased voice, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the value of the home.
What does the appraisal report contain? (Go to list of questions)Every report must reflect a credible value opinion and will identify the following:
Once the assignment has been completed, how can I have a guarantee that the value indicated is veritable?(Go to list of questions) In the documentation of an appraisal, each appraiser must ensure the following:
Who engages the services of appraisers?(Go to list of questions) Mortgage lenders are an appraiser's most likely 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 an appraiser get the information used to estimate values in Gallatin County or other areas?(Go to list of questions) One of the main tasks an appraiser must accomplish is to compile data. Data can be described 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 gathered from a number of sources. To find out about recent sales to be used as "comps", an appraiser will often go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me?(Go to list of questions) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine the 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home 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?(Go to list of questions) PMI is an acronym for Private Mortgage Insurance. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than what is owed 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.
How do I get ready for the appraiser?(Go to list of questions) The first step in most appraisals is the property 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 we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and relocate any items that would make it difficult to measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.
To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
How does an appraiser define "Market Value"?(Go to list of questions) In real estate appraising, Market Value is commonly defined as:
Once complete, who actually owns the appraisal report?(Go to list of questions) 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 entitled to a copy of the report - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may stipulate 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 do whatever they want with the appraisal.
Which home renovations add the most to the price?(Go to list of questions) The answer to this is different depending upon the location of the home. 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.
No matter where you go, however, renovating a kitchen is almost always a safe investment. According to one national survey, kitchen remodels returned an average of 88% of the investment. In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms were second, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.