Bachofen Appraisals LLC has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The procedure of creating an appraisal consists of an inspection which leads to an opinion of value. This opinion or estimate is discerned through a formal process that typically uses three "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, less the depreciation and physical deterioration, plus the land value. The Sales Comparison Approach deals with finding similar homes nearby and discovering the value based on making a comparison of those homes to the home being investigated. Being the most popular approach, the Sales Comparison Approach tends to be 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 involves estimating what an investor would pay based on the income generated by the property.
What does an appraiser do?(Return to top) An appraiser provides a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their professional findings in appraisal reports.
What are the reasons a person would require your services?(Return to top) There are many reasons to purchase an appraisal from Bachofen Appraisals LLC with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an report include:
Is an appraisal the same as a home inspection? (Return to top)Home inspectors do not come to an opinion of value and do not do appraisal reports. An inspection is a third-party investigation of the livable structure and mechanical systems of a home, from the roof to the foundation. Usually, a home inspection report will explain the amenities and the requirements of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) To be honest, they have nothing in common. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are verifiable resources. Also, the appraisal checks other factors like condition, neighborhood and replacement costs. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is who's behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. A certified, Wisconsin licensed professional who made a career on valuing real estate in and around Columbia County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for work they perform, regardless of their outcome.
What are the contents of an appraisal report? (Return to top)The main objective of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
Once the assignment is done, how can I have confidence that the value indicated is veritable?(Return to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(Return to top) Most of the time, appraisers are hired by lenders to render a value opinion on a house involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Bachofen Appraisals LLC get the data used to estimate values in Columbia County or other areas?(Return to top) One of the main things an appraiser does is to compile property data. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.
General data is received from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.
And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other houses in the same market.
Why should I hire a licensed appraiser?(Return to top) If you're making any kind of financial decision and the value of your home matters, you'll want a full appraisal. For those selling a home, you'll want to figure out 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. Simply put, 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?(Return to top) PMI is short for for Private Mortgage Insurance. This supplemental plan protects the lender if a borrower defaults on the loan and the value of the home is less than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Should I do anything in advance of the appraisal appointment(Return to top) The first step in most appraisals is the home inspection. 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any shrubs and relocate any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to 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:
Define "Market Value"(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Return to top) For mortgage transactions, the lender requests 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 entitled to a copy of the appraisal - 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 engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated 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, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.