High Desert Valuation Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The method of creating an appraisal report consists of an inspection which forms an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or estimate. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which deals with figuring a comparison to comparable properties nearby. Usually, the Sales Comparison Approach is the most definite indicator of market value of a home. The third approach is the Income Approach, which is the most important method 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(Back to top) An appraiser produces an objective and well justified opinion of market value, in the support of real property transactions. Appraisers summarize their expert findings in appraisal reports.
What would cause me to require services from High Desert Valuation Inc. ?(Back to top) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal include:
How is an appraisal different than a home inspection? (Back to top)Appraisers do not do complete residential property inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the house, from the top to the bottom. Usually, a home inspection report will explain the amenities and the requirements of the house: air conditioning (weather permitting), electrical systems, 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 other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Back to top) To be honest, they have nothing in common. The CMA utilizes market trends to create most of their business. The appraisal is reliant on similar proven comparable sales. Location and building prices are also a priority in an appraisal. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.
But the biggest difference is who's doing the report. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, state licensed professional who bases a career on valuing real estate in and around Deschutes County creates the appraisal. Moreover, the appraiser is an unbiased voice, with no vested interest in the value conclusion, unlike the agent, who gets a commission based upon the price of the home.
What can I expect to see in my appraisal report? (Back to top)The main objective of an appraisal document is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
After completing the report, how can I have assurance that the value indicated is trustworthy?(Back to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who employs appraisers?(Back to top) Mortgage lenders are an appraiser's most likely customer, needing their services to ensure a home 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 High Desert Valuation Inc. get the information used to estimate values in Deschutes County or other areas?(Back to top) Compiling data is one of the primary activities of an appraiser. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is gathered from a variety of sources. To look up recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. To double-check actual sales prices, we look at tax records and other public documents that are usually online nowadays. Appraisers routinely have to report when a property is in a flood zone, so 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 collective knowledge gained from doing assignments for other properties in the same market.
How can a licensed appraiser help me?(Back to top) If you're making any kind of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make smart financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is an acronym for Private Mortgage Insurance. It protects the lender in the event a borrower is unable to pay on the loan and the value of the property is less 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.
How do I get ready for the appraiser?(Back to top) We begin with an inspection of the property. During this process, we 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 (gates aren't locked, etc). Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access appliances 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:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Back to top) 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 engaging the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may define the purpose of the appraisal; 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.
How can I get the most ROI out of home improvements?(Back to top) This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
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 increase your value would be painting just for the sake of redecorating.