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Central Alabama Appraisals has answers to "Frequently Asked Questions"

Central Alabama Appraisals is always ready to reply to any questions you might have about appraisals in Elmore County. Contact Central Alabama Appraisals today to see how we can help solve your specific valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
Why would a person require your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
After completing the appraisal, what assurance is there that the final number is trustworthy?
What does it mean for an appraiser to be licensed?
Who do appraisers work for?
Where does Central Alabama Appraisals get the data used to estimate values in Elmore County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal appointment
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?

Define the term "Appraisal"   (Back to top)

An appraiser performs an evaluation that generates an opinion of value. This opinion or estimate is found through a formal process that generally utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the property, less the age and physical dilapidation, adding the land value. The Sales Comparison Approach involves searching for similar properties nearby and discovering the value based on comparing those houses to the property being appraised. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.

Describe what an appraiser does   (Back to top)

An appraiser provides a fair and credible opinion of market value, often in the context of a real estate exchange. Appraisers summarize their expert analysis in appraisal reports.

Why would a person require your services?   (Back to top)

There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an report include:
  • To receive a loan.
  • If you would like to reduce your property tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To fight inflated property taxes.
  • If you need to take care of an estate.
  • To give you an edge when purchasing real estate.
  • To determine a reasonable price when selling your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will help.
Click here for a more detailed explanation of the process involved in getting an appraisal.

What is the difference between an appraisal and a home inspection?   (Back to top)

Home inspectors do not produce an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the livable structure and electrical and mechanical systems of a home, from the top to the foundation. The archetypal house inspector's report will include an evaluation of the integrity of the house'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.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Back to top)

Frankly, they have nothing in common. The CMA relies on vague local market trends. An appraisal is based on comparable sales that can be proven by public record. In addition, the appraisal checks other factors like condition, area and construction costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the most significant factor is who's doing the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. 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 collect only a flat fee for work they perform, regardless of their value conclusion.

What's in an appraisal report?   (Back to top)

Each report should demonstrate a credible estimate of value and should identify the following:
  • The client and other intended users.
  • How the appraisal is supposed to be used.
  • The reason for the appraisal.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
  • All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work used while working up the assignment.
For a more detailed view of what goes into an appraisal report click here: Sample Appraisal Report

After completing the appraisal, what assurance is there that the final number is trustworthy?   (Back to top)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
  • That the information analysis utilized in the appraisal was suitable.

  • Whether individually or collectively, there were no substantial errors contained in the report, nor any relevant details left out.

  • That appraisal services were done in a careful and judicious manner.

  • That a believable, substantiated appraisal report was imparted.
There are rigorous classroom and practical experience requirements that must be fulfilled in order to get an appraisal license in Alabama. Likewise, appraisers must abide by a strict industry code of ethics and observe national standards of practice for real estate appraisal. The rules for carrying out an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Back to top) Licensing and certification is achieved through classroom study, tests and real world experience. Once licensed, he/she is required to engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for?   (Back to top)

Mortgage lenders are an appraiser's typical client, needing their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does Central Alabama Appraisals get the data used to estimate values in Elmore County or other areas?   (Back to top)

One of the main tasks an appraiser must accomplish is to compile property data. Data can be divided into Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is collected from a numerous sources. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. To verify actual sales prices, we look at items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.

And last but not least, the appraiser assembles general data from his or her past experience in doing assignments for other properties in the same market.

Why do I need a professional appraisal?   (Back to top)

An appraisal is a worthwhile whenever your home's value is relevant to a financial decision. For those selling a home, you'll want to figure out a 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. For parties settling an estate or divorce, an appraisal from Central Alabama Appraisals is the best way to ensure assets are divided properly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making smart financial decisions.

What exactly is PMI and how can I get rid of it?   (Back to top)

PMI stands for Private Mortgage Insurance. It guards the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan. 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.

The savings from getting rid of your PMI pays for the appraisal in no time. Central Alabama Appraisals stays current with real estate value trends in Wetumpka and Elmore County. Contact us today.

Should I do anything in advance of the appraisal appointment   (Back 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 status of its amenities. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access items like furnaces and water heaters.

You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Written property agreements, such as a maintenance agreement for a shared driveway.
  • Title policy that lists encroachments or easements.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
  • A list of "proposed" improvements if the property is to be appraised "as complete".

What does "Market Value" mean?   (Back to top)

In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:

"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."

Once complete, who actually owns the appraisal report?   (Back 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 entitled to use the report for any other purpose without permission from the lender.

The exception to this rule is when a home owner engages an appraiser directly. In these situations, the appraiser may state 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.

I want to get more for my house. Where should I spend money renovating?   (Back to top)

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.

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 are right up there with kitchens, yielding 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.