Scott Stephens & Associates, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) The appraisal process is an evaluation that produces an opinion of value. The appraiser must use a several "approaches," typically three, to come to the estimation of market value. One of them is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with searching for comparable properties nearby and discerning value based on comparing those homes to the property being investigated. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. One of the least common approaches in appraising houses is the Income Approach, which is generally used to figure the market value of a property based on what an investor would pay based on the income produced by the property.
What does an appraiser do?(Back to top) An appraiser produces an unprejudiced and well supported determination of market value, often in the context of a real estate purchase. Appraisers exhibit their investigation in appraisal reports.
What are the reasons I would require services from Scott Stephens & Associates, Inc.?(Back to top) There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal include:
How is an appraisal different than a home inspection? (Back to top)The appraiser is not a home inspector and does not do a comprehensive home inspection. An inspection is a third-party evaluation of the available structure and electrical and mechanical systems of a house, from the roof to the foundation. The archetypal home inspector's report will include an evaluation of the condition of the house'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?(Back to top) Frankly, they share nothing in common. The CMA relies on vague market trends. Appraisals use comparable sales which are verifiable resources. Also, the appraisal verifies other factors like condition, area and replacement costs. 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 creating the report. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on 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 work they perform, regardless of their value conclusion.
What does the appraisal report contain? (Back to top)Every appraisal should demonstrate a believable value opinion and will identify the following:
Once the assignment has been delivered, what guarantee is there that the final number is veritable?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who employs appraisers?(Back to top) Mortgage lenders are an appraiser's most likely customer, needing their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Harris County or other areas?(Back to top) Collecting data is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a variety of places. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers routinely need to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
How can a licensed appraiser help me?(Back to top) 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. For people settling an estate or divorce, an appraisal from Scott Stephens & Associates, Inc. is the best documentation to ensure assets are split up properly. Simply put, 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?(Back to top) PMI is short for for Private Mortgage Insurance. PMI covers the lender if a borrower defaults on the loan and the value of the property is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
How do I get ready for the appraiser?(Back to top) The first step in most appraisals is the home inspection. 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 . Trim any bushes and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.
You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
What is "Market Value?"(Back to top) In real estate appraising, Market Value is commonly defined as:
Who has rights to 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 certainly 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.
It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. 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 stated 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) A home's location - what city it is in and even what part of that city - is key to this popular question. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
No matter where you go, however, renovating a kitchen is almost always a safe move. 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 were second, returning 85%. Adding bedrooms and baths can also increase the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.