Custom Appraisals has answers to "Frequently Asked Questions"


	Custom Appraisals is always willing to elaborate on any concerns you might have about appraisals in Montgomery County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
What are the reasons a person would need 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 does the appraisal report contain?
Upon completion of the appraisal, what guarantee is there that the final number is accurate?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does an appraiser get the data used to estimate values in Montgomery County or other areas?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Should I do anything in advance of the appraisal appointment
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?

What is an appraisal? (See list of FAQ's)

An appraisal report is an investigation allowing the appraiser to come to an opinion of value. The appraiser will use a few "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the processes that appraisers use to find value; it involves finding what the improvements would cost minus physical degradation, plus the land value. Another of the methods is the Sales Comparison Approach - which deals with discovering a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is normally the most definitive and clearest indicator of a liklely sales price for a residential property. The Income Approach is mainly used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.

Describe what an appraiser does (See list of FAQ's)

An appraiser produces an unprejudiced and well justified determination of market value, often in the context of a real estate purchase. Appraisers show their investigation in appraisal reports.

What are the reasons a person would need your services? (See list of FAQ's)

There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:

To get a loan.
If you would like to reduce your property tax obligations.
To build a case for a homeowner's equity and remove PMI.
To fight inflated property taxes.
If you need to settle an estate.
To offer you an edge when purchasing a home.
To determine the most probable price when putting your home on the market.
To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
Because a government agency such as the IRS requires it.
If you are ever involved in a lawsuit.

Click here for a more extensive explanation of the process dealing with getting an appraisal.

What is the difference between an appraisal and a home inspection? (See list of FAQ's)

The appraiser is not a home inspector nor does he/she do a complete home inspection. An inspection is a third-party investigation of the available structure and systems of a property, from the roof to the foundation. The stereotypical house inspector's report will contain an evaluation of the condition of the home'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)? (See list of FAQ's)

Frankly, it's like comparing Shakespeare to reality TV. The CMA utilizes market trends to conduct most of their business. An appraisal is based on comparable sales that can be validated by records. The appraisal report will also include neighborhood and building costs. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the largest differentiator is the person behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. The appraisal is produce by a licensed, certified professional who has made a career 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 accept a flat fee for work they perform, regardless of their value conclusion.

What does the appraisal report contain? (See list of FAQ's)

The main point 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:

Who engaged the appraiser and other intended users.
The intended use of the report.
The purpose of the appraisal.
The type of value reported and a definition of that value.
The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Relevant property attributes, including: location, physical description, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible factors.
All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
Division of interest, such as fractional interest, physical segment and partial holding.
The scope of work considered when completing the assignment.

For a more in depth view of what goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the appraisal, what guarantee is there that the final number is accurate? (See list of FAQ's)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:

The appraisal used a suitable analysis of the data.

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

That appraisal services were not conducted in a careless or negligent manner.

That a trustworthy, defensible appraisal report was conferred.

To become a state licensed appraiser, we must meet intense education and experience requirements that train us to produce an unbiased opinion. Likewise, appraisers must follow a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(See list of FAQ's) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification is commonly associated with many hours of coursework, tests and real world experience. Once an appraiser is licensed, he or she is required to complete continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who engages the services of appraisers? (See list of FAQ's)

Mortgage lenders are an appraiser's most likely customer, needing their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Montgomery County or other areas? (See list of FAQ's)

One of the most important activities of an appraiser is to gather data. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is received from a number of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. To double-check actual sales prices, we look at tax records and other public documents. Appraisers often need to report when a property lies in a flood zone, so 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 creating appraisals for other properties in the same market.

What can a full appraisal do for me? (See list of FAQ's)

An appraisal is a worthwhile anytime your home's value is pertinent to a financial decision. If you're selling your home, an appraisal will help you determine the most appropriate price. 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 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? (See list of FAQ's)

PMI is the common abbreviation for for Private Mortgage Insurance. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the house is lower 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.


	Is PMI a part of your monthly house payment?Call Custom Appraisals today at 540-951-7350 or send us an e-mail. A current appraisal could save you thousands.

Should I do anything in advance of the appraisal appointment (See list of FAQ's)

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. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:

Any information on the purchase of the property for the last three years.
List of personal property to be sold with the building.
A bill for your most recent real estate taxes which should also contain a legal description of the property.
Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .

How does an appraiser define "Market Value"? (See list of FAQ's)

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."

Who has rights to the appraisal report? (See list of FAQ's)

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 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.

This rule doesn't apply when a home owner engages an appraiser directly. In these cases, the appraiser may define the purpose of the appraisal; 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.

Are some home improvements more worthwhile than others? (See list of FAQ's)

This really depends on where the home is. 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

As a rule, the most value returned from renovating a home comes in the kitchen. 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.