McHugh Appraisal Service has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) An appraisal is an estimation leading to an opinion of value. This opinion or estimate is discerned through a formal process that commonly utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the home, less the age and physical deterioration, plus the land value. Easily the most common approach in finding the likely sales price of a house is the Sales Comparison Approach which concerns making a comparison to comparable houses nearby. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. 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 produced by the property.
What does an appraiser do?(Go to list of questions) An appraiser provides a professional, unbiased assessment of market value, in the support of real estate exchanges. Appraisers exhibit their expert analysis in appraisal reports.
Why would a person need your services?(Go to list of questions) There are a lot of reasons to order an appraisal from McHugh Appraisal Service with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal report include:
Is an appraisal the same as a home inspection? (Go to list of questions)Appraisers do not do perform residential property inspections and are not home inspectors. An inspection is a third-party evaluation of the accessible structure and mechanical systems of a home, from the top to the foundation. For the most part, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible 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?(Go to list of questions) To be blunt, it's like comparing opera to country. What the CMA relies upon are superficial trends. The appraisal is based on specific valid comparable sales. Also, the appraisal verifies other factors like condition, location and construction 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 doing the report. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. 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 previously agreed upon sum for assignments, regardless of their outcome.
What's in an appraisal report? (Go to list of questions)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, you'll usually see the following:
Once the report has been completed, what guarantee is there that the value conclusion is legitimate?(Go to list of questions) In the documentation of an appraisal, each appraiser must make sure of the following:
Who employs appraisers?(Go to list of questions) Most of the time, appraisers are hired by lenders to render a value opinion on a home involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.
Where does McHugh Appraisal Service get the information used to estimate values in San Mateo County or other areas?(Go to list of questions) Collecting information is one of the primary roles of an appraiser. Data can be classified as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is gathered from a number of sources. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.
And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
What can a full appraisal do for me?(Go to list of questions) An appraisal is a worthwhile anytime the value of your home is relevant to some financial decision. 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. For those settling an estate or divorce, an appraisal from McHugh Appraisal Service is the best documentation to ensure assets are split up fairly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it?(Go to list of questions) PMI stands for Private Mortgage Insurance. It covers the lender in case a borrower doesn't pay on the loan and the market price of the house is lower 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 inspection(Go to list of questions) 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 features. 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 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 the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
How does an appraiser define "Market Value"?(Go to list of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(Go to list of questions) 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 certainly entitled to a copy of the appraisal - it's usually included 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 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 do whatever they want with the appraisal.
Which home renovations add the most to the price?(Go to list of questions) Like all things real estate, this is dependent on a home's location. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
No matter where you go, however, renovating a kitchen is almost always a safe move. 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, returning 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.