Adam A. Gromko has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Go to list of questions) An appraisal report is a thought process allowing the appraiser to come to an opinion of value. The real estate appraiser must use a several "approaches," typically three, to conclude the estimation of market value. One of the methods in use is the Cost Approach, which finds 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 finding comparable houses in close proximity and discovering the value based on comparing those houses to the property in question. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is generally used for finding the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.
What does an appraiser do?(Go to list of questions) An appraiser generates a professional, unbiased opinion of market value, in the support of real property exchanges. Appraisers exhibit their expert analysis in appraisal reports.
Why would I need your services?(Go to list of questions) There are a lot of reasons to order an appraisal from Adam A. Gromko with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
Is an appraisal the same as a home inspection? (Go to list of questions)Home inspectors do not produce an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the accessible structure and electrical and mechanical systems of a house, from the roof to the foundation. The usual home inspector's report will include an evaluation of the condition of the property's heating system, 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)?(Go to list of questions) Simply put, it's like comparing sugar and saccharin. The CMA uses market trends to create most of their business. Appraisals use comparable sales which are verifiable resources. Area and construction costs are also important 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 largest differentiator is who's creating the report. A CMA is created 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 created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.
What's in an appraisal report? (Go to list of questions)The main purpose 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:
After completing the report, how can I have confidence that the value conclusion is legitimate?(Go to list of questions) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who hires an appraiser?(Go to list of questions) Most of the time, appraisers are employed by lenders to render a value opinion on property involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Riverside County or other areas?(Go to list of questions) Collecting information is one of the main tasks an appraiser engages in. 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 noted by the appraiser during an inspection.
General data is collected from a numerous places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, 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?(Go to list of questions) An appraisal is a worthwhile anytime your home's value is relevant to a financial decision. When selling your house, an appraisal will help you determine the most appropriate price. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, 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?(Go to list of questions) PMI is short for for Private Mortgage Insurance. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is less than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Do you need anything from the homeowner in advance?(Go to list of questions) 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, pick up any clutter and make sure we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
What does "Market Value" mean?(Go to list of questions) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(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 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 hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may state how the appraisal can be used; 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) It really depends on the market. 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.
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.