Darrel Clark & Associates, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Top) An appraiser performs an estimation that produces an opinion of value. The real estate appraiser will use a few "approaches," typically three, to draw up the estimation of market value. One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the home, minus age and physical dilapidation, plus the land value. The Sales Comparison Approach deals with finding similar houses in close proximity and figuring out the value based on comparing those homes to the house being investigated. The Sales Comparison Approach is normally the most definitive and best indicator of value for a home. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to find the value of a property based on what an investor would pay based on the income produced by the building.
What does an appraiser do?(Top) An appraiser provides a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers illustate their professional findings in appraisal reports.
What would cause me to require a real estate appraisal?(Top) There are a lot of reasons to purchase an appraisal from Darrel Clark & Associates, Inc. with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
Is an appraisal the same as a comparative market analysis(CMA)?(Top) Frankly, it's like comparing broadband and dial-up. The CMA relies on vague trends in the market. The appraisal depends on similar verifiable comparable sales. Also, the appraisal verifies other factors like condition, neighborhood and replacement costs. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person creating the report is actually the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, Utah licensed professional who made their livelihood on valuing homes in and around Utah County creates the appraisal. Moreover, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the value of the home.
Once the appraisal has been completed, what guarantee is there that the final number is accurate?(Top) In communicating an appraisal report, each appraiser must make sure of the following:
Who engages the services of appraisers?(Top) Typically, appraisers are employed by mortgage lenders to estimate the value of property involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Darrel Clark & Associates, Inc. get the information used to estimate values in Utah County or other areas?(Top) Compiling data is one of the primary tasks an appraiser engages in. Data can be categorized as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a variety of places. To look up recently sold homes to be used as "comps", we often use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
Why should I hire a licensed appraiser?(Top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're 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 house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Top) PMI stands for Private Mortgage Insurance. It guards the lender in the event a borrower defaults on the loan and the market price of the house 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.
Does the appraiser need anything from me in advance?(Top) The first step in most appraisals is the property 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 (gates aren't locked, etc). Trim any landscaping and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
What is "Market Value?"(Top) 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?(Top) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 bundled 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 situations, the appraiser may define 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 use the appraisal for any purpose.
How can I get the most ROI out of home improvements?(Top) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.