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Real Property Analysts, Inc. has answers to "Frequently Asked Questions"

Real Property Analysts, Inc. is always happy to address any concerns you might have about appraisals in Franklin County. Contact us today to talk about how we can help solve your valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
What are the reasons a person would require your services?
Is an appraisal the same as a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Upon completion of the report, how can I have assurance that the final number is legitimate?
What goes into an appraiser's certification?
Who do appraisers work for?
Where does Real Property Analysts, Inc. get the data used to estimate values in Franklin County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal appointment
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?

Define the term "Appraisal"   (See list of FAQ's)

The appraisal process is an estimation that generates an opinion of value. There are three "common approaches to value" which assists the real estate appraiser come to this opinion or valuation. One of the processes 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 most common approach in figuring the value of a home is the Sales Comparison Approach which concerns making a comparison to similar houses close by. The Sales Comparison Approach is normally the most definitive and best indicator of a liklely sales price for a house. 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 income a property would bring in.

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

An appraiser provides an impartial and well supported assessment of market value, in the support of real estate transactions. Appraisers present their investigation in appraisal reports.

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

There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:
  • If you are applying for a loan.
  • To lower your tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To fight improperly assessed property taxes.
  • To settle an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To figure out a reasonable sales 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 civil case.
If you need more information about the appraisal process, please click here.

Is an appraisal the same as a home inspection?   (See list of FAQ's)

The appraiser is not a home inspector nor does he/she do a full home inspection. An inspection is a third-party investigation of the livable structure and electrical and mechanical systems of a house, from the top to the bottom. The standard home inspector's report will include an evaluation of the integrity 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.

Is an appraisal the same as a comparative market analysis(CMA)?   (See list of FAQ's)

Frankly, it's like comparing opera to country. The CMA uses market trends to create most of their business. The appraisal is reliant on specific valid comparable sales. Location and building costs are also precedent in an appraisal. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is who's creating the report. 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, Ohio licensed professional who made a career on valuing homes in and around Franklin County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for work they perform, regardless of their value conclusion.

What are the contents of an appraisal report?   (See list of FAQ's)

Every report must indicate a believable estimate of value and will identify the following:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • The intended use of the appraisal.
  • The purpose of the appraisal.
  • The type of value contained and a definition of that value.
  • The effective date of the appraiser's opinions and conclusions.
  • Pertinent 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.
  • What was entailed in the activity of completing the job.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, how can I have assurance that the final number is legitimate?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal contained analysis of the data.

  • That grave errors of omission or commission were not committed individually or collectively.

  • That appraisal services were not carried out in a careless or negligent fashion.

  • That a believable, defensible appraisal report was conferred.
To become a state licensed appraiser, there are strenuous education requirements as well as practical experience that must be attained. Likewise, appraisers must abide by a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (See list of FAQ's) Licensing and certification requires classroom study, tests and practical experience. Once licensed, he or she must then take continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who do appraisers work for?   (See list of FAQ's)

Typically, appraisers are hired by lenders to render a value opinion on a home involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does Real Property Analysts, Inc. get the data used to estimate values in Franklin County or other areas?   (See list of FAQ's)

One of the primary activities of an appraiser is to compile property data. Data can be divided into Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.

General data is received from a variety of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often 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 product.

And most importantly, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.

Why should I hire a licensed appraiser?   (See list of FAQ's)

An appraisal is a valuable tool whenever your home's value is relevant to a financial decision. For those selling a home, you'll want to figure out the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, be sure you're not overpaying by commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from Real Property Analysts, Inc. is the best way to ensure assets are split up fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making smart financial decisions.

What exactly is PMI and how can I get rid of it?   (See list of FAQ's)

PMI is short for for Private Mortgage Insurance. This added policy guards the lender if a borrower defaults on the loan and the market price of the home is less 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.

The savings from dropping the PMI required when you got your mortgage will make up for the price of the appraisal in no time. Real Property Analysts, Inc. is a name you can trust when it comes to value trends in Columbus and Franklin County. Contact us today.

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

We start with an inspection of the property. 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. Inside, 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 exterior walls.

You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
  • Information on the latest purchase of the property in the last three years.
  • Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Find copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A list of "proposed" improvements when the property is being appraised "as complete".

What does "Market Value" mean?   (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."

Once complete, who actually owns the appraisal report?   (See list of FAQ's)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. 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.

It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.

Which home renovations add the most to the price?   (See list of FAQ's)

The added value of a particular amenity truly depends on the local market. 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 investment. 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, work that may not increase your value would be painting just for the sake of redecorating.