FAQs
Zillow and Trulia are just a few of the popular online consumer real estate sites that provide an estimate of the value of your home. These are just what we mentioned, estimations, done by a computer. It is not possible for these computers to take into account all the particulars surrounding your specific house, the market that is resides in, and all the other factors a licensed appraiser reviews. We encourage everyone to take these value estimates with a grain of salt.
Think about it, if these online services were accurate, there would be no need for the nearly 100,000 licensed appraisers across the United States.
How basements or terrace levels are accounted for in the appraisal process is our #1 question that is asked of the appraiser.
Basement or terrace levels are below the main level of the home and are not part of the gross living area (GLA) if any portion of that level is below the grade of the land. This means that if even one of the outside walls is even partially below the land the entire level is considered basement or terrace level.
While this level is not reported in the overall GLA or room count, it is still given value in the analysis, just not the same value as the above grade area or GLA.
As an example, your home might have 3 bedrooms and 2 bathrooms in the GLA and 1 bedroom and 1 bathroom on the basement or terrace level and in your mind your home is a 4 bedroom 3 bathroom home. This is a typical way a homeowner views their home. From a valuation perspective and standard practice, the areas are not treated the same and your home is really a 3 bedroom and 2 bathroom home with a finished basement or terrace level with the additional bedroom and bathroom.
Rest assured though, it is given value, just not the same value as the rest of the home.
As a rule, the most value returned from renovating a home comes in first the kitchen and then the master bathroom. The best way to tell in the Metro Atlanta market is to visit the Remodeling.net site and look over the latest Cost vs Value report for Metro Atlanta.
In most real estate transactions, the appraisal is ordered by the lender. While the home buyer pays for the report as part of the loan process, the lender retains the right to use the report or any information contained within. The home buyer is entitled to a copy of the report – it is required to be included with all of the other closing documents – but is not entitled to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner engages an appraiser directly. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax appeals, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose. Either way, the appraiser can not disclose the report to another outside party with the consent of the client that ordered it.
Market value, or fair market value, is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) 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. Keep in mind, the appraiser does not establish market value, the appraiser reports market value.
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 numerous photos of both the outside and inside of your house for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house. Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure that the appraiser 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:
- A survey of the house and property.
- A deed or title report showing the legal description.
- A recent tax bill.
- A list of personal property to be sold with the house if applicable.
- A copy of the original plans.
- A list of recent improvements in the last 10 years
Gathering data is one of the primary roles of an appraiser. Data can be divided into specific and 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 gathered from a number of sources. 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 gathered from FEMA data sources. And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
In developing and communicating an appraisal report, each appraiser must ensure the following:
- That the information analysis utilized in the appraisal was appropriate.
- That significant errors of omission or commission were not committed individually or collectively.
- That appraisal services were not rendered in a careless or negligent manner.
- That a credible, supportable appraisal report was communicated.
Real estate appraisers are state licensed or certified. The state licensed or certified appraiser is trained to render an unbiased opinion based upon extensive education and experience requirements. To become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP) written by The Appraisal Foundation.
Each report must reflect a credible estimate of value and must identify the following:
- The client and other intended users.
- The intended use of the report.
- The purpose of the assignment.
- The type of value reported and the definition of the value reported.
- The effective date of the appraiser’s opinions and conclusions.
- Relevant property characteristics, including location attributes, physical attributes, legal attributes, economic attributes, the real property interest valued, and non real estate items included in the appraisal, such as personal property, including trade fixtures and intangible items.
- 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 used to complete the assignment.
The CMA relies on vague market trends. The appraisal relies on specific, verifiable comparable sales. In addition, the appraisal looks at other factors like condition, location, and construction costs. A CMA delivers a ”ball park figure.” An appraisal delivers a defensible and carefully documented opinion of value.
The biggest difference is the person creating the report. Many times a CMA is created by a Realtor who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed professional appraiser who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the Realtor, whose income is tied to the perceived value of the home.
There are many reasons to obtain an appraisal with the most common reason being to obtain a mortgage loan. Other reasons for ordering an appraisal include:
- To obtain a loan.
- To lower your tax burden.
- To establish the replacement cost for insurance.
- To contest high property taxes.
- To settle an estate.
- To provide a negotiating tool when purchasing real estate.
- To determine a reasonable price when selling real estate.
- To protect your rights in a condemnation case.
- Because a government agency such as the IRS requires it.
- If the property is involved in a lawsuit.
If you have not read our “What is an Appraisal” page, an appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three ”common approaches to value”. They are:
- Cost Approach – which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value.
- Sales Comparison Approach – which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property.
- Income Approach, which is of most importance in appraising income producing properties – it involves estimating what an investor would pay based on the income produced by the property.
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Client Testimonials
“Worth Every Dollar was outstanding to work with. They did a great job explaining the process before it began and explaining the results. The report was very professional and very well documented and explained. They also offered many suggestions/comments to my questions. Overall, great experience.”
“The appraisal was fast and easy. I initiated contact and he immediately too the time to explain to me my option to ensure I was getting what I needed and at the best price. Once I was sure, I called him back and made the appointment which ended up being just a few days later, so no longer wait (that’s a plus).”
“I learned much more than I expected.
Of course I came away knowing a reasonable value of the home, but I also learned about the market in which I will be selling it. If you need to sell a home, please get an appraisal from this company!”
“This company was quick to return my call even in the midst of them relocating their office. They sent an appraiser out at a time that was convenient for me and my appraisal was completed with the same efficiency and customer service that I received from the first phone call.”
“These days it seems that we ‘expect’ things to not be perfect…
and it is such a pleasant surprise when things not only go well, but beyond your expectations.
Worth Every Dollar Appraisal’s fits this description perfectly.”
“It takes a lot to name your business something like worth every dollar, but the live up to their name. From the first contact, through the process, and follow up questions, they are top notch professional and knowledgeable, moreover with a great understanding of industry related issues.”