Ron Balsamo has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(See list of FAQ's) An appraiser provides an evaluation that generates an opinion of value. The real estate appraiser must use a number of "approaches," typically three, to arrive at the estimation of market value. One of the three is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach involves searching for similar homes in close proximity and figuring out the value based on making a comparison of those homes to the house being investigated. Being the most popular approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residential property. One of the least common approaches in appraising homes is the Income Approach, which is commonly used to find the value of a property based on what an investor would pay based on the capital produced by the property.
Describe what an appraiser does(See list of FAQ's) An appraiser offers a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers summarize their analysis in appraisal reports.
What are the reasons I would request your services?(See list of FAQ's) There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an report include:
Is an appraisal the same as a home inspection? (See list of FAQ's)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the accessible structure and appliances of a house, from the roof to the foundation. Generally, a home inspection report will explain 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, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(See list of FAQ's) Honestly, they share nothing in common. What the CMA depends on are ill-defined trends. The appraisal is reliant on similar valid comparable sales. Location and building costs are also important in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is the person 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, Florida licensed professional who has formed their livelihood on valuing real estate in and around Broward County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for assignments, regardless of their outcome.
What can I expect to see in my appraisal report? (See list of FAQ's)The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
Once the report is done, how can I have a guarantee that the value indicated is veritable?(See list of FAQ's) In the documentation of an appraisal, each appraiser must make sure of the following:
Who hires Ron Balsamo(See list of FAQ's) Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Broward County or other areas?(See list of FAQ's) Compiling information is one of the primary functions of an appraiser. Data can be classified as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is received from a variety of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely have 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 last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.
What can a full appraisal do for me?(See list of FAQ's) If you're involved in any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your home, an appraisal helps you set 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. Knowing its true value means you can make informed financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?(See list of FAQ's) PMI is the common abbreviation for for Private Mortgage Insurance. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is lower than the balance of the loan. 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.
How do I get ready for the appraiser?(See list of FAQ's) The first step in most appraisals is the property 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 amenities. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would make it difficult to measure the structure. Indoors, make sure we can get to appliances 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 does "Market Value" mean?(See list of FAQ's) In real estate appraising, Market Value is commonly defined as:
Who has rights to the appraisal report?(See list of FAQ's) For mortgage transactions, the lender orders 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 certainly entitled to a copy of the appraisal - 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.
It's different when it's the homeowner engaging 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 stipulated otherwise, the home owner can do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(See list of FAQ's) A home's location - what city it is in and even what part of that city - is key to this popular question. 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 are right up there with kitchens, returning 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.