What is an Appraisal?
An appraisal report provides an estimated value for a property, culminating in a value opinion. To arrive at this estimate, appraisers use three primary methods. The Cost Approach calculates value by assessing the expense to replace the property’s improvements, adjusting for depreciation, and then adding the land’s value. The Sales Comparison Approach involves evaluating recently sold, similar properties nearby to determine the value of the property in question. This method is often the most precise and widely used for assessing a home's market value. Lastly, the Income Approach estimates value based on the potential income the property could generate, typically used for investment properties, to determine what an investor might be willing to pay based on projected returns.
What are the reasons someone would require services from Appraisal Consultants?
There are several reasons why someone might need an appraisal, with real estate and mortgage transactions being the most common. Here are some additional situations where an appraisal might be necessary:
- To secure a loan.
- To lower your tax liability.
- To demonstrate that a homeowner has 30% equity in their property, allowing for the removal of Private Mortgage Insurance (PMI).
- To contest high property taxes.
- To settle an estate.
- To gain a competitive advantage when buying a home.
- To determine a suitable listing price for selling your home.
- To ensure fair compensation in eminent domain cases.
- To meet requirements from government agencies like the IRS, which necessitate appraisals for every property.
- Involved in a civil case where an appraisal may be needed.
How do I get ready for the appraiser?
The appraisal process begins with a home inspection. This involves the appraiser visiting the property, after scheduling an appointment, to personally examine the home. They will record the layout of the rooms, take photographs, and document the condition of the amenities. To facilitate this process, ensure that access to the exterior of the house is unobstructed and remove any items that might hinder measurement of the structure. Inside, make sure areas like furnaces and water heaters are easily accessible.
To speed up the appraisal process and enhance the accuracy of the report, it is helpful to have the following documents ready:
- Written agreements related to the property, such as maintenance agreements for shared driveways.
- A list of personal property that will be included in the sale of the home.
- Any agreements from Homeowners Associations or, if applicable, condominium covenants or fees.
- A detailed list of major home improvements and upgrades, including their costs, installation dates, and permit confirmations if available (e.g., energy efficiency upgrades or roof repairs).
- A list of suggested improvements if the property is being appraised as a completed project.
Why do I need a professional Appraisal?
An appraisal is an essential tool whenever you need to make a financial decision related to your home's value. For sellers, an appraisal helps set a price that maximizes profit while ensuring the property sells in a timely manner. Buyers can benefit by using an independent appraisal to avoid overpaying. In cases of estate settlements or divorces, appraisals ensure that property divisions are fair. Since a home is often the largest financial asset a person owns, getting a professional appraisal prevents making decisions without accurate information.