New York Realty Services, LLC has answers to "Frequently Asked Questions"
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Define the term "Appraisal"
What does an appraiser do?
What would cause me to need your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
After completing the report, how can I have confidence that the final number is valid?
What goes into an appraiser's certification?
Who hires an appraiser?
Where does an appraiser get the data used to estimate values in New York County or other areas?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What is "Market Value?"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?
Define the term "Appraisal" (List of questions)
An appraiser provides an evaluation that produces 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 three is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value.
The Sales Comparison Approach deals with searching for comparable houses in the vicinity and figuring out the value based on making a comparison of those homes to the home being appraised.
The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a home.
The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the capital produced by the property.
What does an appraiser do? (List of questions)
An appraiser produces a professional, unbiased assessment of market value, in the support of real property exchanges.
Appraisers reveal the details of their findings in appraisal reports.
What would cause me to need your services? (List of questions)
There are a lot of reasons to order an appraisal from New York Realty Services, LLC with the usual reason being real estate and mortgage transactions.
Some other reasons for purchasing an appraisal include:
If you need a more detailed explanation of the appraisal process, please click here.
- To receive a loan.
- If you would like to reduce your property tax obligations.
- To build a case for a homeowner's equity and remove PMI.
- To contest inflated property taxes.
- To settle an estate.
- To provide you a leg-up when purchasing a home.
- To determine the most probable price when putting your home on the market.
- To ensure parties are provided just compensation in eminient domain cases.
- Government agencies such as the IRS require an appraisal on every house.
- It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
The appraiser is not a home inspector nor does he/she do a complete home inspection.
A third-party home inspector will inspect the structure of the property, from the roof to the foundation.
The general house inspector's report will include an evaluation of the integrity of the home'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.
What is the difference between an appraisal and a comparative market analysis (CMA)? (List of questions)
Simply, they have nothing in common.
The CMA uses market trends to generate most of their business.
An appraisal is based on comparable sales that can be verified by records.
The appraisal report will also contain area and construction values.
All a CMA does is generate a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person behind the report.
Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation.
The appraisal is created by a licensed, certified professional who has made a career out of valuing properties.
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 sum for work they perform, regardless of their value conclusion.
The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report
- The client and whose purposes the appraisal is to serve.
- The intended use of the report.
- The purpose of the assignment.
- Precisely what "value" attribute is being reported and what that value means.
- The effective date of the appraiser's opinions and conclusions.
- Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the property rights valued, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible considerations.
- Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
- Division of interest, such as fractional interest, physical segment and partial holding.
- What was included in the activity of completing the appraisal.
After completing the report, how can I have confidence that the final number is valid? (List of questions)
In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
To become a state licensed appraiser, we must meet considerable education and experience requirements that train us to formulate an unbiased opinion.
Plus, appraisers must abide by a strict industry code of ethics and respect national standards of practice for real estate appraisal. The rules for working up an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- The appraisal contained an apropos analysis of the information.
- That significant errors of omission or commission were not committed individually or collectively.
- That appraisal services were done in a careful and judicious manner.
- The final appraisal report was understandable, legitimate and conclusive.
(List of questions)
Licensing and certification takes coursework, tests and practical experience.
Once licensed, he or she is required to take continuing education courses so the license remains up to date. To see the specific requirements for any state click here.
Who hires an appraiser? (List of questions)
Mortgage lenders are an appraiser's typical client, needing their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default.
Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in New York County or other areas? (List of questions)
One of the primary tasks an appraiser performs is to compile property data.
Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.
General data is collected from a numerous sources.
To find out about recent sales to be used as "comps", we typically go to the local Multiple Listing Service.
Tax records and other public documents verify actual sales prices in a market.
Appraisers routinely need to report when a property is 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 assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
What can a full appraisal do for me? (List of questions)
Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps.
When selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market.
If you're buying, it makes sure you don't overpay.
For people settling an estate or divorce, an appraisal from New York Realty Services, LLC is the best documentation to ensure assets are divided properly.
Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that? (List of questions)
PMI is short for for Private Mortgage Insurance.
PMI protects the lender if a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Has your real estate appreciated since you first purchased? Contact New York Realty Services, LLC today at (212) 532-6650. You may be able to save money by removing your Private Mortgage Insurance premium.
How do I get ready for the appraiser? (List of questions)
We start with an inspection of the home.
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 find our way to 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 accuracy of the appraisal report by having the following things on hand:
- A plot plan or survey of the house and land (if readily available).
- Written property agreements, such as a maintenance agreement for a shared driveway.
- Most recent real estate tax bill from New York and or legal description of the property.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
- Information on "Homeowners Associations" or condominium covenants and fees.
What is "Market Value?" (List of questions)
In real estate appraising, 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."
Who has rights to the appraisal report? (List of questions)
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 certainly entitled to a copy of the appraisal - it's usually bundled with all the other closing documents - but is not allowed 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 scenarios, the appraiser may stipulate 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.
Are some home improvements more worthwhile than others? (List of questions)
Like all things real estate, this is dependent on a home's location.
while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
As a rule, the most value returned from renovating a home comes in the kitchen.
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 weren't far behind, returning 85%.
Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.