Warren Group, Inc. has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) An appraiser provides an estimation that produces an opinion of value. The appraiser must use a number of "approaches," typically three, to draw up the estimation of market value. One of them is the Cost Approach - which is how much 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 similar homes in close proximity and figuring out the value based on making a comparison of those properties to the home being investigated. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is generally used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.
What does an appraiser do?(Back to top) An appraiser generates an objective and well justified assessment of market value, in the support of real estate transactions. Appraisers show their conclusions in appraisal reports.
What are the reasons I would require services from Warren Group, Inc.?(Back to top) There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
How is an appraiser different than a home inspector? (Back to top)The appraiser is not a home inspector and does not do a full home inspection. The purpose of a home inspection is to evaluate the structure of the property from bottom to top. Generally, a home inspection report will evaluate the amenities and the necessities of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) To be blunt, it's apples and oranges. The CMA relies on indistinct market trends. The appraisal relies on specific definite comparable sales. The appraisal report will also include neighborhood and construction prices. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the largest differentiator is the person doing 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. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in 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 assignments, regardless of their value conclusion.
What can I expect to see in my appraisal report? (Back to top)The main objective of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
Upon completion of the appraisal, what assurance is there that the final number is veritable?(Back to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who are an appraiser's customers?(Back to top) Typically, appraisers are employed by mortgage lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Warren Group, Inc. get the information used to estimate values in Dupage County or other areas?(Back to top) Compiling data is one of the primary activities of an appraiser. Data can be split into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is collected from a number of places. Local Multiple Listing Services (MLS) have 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 outlets, such as a la mode's InterFlood product.
And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other houses in the same market.
Why do I need a professional appraisal?(Back to top) Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine 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, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house 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?(Back to top) PMI is the common abbreviation for for Private Mortgage Insurance. This additional plan takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the home is less 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?(Back to top) The first step in most appraisals is the property inspection. During this process, we 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 several photos of your house for inclusion in the report. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser 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:
How does an appraiser define "Market Value"?(Back to top) In real estate appraising, Market Value is commonly defined as:
Who actually owns the appraisal report?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is 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.
This rule doesn't apply 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 challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
Which home renovations add the most to the price?(Back to top) The answer to this is different depending upon the location of the home. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 were second, yielding 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.