American Valuation Group, Inc. has answers to "Frequently Asked Questions"
American Valuation Group, Inc. is ready to answer any concerns you might have about appraisals or real estate in Lansing and Cook County. Feel free to contact us today.
(Return to top)The procedure of creating an appraisal consists of an evaluation which leads to an opinion of value. There are three "common approaches to value" which assists the appraiser arrive at this opinion or valuation. One of the methods is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which deals with concluding a comparison to comparable houses close by. Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residence. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the income generated by the property.
(Return to top)An appraiser produces a fair and credible opinion of market value, to be used in making real estate transactions. Appraisers present their conclusions in appraisal reports.
(Return to top)There are many reasons to obtain an appraisal from American Valuation Group, Inc. with the most common reason being real estate and mortgage transactions. Other reasons for getting an report include:
If you are applying for a loan.
To lower your property taxes.
To show a homeowner has 30% equity and remove PMI.
To contest improperly assessed property taxes.
If you need to take care of an estate.
To offer you an edge when purchasing real estate.
To determine a reasonable property value 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 home.
If you are ever involved in a lawsuit.
For a more extensive description of the appraisal process click here.
Home inspectors do not produce an opinion of value and are not appraisers. The purpose of a home inspection is to evaluate the structure of the property from bottom to attic. The stereotypical house inspector's report will contain 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 accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.
(Return to top)Frankly, it's night and day. The CMA uses market trends to generate most of their business. Appraisals use similar sales which are verifiable resources. In addition, the appraisal checks other factors like condition, area and building 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 biggest difference is who's behind 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 produce by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an unbiased voice, with no vested interest in the property's value, unlike the agent, whose income is tied to the value of the home.
Every appraisal should indicate a credible value opinion and will clearly state the following:
Who engaged the appraiser and whose purposes the appraisal is to serve.
The intended use of the appraisal.
The purpose of the assignment.
The type of value reported and a definition of that value.
The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible factors.
All 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 process of completing the appraisal.
For a more detailed view of the work that goes into an appraisal report click here: Sample Appraisal Report
(Return to top)In communicating an appraisal report, each appraiser must make sure of the following:
That the information analysis implemented in the appraisal was proper.
That grave errors of omission or commission were not committed individually or collectively.
That appraisal services were rendered in a careful and cognizant manner.
The final appraisal report was understandable, legitimate and not easily discredited.
To become a state licensed appraiser, we must satisfy considerable education and experience requirements that train us to formulate an unbiased opinion. Plus, appraisers must follow a strict industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
(Return to top)Commonly, appraisers are called upon by lenders to render a value opinion on real estate involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
(Return to top)One of the main things an appraiser does is to collect property data. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is collected from a variety of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often 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 service.
And most importantly, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
(Return 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. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. 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.
(Return to top)PMI stands for Private Mortgage Insurance. This additional policy covers the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Does your monthly house payment include a fee for PMI?Call American Valuation Group, Inc. today at (708) 895-9518 or send us an e-mail. Documentation of your home's present value could save you thousands.
(Return to top)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 we have easy access to the exterior of the house . Trim any bushes and relocate any items that would make it difficult to measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.
You can make our visit 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).
List of personal property to be sold with the home.
Most recent real estate tax bill from Cook and or legal description of the property.
A list of any major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
A list of "suggested" improvements when the property is being appraised "as complete".
(Return to top)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."
(Return 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 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 cases, the appraiser may define 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.
(Return to top)Like all things real estate, this is dependent on a home's location. 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, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.
"Understanding Real Property Economics"
American Valuation 2420 186th Street Lansing, IL 60438
