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Craggs Appraisal Services, LTD has answers to "Frequently Asked Questions"

Craggs Appraisal Services, LTD is always happy to address any questions you might have about appraisals or real estate in Champaign County. Contact us today to see how we can help solve your valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
What would cause me to need a real estate appraisal?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
Once the assignment has been delivered, how can I have certainty that the value indicated is trustworthy?
How are appraisers certified?
Who do appraisers work for?
Where does an appraiser get the information used to estimate values in Champaign County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
Define "Market Value"
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?

Define the term "Appraisal"   (List of questions)

An appraisal report is an inspection that concludes with an opinion of value. This opinion or estimate is discerned through a formal process that generally utilizes the three main "common approaches to value". One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the home, minus age and physical dilapidation, adding 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 homes nearby. The Sales Comparison Approach is commonly the most definitive and best indicator of a liklely sales price for a house. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.

Describe what an appraiser does   (List of questions)

An appraiser produces a fair and credible opinion of market value, in the support of real property exchanges. Appraisers exhibit their expert findings in appraisal reports.

What would cause me to need a real estate appraisal?   (List of questions)

There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal include:
  • To obtain a loan.
  • To lower your tax burden.
  • To demonstrate a homeowner's acquired equity and remove PMI.
  • To contest high property taxes.
  • If you need to take care of an estate.
  • To offer you a leg-up when purchasing real estate.
  • To find the most probable sales price when selling real estate.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because an official agency such as the IRS requires it.
  • It's possible you could be involved in a lawsuit - an appraisal will definitely help.
For a more detailed explanation of the appraisal process click here.

Is an appraisal the same as a home inspection?   (List of questions)

The appraiser is not a home inspector nor does he/she do a full home inspection. A third-party home inspector will investigate the structure of the home, from the roof to the bottom. The archetypal property inspector's report will include an evaluation of the condition 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)

To be honest, they share nothing in common. The CMA depends on indefinite trends in the market. An appraisal is based on comparable sales that can be validated by records. Also, the appraisal checks other factors like condition, area and building prices. 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.

The credentials of the person behind the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents write 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. Moreover, the appraiser is an independent voice, with no vested interest in the value conclusion, unlike the real estate agent, who gets a commission based upon the price of the home.

What's in an appraisal report?   (List of questions)

Every report must indicate a believable estimate of value and should clearly state the following:
  • The client and other intended users.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • The type of value reported and a definition of that value.
  • The effective date of the appraiser's opinions and conclusions.(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 attributes, the real property interest in question, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible factors.
  • Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • What was included in the process of completing the job.
For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the assignment has been delivered, how can I have certainty that the value indicated is trustworthy?   (List of questions)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • That the information analysis implemented in the appraisal was suitable.

  • Whether individually or collectively, there were no crucial errors contained in the appraisal, nor any material details left out.

  • That appraisal services were rendered in a careful and judicious fashion.

  • That a solid, defensible appraisal report was communicated.
There are rigorous education and real world experience requirements that must be met in order to become a licensed appraiser in Illinois. In addition, appraisers must obey a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (List of questions) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, he or she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for?   (List of questions)

Most of the time, appraisers are hired by lenders to render a value opinion on a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does an appraiser get the information used to estimate values in Champaign County or other areas?   (List of questions)

One of the main things an appraiser does is to compile data. Data can be categorized as either Specific or General. Specific data is gathered from the home 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 data on recently sold homes that might be used as comparables. To double-check actual sales prices, we look at tax records and other public documents. Appraisers often need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.

Why do I need a professional appraisal?   (List of questions)

An appraisal is a valuable tool anytime your home's value is relevant to some financial decision. For those selling a home, you'll want to figure out 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. 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. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.

What exactly is PMI and how can I get rid of it?   (List of questions)

PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary plan protects the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan. 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.

Did you secure your mortgage with less than 20% down? Call Craggs Appraisal Services, LTD today at 2177781818 to see if you can save money by removing your Private Mortgage Insurance payment.

Should I do anything in advance of the appraisal inspection   (List of questions)

We begin with an inspection of the home. During this process, the appraiser 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. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any landscaping and move any items that would get in our way while we measure the structure. On the inside, 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:
  • Information on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the home.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • Brag sheet that lists major home improvements and enhancements, the date of their installation and their cost (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .

Define "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."

Does the appraisal belong to the bank or the consumer?   (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 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.

It's different when it's the homeowner hiring 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.

I want to get more for my house. Where should I spend money renovating?   (List of questions)

It really depends on the market. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

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 were second, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.