Appraisers Of Colorado Springs.Com
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Real estate appraisal is the practice of developing an opinion of the value of real property, usually its Market Value. (Real estate appraisal is American usage; many other countries use the terms property valuation or land valuation.) The need for appraisals arises from the heterogeneous nature of property as an investment class: no two properties are identical, and all properties differ from each other in their location - which is the most important determinant of their value. So there cannot exist a centralised Walrasian auction setting for the trading of property assets, as there exists for trade in corporate stock. The absence of a market-based pricing mechanism determines the need for an expert appraisal/valuation of real estate/property.
A real estate appraisal is performed by a licensed or certified appraiser (in many countries known as a property valuer or land valuer). If the appraiser's opinion is based on Market Value, then it must also be based on the Highest and Best Use of the real property. For mortgage valuations of improved residential property in the US, the appraisal is most often reported on a standardized form, such as the Uniform Residential Appraisal Report.[1]This opinion or estimated value is arrived at through a process that typically uses the three ''common approaches to value''. They are the Cost Approach - which is the cost to replace the improvements, less physical external & functional accrued depreciation, and estimating the present land value. There is the Sales Comparison Approach - which involves making a comparative analysis to other similar, nearby homes which have sold with in the past six months to one year. Usually six months or less. The Sales Comparison Approach is normally the most accurate and widely accepted indicator of value for a residential property. The third approach is the Income Approach, which is most reliable for appraising income producing properties . The income
approach is used to estimate the market value of income producing
properties such as office buildings, warehouses, apartment buildings
and shopping centers. The income approach involves estimating what an investor would pay based on the income produced by the property through the development of income capitalization rates from the local market data.
Why do we need licensed appraisers?
In the aftermath of the $400 billion savings and loan debacle in 1989, Congress passed a bill mandating that all states set up licensing programs for appraisers. Their intent was to help prevent the kind of shaky loans that led to the biggest taxpayer bailout in history until the recent TARP program.
Licensed appraisers must adhere to the Uniform Standards of Professional Appraisal Practice (USPAP), which became effective in 1993. These rules have established a high level of professional and ethical standards which all licensed appraisers must follow.
Why get a home appraisal?
There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal include:
What is the difference between an appraisal and a home inspection?
The appraiser is not a home inspector nor does he/she do a complete home inspection. A home inspection is a third-party evaluation of the structure and mechanical systems of a house, from the roof to the foundation. The standard home 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 does the appraisal report contain?
Each report must reflect a credible estimate of value and must identify the following:
After completing the report, what assurance is there that the value indicated is valid?
In communicating an appraisal report, each appraiser must ensure the following:
Most states require that real estate appraisers are state licensed or certified. The state licensed or certified appraiser is trained to render an unbiased opinion based upon extensive education and experience requirements. To become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
How are appraisers certified?
Regulations regarding licensing and certification of Real Estate Appraisers vary 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 take continuing education courses in order to keep the license current. To see the specific requirements for any state visit www.asc.gov .
Who do appraisers work for?
Typically, appraisers are employed by 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 an appraiser get the information used to estimate value?
Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the home itself. Location, condition, amenities, size and other specific data are gathered by the appraiser during the inspection process.
General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide 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, and most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal?
Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your home, an appraisal helps you set the most appropriate value. 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 home is often the single, largest financial asset anybody owns. Knowing its true value means you can the make correct financial decisions.
What is ''Market Value?''
Market value or fair market value is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) 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 Actually Owns the Appraisal Report?
In most real estate transactions, the appraisal is ordered by the lender. While the home 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 home buyer is entitled to a copy of the report - it's usually included with all of the other closing documents - but is not entitled 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 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.
Which home renovations add the most to the price?
The answer to this is different depending upon the location of the home. Different markets value amenities differently. Adding a central air conditioner or swimming pool in Phoenix , Arizona may add significant value, while putting one in a home located in Buffalo, New York might not have as much impact. Also adding extensive renovations beyond the neighborhood typical expectation may have diminishing returns and may be termed as over improved for the market. Market research or consultation by a state licensed or certified appraiser can be a valuable tool for the home remodeler.
As a guideline, the most value returned from renovating a home comes in the kitchen. According to one national survey, kitchen remodels returned an average of 88% of the investment. (ROI) In other words, a $10,000 kitchen remodeling project would add approximately $8,800 to the value of the home. Bathrooms were second, returning 85%.
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