JRM & Associates, Inc. has answers to "Frequently Asked Questions"
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JRM & Associates, Inc. is eager to reply to any questions you might have about appraisals or real estate in Ames and Story County.
Contact JRM & Associates, Inc. today to learn how we can help you with your specific valuation problems.
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Describe an appraisal
Describe what an appraiser does
Why would a person request a real estate appraisal?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Upon completion of the appraisal, what assurance is there that the value indicated is legitimate?
What goes into an appraiser's certification?
Who are an appraiser's customers?
Where does JRM & Associates, Inc. get the data used to estimate values in Story County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What is "Market Value?"
Once complete, who actually owns the appraisal report?
How can I get the most ROI out of home improvements?
Describe an appraisal (Go to list of questions)
An appraiser performs an evaluation that generates an opinion of value.
There are three "common approaches to value" which assists the real estate appraiser come to this opinion or estimate.
One of the three is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value.
The Sales Comparison Approach deals with finding similar houses in close proximity and finding value based on making a comparison of those prior sales to the house being investigated.
The Sales Comparison Approach is commonly the most definitive and clearest indicator of value for a home.
The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.
Describe what an appraiser does (Go to list of questions)
An appraiser offers a professional, unbiased opinion of market value, in the support of real property exchanges.
Appraisers summarize their expert conclusions in appraisal reports.
Why would a person request a real estate appraisal? (Go to list of questions)
There are many reasons to order an appraisal from JRM & Associates, Inc. with the usual reason being real estate and mortgage transactions.
A few other reasons for getting an report include:
- If you are applying for a loan.
- To lower your property taxes.
- To demonstrate a homeowner's acquired equity and remove insurance.
- To fight high property taxes.
- To deal with an estate.
- To provide you an edge when purchasing real estate.
- To determine a likely price when listing your home.
- 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 description of the appraisal process click here.
Appraisers do not do perform residential property inspections and are not home inspectors.
The purpose of a home inspection is to evaluate the structure of the property from basement to top.
For the most part, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal? (Go to list of questions)
Honestly, they share nothing in common.
The CMA utilizes market trends to create most of their business.
The appraisal relies on specific definite comparable sales.
Location and architectural values are also precedent in an appraisal.
A CMA delivers a "ball park figure."
Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is who's doing the report.
A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends.
A certified, Iowa licensed professional who made a career on valuing homes in and around Story County creates the appraisal.
Further, the appraiser is an unbiased voice, with no conditional interest in the value conclusion, unlike the real estate agent, whose income is tied to the price of the home.
Each report should demonstrate a credible estimate of value and will document the following:
- The client and whose purposes the appraisal is to serve.
- The intended use of the appraisal.
- The appraisal's purpose.
- 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 in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible considerations.
- All 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.
- The scope of work used to complete the appraisal.
For a more detailed look at all that goes into an appraisal report click here: Sample Appraisal Report
Upon completion of the appraisal, what assurance is there that the value indicated is legitimate? (Go to list of questions)
In communicating an appraisal report, each appraiser must ensure the following:
- The appraisal used a suitable analysis of the information.
- Whether individually or collectively, there were no substantial errors contained in the appraisal, nor any relevant details left out.
- That appraisal services were provided in a careful and conscientious manner.
- The final appraisal report was clear, sound and conclusive.
To become a state licensed appraiser, there are extensive education requirements as well as real world experience that must be attained - all with the end goal of gaining the skills required to provide unbiased value opinions.
Plus, appraisers must abide by a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for working up an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
(Go to list of questions)
Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification typically translates to many hours of classroom study, tests and practical experience.
Once licensed, he or she must then engage in continuing education courses in order to keep the license current. To see the specific requirements for any state click here.
Who are an appraiser's customers? (Go to list of questions)
Mortgage lenders are an appraiser's typical client, needing their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default.
Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does JRM & Associates, Inc. get the data used to estimate values in Story County or other areas? (Go to list of questions)
Compiling data is one of the primary things an appraiser engages in.
Data can be described as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is received from a many places.
Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables.
Tax records and other courthouse documents verify actual sales prices in a market.
Appraisers routinely need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other properties in the same market.
Why do I need a professional appraisal? (Go to list of questions)
An appraisal is a worthwhile whenever your home's value is pertinent to some financial decision.
For those selling a home, you'll want to figure out the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that.
When buying, you can avoid overpaying by getting an independent appraisal.
For parties settling an estate or divorce, an appraisal from JRM & Associates, Inc. is the best documentation to ensure assets are split up fairly.
Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it? (Go to list of questions)
PMI is short for for Private Mortgage Insurance.
This supplemental policy takes care of the lender if a borrower is unable to pay on the loan and the market price of the property is lower 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.
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The amount you keep from getting rid of the PMI required when you got your mortgage will make up for the price of the appraisal in no time. JRM & Associates, Inc. is a name you can trust when it comes to value trends in Ames and Story County. Contact us today.
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How do I get ready for the appraiser? (Go to list of questions)
We begin with an inspection of the property.
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.
Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
- Records on the latest purchase of the property in the last three years.
- Title policy that describes encroachments or easements.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
- A list of any major home improvements and enhancements, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
- Most recent real estate tax bill and or legal description of the property.
What is "Market Value?" (Go to 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."
Once complete, who actually owns the appraisal report? (Go to 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 included 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 scenarios, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
How can I get the most ROI out of home improvements? (Go to list of questions)
Like all things real estate, this is dependent on a home's location.
For example,
if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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 are right up there with kitchens, returning 85%.
Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.
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