Financial Control Group, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Back to top) The procedure of creating an appraisal deals with an inspection which leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or estimate. The Cost Approach is one of the processes that real estate appraisers use to find value; it involves finding what the improvements would cost minus physical deterioration, adding the land value. The Sales Comparison Approach involves searching for similar houses in the vicinity and discovering the value based on making a comparison of those properties to the property being investigated. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is mainly 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 produce.
What does an appraiser do?(Back to top) An appraiser provides a professional, unbiased assessment of market value, often in the context of a real estate purchase. Appraisers exhibit their investigation in appraisal reports.
Why would someone need services from Financial Control 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. Other reasons for purchasing an report include:
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) Simply put, it's apples and oranges. What the CMA depends on are vague trends. Appraisals use comparable sales which are verifiable resources. Also, the appraisal verifies other factors like condition, location and replacement prices. A CMA delivers 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, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, state licensed professional who has formed a career on valuing homes in and around Cook County creates the appraisal. 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 work they perform, regardless of their value conclusion.
What are the contents of an appraisal report? (Back to top)The main objective of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
Upon completion of the appraisal, what guarantee is there that the value conclusion is valid?(Back to top) In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for?(Back to top) Mortgage lenders are an appraiser's most likely client, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Cook County or other areas?(Back to top) One of the main activities of an appraiser is to collect data. Data can be described 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 during an inspection.
General data is collected from a number of sources. To find out about recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers routinely have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
Why should I hire a licensed appraiser?(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 figure out a 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. 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 house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
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. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is less than what is owed on 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.
Does the appraiser need anything from me in advance?(Back to top) The first step in most appraisals is the home inspection. 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 (gates aren't locked, etc). Trim any landscaping and move any items that would get in our way while we measure the structure. Indoors, 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:
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 certainly entitled to a copy of the report - 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 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.
How can I get the most ROI out of home improvements?(Back to top) The added value of a particular amenity truly depends on the local market. 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 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 weren't far behind, yielding 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.