Frost Appraisal Services, LLC has answers to "Frequently Asked Questions"
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Frost Appraisal Services, LLC is prepared to address any questions you might have about appraisals or real estate in Dona Ana County.
Feel free to contact us today.
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Describe an appraisal
What does an appraiser do?
What would cause me to need your services?
Is an appraisal the same as a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
After completing the report, what assurance is there that the value indicated is legitimate?
What are the requirements to be a certified appraiser?
Who do appraisers work for?
Where does Frost Appraisal Services, LLC get the data used to estimate values in Dona Ana County or other areas?
How can a licensed appraiser help me?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What is "Market Value?"
Who actually owns the appraisal report?
Which home renovations add the most to the price?
Describe an appraisal (Return to top)
The appraisal process is an estimation that produces an opinion of value.
This opinion or estimate is figured through a formal process that typically uses the three main "common approaches to value".
One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value.
Another of the approaches is the Sales Comparison Approach - which deals with finding a comparison to other similar properties within a close vicinity which have recently sold.
Being the most popular approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a house.
The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the capital produced by the property.
What does an appraiser do? (Return to top)
An appraiser offers an impartial and well justified opinion of market value, in the support of real estate exchanges.
Appraisers summarize their expert conclusions in appraisal reports.
What would cause me to need your services? (Return to top)
There are many reasons to obtain an appraisal from Frost Appraisal Services, LLC with the usual reason being real estate and mortgage transactions.
A few other reasons for getting an report include:
- To obtain a loan.
- To lower your property taxes.
- To build a case for a homeowner's equity and remove insurance.
- To fight inflated property taxes.
- To handle an estate.
- To offer you a negotiating tool when purchasing a home.
- To determine a likely price when selling your home.
- To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
- Government agencies such as the IRS require an appraisal on every property.
- It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
For a more extensive explanation of the appraisal process click here.
Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers.
A third-party home inspector will evaluate the structure of the home, from the top to the bottom.
The usual home inspector's report will include an evaluation of the integrity of the home's heating systems, 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.
Is an appraisal the same as a comparative market analysis(CMA)? (Return to top)
Simply put, it's like comparing Shakespeare to reality TV.
What the CMA relies upon are vague trends.
The appraisal is based on specific valid comparable sales.
The appraisal report will also contain neighborhood and construction costs.
A CMA delivers a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
But the most significant factor is the person behind the report.
A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends.
The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties.
Further, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the price of the home.
The main point of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
- Who engaged the appraiser and other intended users.
- The intended use of the report.
- The reason for the assignment.
- The type of value contained and a definition of the value reported.
- The effective date of the appraisal.(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 description, legal attributes, economic factors, the property rights valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible items.
- 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 when completing the job.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report
After completing the report, what assurance is there that the value indicated is legitimate? (Return to top)
In the documentation of an appraisal, each appraiser must ensure the following:
- The appraisal used analysis of the information.
- Whether individually or collectively, there were no major errors contained in the appraisal, nor any material details left out.
- That appraisal services were not conducted in a careless or negligent fashion.
- The final appraisal report was clear, legitimate and not easily discredited.
To become a state licensed appraiser, there are strenuous education requirements as well as real world experience that must be logged.
Plus, appraisers must obey a strict industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
(Return to top)
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification is commonly associated with many hours of coursework, tests and real world experience.
Once licensed, he/she must then take 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? (Return to top)
Typically, appraisers are called upon by lenders to estimate the value of property involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Frost Appraisal Services, LLC get the data used to estimate values in Dona Ana County or other areas? (Return to top)
One of the most important activities of an appraiser is to collect data.
Data can be categorized as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a number of places.
Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables.
To double-check actual sales prices, we look at items in the assessor's office and other public documents.
Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.
And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other houses in the same market.
How can a licensed appraiser help me? (Return to top)
If you're making any kind of financial decision and the value of your home is relevant, you'll want an appraisal.
If you're selling your house, an appraisal helps you set the most appropriate price.
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. Without knowing its real value, wise financial decisions are impossible.
What exactly is PMI and how can I get rid of it? (Return to top)
PMI is an acronym for Private Mortgage Insurance.
It takes care of the lender if a borrower is unable to pay on the loan and the market price of the property 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.
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Does your monthly loan payment have a lineitem for PMI?Call Frost Appraisal Services, LLC today at 575-640-5585 or send us an e-mail. A current appraisal could save you thousands.
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How do I get ready for the appraiser? (Return to top)
The first step in most appraisals is the property inspection.
During this process, we 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. On the inside, make sure we can get to items like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, try if possible to have the following items:
- Written property agreements, such as a maintenance easement for a shared driveway.
- Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
- Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
- Locate copies of the current listing agreement, broker's data sheet and, in the event of a pending sale.
- Most recent real estate tax bill from Dona Ana and or legal description of the property.
What is "Market Value?" (Return to top)
In real estate appraising, Market Value (as opposed to Fair 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."
Who actually owns the appraisal report? (Return to top)
In most real estate transactions, the appraisal is ordered by the lender.
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 entitled to use the report for any other purpose without permission from the lender.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage.
In these situations, the appraiser may define 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 use the appraisal for any purpose.
Which home renovations add the most to the price? (Return to top)
The added value of a particular amenity truly depends on the local 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.
As a rule, the best ROI from renovating a home comes in the kitchen.
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 increase the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.
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