FAQ

Frequently asked questions

What is an appraisal?

A real estate appraisal is a professional assessment of a property’s market value.  The appraisal process involves a thorough examination of a property, both inside and out, as well as a comparison with similar properties in the area.  Certified appraisers analyze various factors including location, condition, size, and recent sale prices of comparable properties to provide an accurate and unbiased valuation.

Why do I need a real estate appraisal?

Appraisals can be necessary for various purposes, such as buying/selling a home, refinancing a home, removing private mortgage insurance from a loan, and estate or financial planning, to name a few.

What is PMI?

PMI stands for private mortgage insurance, and it is typically added to your mortgage payment.  It ensures a lender against loss on homes purchased with a down payment of less than 20%. Once you have at least 20% equity in your home, you can typically eliminate having to pay for PMI each month.

How long does an appraisal take?

This can vary depending on the assignment.  The on-site portion of the appraisal process typically takes 30-45 minutes, depending on the property.  However, like many things, research and paperwork can take quite a bit of time, especially for complex appraisal assignments.  Some appraisal assignments can take a few days while others may take a couple of weeks.

How much does an appraisal cost?

The cost of an appraisal varies depending on several factors such as the size of the property, acreage, location, characteristics that are unique to a particular property, and overall complexity.

What is market value?

According to the Uniform Standards of Professional Appraisal Practice, market value is defined as a type of value, stated as an opinion, that presumes the transfer of a property (i.e.-a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the value definition that is identified by the appraiser as applicable in an appraisal.  For most residential lending and/or purchase transactions, market value is defined as the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

How do appraisers determine the value of a property?

Real estate appraisers use several valuation methods to determine the value of a property. The choice of method(s) depends on the type of property, its characteristics, and the availability of data. The three primary methods are:

  1. Sales Comparison Approach (Market Approach):
    • This method involves comparing the subject property to recently sold similar properties, known as “comparables” or “comps,” in the same or similar neighborhood.
    • Appraisers make adjustments to the sale prices of the comps to account for differences in features, size, condition, location, and other factors.
    • The adjusted sale prices of the comps are then used to develop an opinion of value of the subject property.
  2. Cost Approach:
    • The Cost Approach estimates the property’s value by determining the cost to replace it with a similar one, taking into account depreciation.
    • It considers the cost of land, construction or replacement cost, and subtracts depreciation based on factors such as age and condition.
    • This method is often used for new or unique properties where comparable sales data is limited.
  3. Income Approach (Income Capitalization):
    • The Income Approach is mainly used for income-generating properties like rental apartments, commercial buildings, or investment properties.
    • It estimates the property’s value based on its income potential. This involves analyzing rental income, expenses, and the property’s overall capitalization rate.
While the use of these techniques and other data helps to develop a credible report, an appraiser’s experience in the market is also very important, as there are many other factors that must be considered in determining a final opinion of value (i.e-supply/demand, days on market, local external influences, updates/upgrades, etc.).

What is the difference between an appraisal and a home inspection?

Appraisal: An appraisal is focused on determining the market value of a property. Conducted by a licensed/certified appraiser, this assessment takes into account factors like the home’s size, condition, location, and comparable property sales in the area. The appraisal serves as a guide for lenders to establish loan amounts and for buyers and sellers to negotiate a fair price.

Home Inspection: Unlike an appraisal, a home inspection is a thorough evaluation of the structural and mechanical condition of a property. Conducted by a licensed home inspector, this process looks for potential issues such as electrical problems, plumbing defects, roof damage, and more. The primary aim is to inform the buyer of any underlying problems or necessary repairs.

In short, while an appraisal tells you what a home is worth, a home inspection tells you about its condition. Both are important but serve different purposes in a real estate transaction.

 

I recently purchased or refinanced a home with a lender, and I paid for the report. Why is the appraiser unable to discuss the appraisal report with me?

In most mortgage transactions, the lender engages the services of the appraiser directly.  As such, the lender is the client and there are special obligations and responsibilities as a result of this appraiser- client relationship. (i.e.-confidentiality, etc.)   Borrowers are entitled to a copy of the report, and it is typically provided to them by the lender.  However, federal guidelines prohibit the appraiser from discussing the results and opinions of an appraisal with anyone without the express written permission of the client.  It is also common practice for the lender to collect the appraisal fee up front.  While borrowers typically pay this fee, they pay it to the lender, not the appraiser.  The appraiser is later engaged by the lender and has a fiduciary duty to their client.

I would like to have an appraisal completed. What do I need to do?

Feel free to fill out the contact form on this site, call us at 919-459-7711, or email us at bcoats@coatsvaluationgroup.com.  We’ll be glad to help!

Let’s Get Started

We are always happy to answer any questions you have about the process or to explain how a value is derived. While we cannot guarantee outcomes (as in a particular value), we can promise superior service.

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