JR Appraisal has answers to "Frequently Asked Questions"

JR Appraisal is always prepared to answer any questions you might have about appraisals or real estate in Oxford and Oakland County. Contact us today to see how we can help you with your valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
What are the reasons I would need your services?
How is an appraisal different than a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Once the assignment has been delivered, what assurance is there that the value conclusion is veritable?
How are appraisers certified?
Who hires an appraiser?
Where does JR Appraisal get the data used to estimate values in Oakland County or other areas?
Why do I need a professional appraisal?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?



Define the term "Appraisal"   (See list of FAQ's)

The method of performing an appraisal consists of an evaluation which forms an opinion of value. The real estate appraiser must use a number of "approaches," typically three, to come to the estimation of market value. The Cost Approach is one of the processes that appraisers use to find value; it involves finding what the improvements would cost less physical deterioration, plus the land value. The Sales Comparison Approach deals with finding comparable properties in close proximity and figuring out the value based on making a comparison of those prior sales to the house in question. The Sales Comparison Approach is normally the most definitive and clearest indicator of a liklely sales price for a house. One of the least common approaches in appraising homes is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the property.

Describe what an appraiser does   (See list of FAQ's)

An appraiser offers a professional, unbiased opinion of market value, in the support of real property exchanges. Appraisers present their expert conclusions in appraisal reports.


What are the reasons I would need your services?   (See list of FAQ's)

There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax obligations.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To challenge inflated property taxes.
  • To deal with an estate.
  • To offer you an edge when purchasing real estate.
  • To find the most probable property value when listing your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS need an appraisal on every home.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
For a more detailed explanation of the appraisal process click here.


How is an appraisal different than a home inspection?   (See list of FAQ's)

Home inspectors do not generate an opinion of value and do not do appraisal reports. An inspection is a third-party evaluation of the livable structure and mechanical systems of a property, from the roof to the bottom. For the most part, a home inspection report will explain the amenities and the necessities of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible 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?   (See list of FAQ's)

Frankly, it's like comparing broadband and dial-up. The CMA relies on vague market trends. The appraisal depends on similar verifiable comparable sales. Also, the appraisal verifies other factors like condition, area and building prices. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

Who's creating the report is actually the most significant difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, state licensed professional who has formed their livelihood on valuing homes in and around Oakland County is behind the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat fee for assignments, regardless of their outcome.

What's in an appraisal report?   (See list of FAQ's)

The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
  • The client and whose purposes the appraisal is to serve.
  • The intended use of the report.
  • The purpose of the appraisal.
  • The type of value contained and a definition of the value reported.
  • The effective date of the appraiser's opinions and conclusions.(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 real property interest in question, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible factors.
  • All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work used when completing the assignment.
For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report


Once the assignment has been delivered, what assurance is there that the value conclusion is veritable?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal contained analysis of the data.

  • That substantial errors of omission or commission were not committed individually or collectively.

  • That appraisal services were not rendered in a careless or negligent fashion.

  • The final appraisal report was transparent, sound and defensible.
To become a state licensed appraiser, there are extensive education requirements as well as experience that must be attained - all with the objective of being able to provide unbiased value opinions. Plus, appraisers must abide by a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for carrying out an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (See list of FAQ's) Regulations regarding licensing and certification are different from state to state. In general, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once licensed, he or she is required to engage in continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who hires an appraiser?   (See list of FAQ's)

Mortgage lenders are an appraiser's typical client, requiring 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 JR Appraisal get the data used to estimate values in Oakland County or other areas?   (See list of FAQ's)

One of the primary activities of an appraiser is to compile data. Data can be described as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is gathered from a many places. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Appraisers often need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

And most importantly, 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?   (See list of FAQ's)

If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from JR Appraisal is the best documentation to ensure assets are divided evenly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.


My mortgage statement has an item on it for PMI? Can I get rid of that?   (See list of FAQ's)

PMI is short for for Private Mortgage Insurance. This additional policy covers the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

The savings from getting rid of the PMI required when you got your mortgage pays for the appraisal in no time. JR Appraisal stays current with value trends in Oxford and Oakland County. Contact us today.

How do I get ready for the appraiser?   (See list of FAQ's)

The first step in most appraisals is the home 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. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.

To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
  • A plot plan or survey of the house and land (if readily available).
  • Title policy that lists encroachments or easements.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Brag sheet that lists major home improvements and enhancements, the date of their installation and their cost (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • Most recent real estate tax bill and or legal description of the property.

How does an appraiser define "Market Value"?   (See list of FAQ's)

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."



Does the appraisal belong to the bank or the consumer?   (See list of FAQ's)

For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 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 scenarios, 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 use the appraisal for any purpose.


Which home renovations add the most to the price?   (See list of FAQ's)

Like all things real estate, this is dependent on a home's location. 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.

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 help 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.