The Appraisal Office has answers to "Frequently Asked Questions"


	The Appraisal Office is prepared to handle any questions you might have about appraisals in counties we cover. Feel free to contact us today.

Define the term "Appraisal"
Describe what an appraiser does
Why would a person request your services?
How is an appraiser different than a home inspector?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
Upon completion of the report, what assurance is there that the final number is legitimate?
What does it mean for an appraiser to be licensed?
Who engages the services of appraisers?
Where does an appraiser get the data used to estimate values in Cass 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?
Does the appraiser need anything from me in advance?
How does an appraiser define "Market Value"?
Who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?

Define the term "Appraisal" (Return to top)

An appraisal is a thought process leading to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or estimate. One of the processes in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the property, less the age and physical dilapidation, plus the land value. Another of the methods is the Sales Comparison Approach - which concerns finding a comparison to other similar nearby properties which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. 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 money produced by the property.

Describe what an appraiser does (Return to top)

An appraiser provides an objective and well substantiated opinion of market value, to be used in making real estate transactions. Appraisers exhibit their professional findings in appraisal reports.

Why would a person request your services? (Return to top)

There are a lot of reasons to obtain an appraisal from The Appraisal Office with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an report include:

To get a loan.
If you would like to reduce your property tax obligations.
To show a homeowner has 30% equity and remove Primary Mortgage Insurance.
To fight inflated property taxes.
To settle an estate.
To give you a negotiating tool when purchasing real estate.
To find an honest 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 a government agency such as the IRS requires it.
If you ever find yourself in a lawsuit.

If you need more information about the appraisal process, please click here.

How is an appraiser different than a home inspector? (Return to top)

The appraiser is not a home inspector and he or she does not do a comprehensive home inspection. An inspection is a third-party investigation of the accessible structure and mechanical systems of a property, from the top to the bottom. The standard house inspector's report will contain an evaluation of the condition of the house's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.

What is the difference between an appraisal and a comparative market analysis (CMA)? (Return to top)

Honestly, they have nothing in common. The CMA uses market trends to create most of their business. The appraisal is based on similar verifiable comparable sales. The appraisal report will also include area and building prices. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

The credentials of the person behind the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no conditional interest in the value conclusion, unlike the real estate agent, whose income is tied to the price of the home.

What does the appraisal report contain? (Return to top)

The main purpose 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:

The client and other intended users.
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 value opinion.
Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights valued, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible considerations.
Any 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 considered when completing the job.

For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, what assurance is there that the final number is legitimate? (Return to top)

In communicating an appraisal report, each appraiser must ensure the following:

The appraisal contained an appropriate analysis of the information.

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

That appraisal services were rendered in a careful and judicious fashion.

The final appraisal report was understandable, sound and conclusive.

To become a state licensed appraiser, there are extensive education requirements as well as on the jobexperience that must be logged. Plus, appraisers must abide by a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Return to top) Regulations regarding licensing and certification are different from state to state. However, licensing and certification typically translates to many hours of coursework, tests and experience working under a supervisor. Once an appraiser is licensed, he or she is required to engage in continuing education courses so the license stays current. To see the specific requirements for any state click here.

Who engages the services of appraisers? (Return to top)

Mortgage lenders are an appraiser's typical customer, needing their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Cass County or other areas? (Return to top)

One of the primary tasks an appraiser engages in is to compile data. Data can be split into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.

General data is gathered from a numerous places. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To verify actual sales prices, we research tax records and other public documents. Appraisers routinely have 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 most importantly, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.

Why do I need a professional appraisal? (Return 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 determine a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, you can avoid overpaying by commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from The Appraisal Office is the best documentation to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that? (Return to top)

PMI stands for Private Mortgage Insurance. PMI protects the lender if a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes 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.


	Is PMI a part of your monthly house payment? Call The Appraisal Office today at 701-280-1400 or send us an e-mail. A new appraisal could save you thousands.

Does the appraiser need anything from me in advance? (Return to top)

The first step in most appraisals is the home inspection. 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 condition of its amenities. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any bushes and relocate any items that would get in our way while we measure the structure. Indoors, make sure we can get to items like furnaces and water heaters.

To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:

A plot plan or survey of the house and land (if available).
Information on any written private easements, such as a shared driveway with a neighbor.
A bill for your most recent real estate taxes which should also contain a legal description of the property.
Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
A list of "proposed" improvements if the property is to be appraised "as complete".

How does an appraiser define "Market Value"? (Return to top)

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."

Who actually owns the appraisal report? (Return to top)

In most real estate transactions, the appraisal is ordered by the lender/client. While the borrower 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 borrower is entitled to a copy of the report from lender/client - 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.

This rule doesn't apply when a borrower engages an appraiser directly or for private purposes. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, estate planning, divorce, or tax challenges, for example.

I want to get more for my house. Where should I spend money renovating? (Return to top)

The added value of a particular amenity truly depends on the local market. Renovating or updating items that pertain to the overall condition or quality of a home are where value is often times returned. Examples: new mechanicals, windows, siding, flooring, kitchen or bath finishes. These items are common examples and this is not meant to be an all-inclusive list or automatic increase of value.