Appraisal Associates, Inc. has answers to "Frequently Asked Questions"

Appraisal Associates, Inc. is more than happy to elaborate on any inquiries you might have about appraisals or real estate in Kalamazoo and Kalamazoo County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
What would cause me to require services from Appraisal Associates, Inc.?
How is an appraiser different than a home inspector?
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 indicated is legitimate?
What goes into an appraiser's certification?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in Kalamazoo County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Do you need anything from me in advance?
How does an appraiser define "Market Value"?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



Describe an appraisal   (Top)

The process of performing an appraisal report deals with an investigation which leads to an opinion of value. The real estate appraiser will typically use a several "approaches," typically three, to draw up the estimation of market value. One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which deals with making a comparison to comparable properties nearby. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to find the value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?   (Top)

An appraiser generates an unprejudiced and well justified opinion of market value, to be used in making real estate transactions. Appraisers present their professional investigation in appraisal reports.


What would cause me to require services from Appraisal Associates, Inc.?   (Top)

There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal report include:
  • To get a loan.
  • To reduce your property taxes.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To challenge high property taxes.
  • If you need to take care of an estate.
  • To offer you an edge when purchasing real estate.
  • To figure out an honest property value when selling real estate.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
For a more detailed description of the appraisal process click here.


How is an appraiser different than a home inspector?   (Top)

Home inspectors do not provide an opinion of value and do not do appraisal reports. A third-party home inspector will judge the structure of the property, from the roof to the bottom. Generally, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible 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?   (Top)

Simply put, it's like comparing broadband and dial-up. The CMA uses market trends to create most of their business. The appraisal relies on specific verifiable comparable sales. Also, the appraisal looks at other factors like condition, area and building prices. The CMA will provide a non-specific 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 creating the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. 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 work they perform, regardless of their outcome.

What's in an appraisal report?   (Top)

The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
  • Who engaged the appraiser and other intended users.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • The type of value reported and a definition of that value.
  • The effective date of the value opinion.
  • Pertinent property characteristics, including: location, physical characteristics, legal attributes, economic attributes, 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 while working up the assignment.
For a more comprehensive view of what goes into an appraisal report click here: Sample Appraisal Report


Once the assignment has been delivered, what assurance is there that the value indicated is legitimate?   (Top)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • The appraisal used a suitable analysis of the data.

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

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

  • The final appraisal report was understandable, credible and defensible.
There are intense education and practical experience requirements that must be adhered to in order to get an appraisal license in Michigan. In addition, appraisers must follow a strict 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 guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Top) Licensing and certification requires coursework, tests and experience working under a supervisor. Once an appraiser is licensed, he or she must then engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Top)

Mortgage lenders are an appraiser's most likely customer, requiring their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does an appraiser get the information used to estimate values in Kalamazoo County or other areas?   (Top)

One of the main things an appraiser does is to gather property 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 gathered by the appraiser while on site.

General data is received from a variety of places. To look up recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office and other public documents. Appraisers routinely need 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 product.

And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.


Why do I need a professional appraisal?   (Top)

If you're making any kind of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to determine 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. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.


What exactly is PMI and how can I get rid of it?   (Top)

PMI is short for for Private Mortgage Insurance. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of 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 mortgage payment?Call Appraisal Associates, Inc. today at 800.728.8444 or send us an e-mail. A new appraisal could save you thousands.

Do you need anything from me in advance?   (Top)

We begin with an inspection of the home. 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. 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 move any items that would make it difficult to measure the structure. On the inside, make sure we can get to items like furnaces and water heaters.

You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • A survey or plot map of the property and building (if available).
  • A list of any personal property that is part of the home and you intend to be sold with the home, such as a oven, or a washer and dryer, if applicable.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • A list of any 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"?   (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."



Once complete, who actually owns the appraisal report?   (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 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 engaging the appraiser for things outside securing a mortgage. In these cases, 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 do whatever they want with the appraisal.


Are some home improvements more worthwhile than others?   (Top)

This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.