Frequently Asked Questions
What is an Appraisal?
"The act or process of estimating value. (USPAP, January 1, 1989). An opinion of the nature, quality, value, or utility of specified interests, or aspects of, identified real estate. (Supplement Standard 1, USPAP, January 1, 1989)."
What is an Appraisal Report?
"Any communication, written or oral, of an appraisal; the document that is transmitted to the client upon completion of an appraisal assignment. Reporting requirements are set forth in Standards Rules relating to Standards 2 and 5 of the USPAP."
What is Market Value?
"Market Value is the major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. Continual refinement is essential to the growth of the appraisal profession. The current economic definition of market value can be stated as follows:
|The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress." (American Real Estate Appraisers, The Appraisal of Real Estate, 9th ed. (Chicago: American Institute of Real Estate Appraisers, 1987, 19.)|
What is USPAP?
"Uniform Standards of Professional Appraisal Practice (USPAP). Current standards of the appraisal professions, developed for appraisers and the users of appraisal services; the USPAP deal with the procedures to be followed in developing an appraisal, analysis, or opinion and the manner in which an appraisal, analysis, or opinion is communicated. The USPAP are endorsed by the Appraisal Institute and other professional appraisal organizations."
What is PMI?
"Private Mortgage Insurance (PMI). Insurance provided by a private mortgage lender to protect against loss caused by a borrowers default under a residential or commercial mortgage loan.."
Is the Estimated Market Value the same as CMA?
Estimated Market Value is the value determined in most appraisals by a qualified appraiser using settled sales, while considering current market conditions. Comparative Market Analysis is an estimated listing price range determined by a licensed realtor using competitive properties and considering current market conditions.
Is an Appraisal Inspection the same as a Home Inspection?
No. A licensed Real Estate Appraiser or a trainee performs an appraisal inspection. A licensed Home Inspector performs a home inspection. An appraiser views the property as the typical buyer would view the property, with the additional expertise to recognize potential problems that should be disclosed to the lender/client. A home inspector tests the electric, plumbing, mechanicals, crawls under the dwelling and into the attic. Also, they have responsibilities to recognize structural and infestation problems, beyond the typical appraisal inspection.
Why do I need an Appraisal?
In most circumstances, a lender uses the information in appraisal report to help make lending decisions. The lender needs to know that there is enough equity in the real estate to support the loan to value ratio. In other words, to make sure that if the borrower defaults on the loan that there is enough value remaining in the property for them to recuperate their investment.
Who is the client?
"Any party for whom an appraiser performs a service. (USPAP, January 1, 1989)." Typically, the client, for most appraisals, is the lender or mortgage company who engages the appraiser. Some lenders instruct the appraiser to pick up the fee for the appraisal, at the time of inspection. This situation creates an ethical "gray area" where the appraiser is caught in the middle. Even though, the borrower pays for the appraisal; the lender is the client, not the borrower. Therefore, the appraiser can not discuss value or release any information directly to the borrower without violating client confidentiality.
Why does the Appraiser have to come inside the house?
An appraiser can estimate value for most residential properties based on an interior walk-through or an exterior only inspection. The lender usually determines which type of appraisal report will serve their purposes. However, if the appraiser has compelling reasons, they can recommend an interior inspection. Conditions including very good or very poor quality of construction, large unfinished areas, incomplete renovation, noticeable fire damage, and structural problems are possible reasons for an appraiser to delay an inspection or upgrade to an interior inspection.
Will the Appraiser have an estimated value today?
At the time of inspection, the appraiser will not have an estimated market value determined. After the inspection, the appraiser must analyze all relevant information used in determining the estimated market value for a property (such as: comparables, market conditions, estimated cost of repairs, etc.); develop costs of replacement, make appropriate adjustments to the comparables, and reconcile all of this information. It is unethical for an appraiser to report a value until all of these steps have been taken. Then, and only then, can the appraiser report an estimated market value. Typically, this process takes a few hours to several days to gather, analyze, and report.
I just had an Appraisal done 1 month ago, but decided to use a different lender. Can the Appraiser change the name of the client on the original report to the new lender?
No. It is a violation of USPAP for the appraiser to change the name of the client on a report completed for another client. Every request is considered a new order. Ethically, the appraiser must complete all the steps necessary to produce a credible report for the new request. At the very least, the appraiser needs to re-inspect the property, research the market to determine if market conditions have changed, and revise the report to include the new lenders information. For a reduced fee, Appraisals on the Shore, Inc. will re-inspect the property, do the research, and complete a new appraisal report, which includes the updated information and the new clients name.
What type of remodeling adds the most value?
Typically, kitchens and bathrooms offer the highest return on your investment. Painting, new flooring, and improving the propertys curb appeal are relatively inexpensive improvements that appeal to most buyers. Only buyers that are looking for bargains want to make these improvements themselves. Remember strong paint colors and personalized decor can turn off some buyers.
We plan to remodel our only bathroom. Should we hold off with the demolition until the appraiser comes to inspect the house?
Remodeling that will be completely finished BEFORE the appraiser comes for the inspection will usually add value. Major demolition of a kitchen or bathroom that cannot be completed prior to the inspection should NOT be started, at all. The exception to this would be if the homeowner were applying for a construction loan.
What type of training does a Real Estate Appraiser have to complete?
The requirements for training, licensing, and continuing education vary from state to state. Each license category requires the applicant to meet the following educational requirements to be eligible to take the Real Estate Appraisers examination. As of 2008, a Maryland applicant for
Certified General Real Estate Appraiser is required to successfully complete 300 hours of courses approved by the Commission; and hold a bachelors degree or higher; and compile a minimum of 3,000 hours of appraisal work over a period of, at least, 30 months, with 1,500 hours of non-residential real property appraisal work.
Certified Residential Real Estate Appraiser is required to successfully complete 200 hours of courses approved by the Commission; and hold an associates degree or higher; and compile a minimum of 2,500 hours of appraisal work over a period of, at least, 2 calendar years.
Licensed Real Estate Appraiser is required to successfully complete 150 hours of courses approved by the Commission; and compile at least 2,000 hours of appraisal work experience over a period of, at least, 2 calendar years.
Appraiser Trainee is required to successfully complete 75 tested hours of Commission-approved real estate appraisal courses of which 15 hours shall be in the subject of Uniform Standards of Professional Appraisal Practice.
For license/certification renewal, a total of 42 hours of appraisal related continuing education credit is required. Effective January 01, 2003, all licensed and certified appraisers must complete the 7-Hour National USPAP Update Course, or its equivalent, at least, once every two calendar years.