Independent Valuation Services has answers to "Frequently Asked Questions"
Independent Valuation Services is eager to answer any questions you might have about appraisals or real estate in Prior Lake and Scott County.
Don't hesitate to contact us today.
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An appraisal is an inspection allowing the appraiser to come to an opinion of value.
The appraiser will typically use a number of "approaches," typically three, to conclude the estimation of market value.
One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value.
Easily the most common approach in finding the likely sales price of a home is the Sales Comparison Approach which involves figuring a comparison to similar properties close by.
The Sales Comparison Approach is commonly the most accurate and clearest indicator of a liklely sales price for a house.
One of the least common approaches in appraising houses is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the income produced by the building.
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An appraiser produces an objective and well supported assessment of market value, often in the context of a real estate exchange.
Appraisers document their expert investigation in appraisal reports.
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There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions.
Other reasons for getting an report include:
If you are applying for a loan.
If you would like to reduce your property tax burden.
To demonstrate a homeowner's acquired equity and remove insurance.
To challenge inflated property taxes.
To handle an estate.
To provide you a negotiating tool when purchasing a home.
To figure out a reasonable property value when selling your home.
To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
Government agencies such as the IRS need an appraisal on every house.
It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
If you need a more detailed explanation of the appraisal process, please click here.
Appraisers do not do perform home inspections and are not home inspectors.
An inspection is a third-party evaluation of the available structure and mechanical systems of a property, from the top to the foundation.
The usual home inspector's report will contain an evaluation of the condition of the property'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.
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Frankly, they have nothing in common.
The CMA relies on indistinct trends in the market.
Appraisals use comparable sales which are verifiable resources.
Area and construction costs are also important in an appraisal.
The CMA will provide a non-specific figure.
An appraisal delivers a defensible and carefully documented 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 produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation.
A certified, Minnesota licensed professional who made a career on valuing homes in and around Scott County creates the appraisal.
Moreover, the appraiser is an unbiased voice, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.
Every appraisal should reflect a supported value opinion and should clearly state the following:
Who engaged the appraiser and other intended users.
How the appraisal is supposed to be used.
The appraisal's purpose.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Pertinent property attributes, including: location, physical attributes, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible items.
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 to complete the job.
For a more detailed view of what goes into an appraisal report click here: Sample Appraisal Report
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In the documentation of an appraisal, each appraiser must ensure the following:
That the information analysis contained in the appraisal was suitable.
That grave errors of omission or commission were not committed individually or collectively.
That appraisal services were not executed in a careless or negligent fashion.
That a trustworthy, defensible appraisal report was imparted.
There are rigorous education and real world experience requirements that must be fulfilled in order to get an appraisal license in Minnesota.
Likewise, appraisers must obey a strict industry code of ethics and respect national standards of practice for real estate appraisal. The rules for developing an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
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Commonly, appraisers are called upon by lenders to estimate the value of real estate involved in a loan transaction - to make sure the property is indeed adequate collateral for the loan.
Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
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Collecting information is one of the main things an appraiser performs.
Data can be split into Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.
General data is gathered from a numerous places.
To look up recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service.
Tax records and other courthouse documents reveal actual sales prices in a market.
Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
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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 figure out the 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. Knowing its true value means you can make the right financial decisions.
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PMI is short for for Private Mortgage Insurance.
PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
Is PMI a lineitem in your monthly house payment?Call Independent Valuation Services today at 952-440-3909 or send us an e-mail. A new appraisal could save you thousands.
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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 features.
Inside, make sure it is clutter free and that we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside walls.
You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
Records on the latest purchase of the property in the last three years.
Written property agreements, such as a maintenance agreement for a shared driveway.
Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
A list of "proposed" improvements when the property is being appraised "as complete".
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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."
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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 entitled to a copy of the report - 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.
The exception to this rule is when a home owner hires an appraiser directly.
In these situations, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
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The added value of a particular amenity truly depends on the local market.
For example,
if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
As a rule, the most value returned from renovating a home comes in the kitchen.
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 were second, yielding 85%.
On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.
Independent Valuation Services 2906 Center Rd SW Prior Lake, MN 55372-2305
