Building & Home Inspection Service has answers to "Frequently Asked Questions"

Building & Home Inspection Service is eager to elaborate on any questions you might have about appraisals in Craighead County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
Why would a person need services from Building & Home Inspection Service?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
After completing the appraisal, how can I have a guarantee that the value conclusion is valid?
What are the requirements to be a certified appraiser?
Who do appraisers work for?
Where does an appraiser get the data used to estimate values in Craighead County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What is "Market Value?"
Once complete, who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?



Describe an appraisal   (Top)

An appraisal report is an estimation that concludes with an opinion of value. There are three "common approaches to value" which assists the real estate appraiser come to this opinion or valuation. One of them is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Easily the most common approach in finding the likely sales price of a house is the Sales Comparison Approach which involves making a comparison to similar homes nearby. Being the most commonly used approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the money produced by the property.

What does an appraiser do?   (Top)

An appraiser forumlates a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers document their professional investigation in appraisal reports.


Why would a person need services from Building & Home Inspection Service?   (Top)

There are a lot of reasons to obtain an appraisal from Building & Home Inspection Service with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
  • If you are applying for a loan.
  • To reduce your property taxes.
  • To demonstrate a homeowner's acquired equity and remove insurance.
  • To contest inflated property taxes.
  • If you need to take care of an estate.
  • To offer you a leg-up when purchasing a home.
  • To determine the most probable price when selling your home.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because an official 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.
Click here for a more detailed explanation of the process about getting an appraisal.


How is an appraisal different than a home inspection?   (Top)

Home inspectors do not come to an opinion of value and do not use the same forms as appraisers. A third-party home inspector will evaluate the structure of the house, from the top to the foundation. Generally, a home inspection report will discuss the amenities and the requirements of the house: 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.

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

Frankly, it's like comparing broadband and dial-up. What the CMA depends on are superficial trends. An appraisal is based on comparable sales that can be validated by public record. Area and architectural prices are also precedent in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

Who's behind the report is frankly 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 have specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an unbiased voice, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.

What's in an appraisal report?   (Top)

The main purpose of an appraisal document is to provide 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 appraisal.
  • The reason for the assignment.
  • The type of value contained and a definition of that value.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Pertinent property characteristics, including: location, physical description, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the appraisal, 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 considered while working up the assignment.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report

After completing the appraisal, how can I have a guarantee that the value conclusion is valid?   (Top)

In the documentation of an appraisal, each appraiser must ensure the following:
  • The appraisal contained an apropos 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 manner.

  • That a solid, substantiated appraisal report was conferred.
To become a state licensed appraiser, there are intense education requirements as well as real world experience that must be attained. Likewise, appraisers must follow a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Top) Licensing and certification takes classroom study, tests and experience working under a supervisory appraiser. Once an appraiser is licensed, he/she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for?   (Top)

Most of the time, appraisers are employed by lenders to estimate the value of a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

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

Collecting data is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.

General data is received from a variety of places. To find out about recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.

And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.

Why should I hire a licensed appraiser?   (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 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. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

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

PMI stands for Private Mortgage Insurance. PMI protects the lender in case a borrower defaults on the loan and the value of the property is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

The savings from getting rid of your PMI pays for the appraisal in no time. Building & Home Inspection Service is a name you can trust when it comes to real estate value trends in Jonesboro and Craighead County. Contact us today.

How do I get ready for the appraiser?   (Top)

We start with an inspection of the home. 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any landscaping and relocate any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to appliances like furnaces and water heaters.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Any records on the purchase of the property for the last three years.
  • List of personal property to be sold with the building.
  • Most recent real estate tax bill and or legal description of the property.
  • 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).
  • Information on "Homeowners Associations" or condominium covenants and fees.

What is "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. 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 appraisal - 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.

The exception to this rule is when a home owner engages an appraiser directly. In these situations, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.

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

A home's location - what city it is in and even what part of that city - is key to this popular question. 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.

As a rule, the best ROI from renovating a home comes in the kitchen. 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, yielding 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.