An Appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three “common approaches to value”:

• The Cost Approach – is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value.
• The Sales Comparison Approach – involves making a comparison to other similar, nearby properties which have recently sold. It is normally the most accurate and best indicator of value for a residential property.
• The Income Approach – which is of most importance in appraising income producing properties – it involves estimating what an investor would pay based on the income produced by the property.

Market Value or Fair Market Value is the most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, 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:

• Buyer and Seller are typically motivated;
• Both parties are well informed or well advised;
• A reasonable time is allowed for exposure to the open market;
• Payment is made in terms of cash in U.S. 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.

An Appraiser provides a professional, unbiased opinion of market value, to be used in making real estate decisions. Appraisers present their formal analysis in appraisal reports.

The Appraiser 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. Some think they have to make the place spotless before the appraiser comes. Appraisers see hundreds of homes a year and will look past clutter and dust. The best thing you can do to help is make 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 that the appraiser can easily access items like furnaces and water heaters.

To facilitate the appraisal process, it’s beneficial to have the following documents ready for the Appraiser:

• A plot plan or survey of the house and land (if readily available).
• Written property agreements, such as a maintenance agreement for a shared driveway.
• Title policy that describes encroachments or easements.
• Information and/or permits on septic systems and wells.
• A list of major home improvements and upgrades, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs).
• Information on “Homeowners Associations” or condominium covenants and fees.
• A list of “Proposed” improvements if the property is to be appraised “As Complete”.

An Appraisal will tell you of the fair market value of the home you are planning on purchasing. You don’t want to spend money on a home that is valued at below the purchase price. You want to know that your new home will be worth what you are paying for it.

You don’t want to under-sell you home. You have put time, money and investment into your home and you should get what it is worth. With an appraisal, you will know what your home is worth.

A refinance can save money! An appraisal can help you acquire a better rate for your mortgage by showing that you have more equity in your home. Reappraising your home, especially after modifications, additions and repairs can help you refinance your home. A first mortgage carries a lower interest rate than second and third mortgages. You can use that extra equity to consolidate your mortgage loans, pay off your credit cards, and lower your higher interest debts.

You can save money if you are paying PMI (Private Mortgage Insurance).  This is insurance your mortgage company charges to insure that your mortgage loan will get paid.  If you financed your home with less than 20% down, it is likely that you are paying PMI.  By getting an appraisal, you might find that you have 20% equity in your home.  You can eliminate that PMI payment which could be enough to make an extra home payment.  Did you know that if you made one extra home payment a year, you could cut your 30 year mortgage down by several years?