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Hudson Appraisals, Inc. has answers to "Frequently Asked Questions"

Hudson Appraisals, Inc. is always ready to answer any concerns you might have about appraisals or real estate in Rogers and Benton County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
What are the reasons I would need a real estate appraisal?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What can I expect to see in my appraisal report?
Upon completion of the report, how can I have assurance that the final number is veritable?
What does it mean for an appraiser to be licensed?
Who hires an appraiser?
Where does an appraiser get the information used to estimate values in Benton County or other areas?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
Define "Market Value"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?

Describe an appraisal   (Go to list of  questions)

An appraisal is an investigation allowing the appraiser to come to an opinion of value. This opinion or estimate is concluded by a formal method that usually uses the three main "common approaches to value". One of the processes 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. The Sales Comparison Approach involves finding comparable homes nearby and finding value based on comparing those houses to the house being investigated. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. The third approach is the Income Approach, which is the best method in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.

What does an appraiser do?   (Go to list of  questions)

An appraiser offers an unbiased and well substantiated assessment of market value, in the support of real property exchanges. Appraisers document their professional conclusions in appraisal reports.

What are the reasons I would need a real estate appraisal?   (Go to list of  questions)

There are a lot of reasons to order an appraisal from Hudson Appraisals, Inc. with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an report include:
  • To obtain a loan.
  • To lower your tax burden.
  • To build a case for a homeowner's equity and remove insurance.
  • To contest improperly assessed property taxes.
  • To deal with an estate.
  • To offer you an edge when purchasing real estate.
  • To determine the most probable sales price when selling real estate.
  • 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 help.
If you need more information regarding the appraisal process, please click here.

How is an appraiser different than a home inspector?   (Go to list of  questions)

Appraisers do not do perform house inspections and are not home inspectors. An inspection is a third-party evaluation of the available structure and mechanical systems of a house, from the top to the bottom. The usual property inspector's report will include an evaluation of the condition of the home's heating systems, 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.

My agent performed a CMA for me. Is that the same as an appraisal?   (Go to list of  questions)

Frankly, it's like comparing Shakespeare to reality TV. The CMA relies on indistinct local market trends. Appraisals use comparable sales which are valid resources. The appraisal report will also contain location and building prices. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the largest differentiator is who's doing the report. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, state licensed professional who has formed their livelihood on valuing properties in and around Benton County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their value conclusion.

What can I expect to see in my appraisal report?   (Go to list of  questions)

Each report must demonstrate a credible estimate of value and will clearly state the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • The type of value reported and a definition of that value.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Relevant property characteristics, including: location, physical description, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible items.
  • All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
  • 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 all that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, how can I have assurance that the final number is veritable?   (Go to list of  questions)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
  • The appraisal contained an apropos analysis of the information.

  • Whether individually or collectively, there were no grave errors contained in the report, nor any material details left out.

  • That appraisal services were delivered in a careful and conscientious manner.

  • The final appraisal report was understandable, legitimate and defensible.
To become a state licensed appraiser, there are extensive education requirements as well as real world experience that must be logged - all with the end goal of gaining the skills required to render unbiased value opinions. In addition, appraisers must stick to a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Go to list of  questions) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification typically translates to many hours of coursework, tests and experience working under a supervisor. Once an appraiser is licensed, he/she is required to complete continuing education courses so the license stays current. To see the specific requirements for any state click here.

Who hires an appraiser?   (Go to list of  questions)

Mortgage lenders are an appraiser's most likely client, using their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does an appraiser get the information used to estimate values in Benton County or other areas?   (Go to list of  questions)

One of the most important tasks an appraiser engages in is to assimilate property data. Data can be divided into Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.

General data is collected from a numerous sources. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To double-check actual sales prices, we look at items in the assessor's office and other public documents. Appraisers often need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

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

What can a full appraisal do for me?   (Go to list of  questions)

If you're involved in some sort of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. If you're selling your home, an appraisal will help you determine the most appropriate price. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Hudson Appraisals, Inc. is the best way to ensure assets are split up evenly. A home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.

My mortgage statement has an item on it for PMI? Can I get rid of that?   (Go to list of  questions)

PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary policy covers the lender in the event a borrower defaults on the loan and the value of the home 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.

The money you keep from getting rid of the PMI required when you got your mortgage pays for the appraisal in a matter of months. Hudson Appraisals, Inc. is a name you can trust when it comes to real estate value trends in Rogers and Benton County. Contact us today.

How do I get ready for the appraiser?   (Go to list of  questions)

We start with an inspection of the property. 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 (gates aren't locked, etc). Trim any shrubs and move any items that would get in our way while we measure the structure. Indoors, make sure we can easily access items like furnaces and water heaters.

You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Records on the latest purchase of the property in the last three years.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.

Define "Market Value"   (Go to list of  questions)

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."

Who has rights to the appraisal report?   (Go to list of  questions)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 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 engages an appraiser directly. In these situations, the appraiser may state 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?   (Go to list of  questions)

The added value of a particular amenity truly depends on the local market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.