Frequently Asked Questions

  • The process of creating an appraisal consists of research and analysis which helps to form an opinion of value. There are three "common approaches to value" which the appraiser considers to conclude this valuation. The Cost Approach is one of the methods that real estate appraisers use to find the value of a house; it involves concluding what the improvements cost to build using costs to construct plus the land value. The most common approach is the Sales Comparison Approach which relies on sales and listings of similar property for comparison.  The Sales Comparison Approach is generally the most accurate and best indicator of value for a residential property. The Income Approach is primarily used for valuation of income-producing properties based on what a buyer or investor would pay to receive the future income potential of the property.

  • An appraiser makes an unbiased and professional opinion on the value of a property.  Appraisers display their formal research and analysis in appraisal reports.  

  • There are many reasons to purchase an appraisal from Davis & Lagerman LLC with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal include:

    • To reduce your tax burden.
    • To establish the replacement cost of insurance.
    • To contest high property taxes.
    • If you need to settle an estate.
    • To provide you an edge when purchasing real estate.
    • To figure out a reasonable sales price when selling real estate.
    • To defend your rights in a condemnation case.
    • Government agencies need an appraisal for many different reasons.
    • Divorce settlement

  • In communicating an appraisal report, each appraiser must ensure the following:

    • That the information analysis utilized in the appraisal was appropriate.
    • That significant errors of omission or commission were not committed individually or collectively.
    • That appraisal services were not rendered in a careless or negligent manner.
    • That a credible, supportable appraisal report was communicated.

    Most states require that real estate appraisers are state licensed or certified. The state licensed or certified appraiser is trained to render an unbiased opinion based upon extensive education and experience requirements. To become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

  • Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, he or she is required to take continuing education courses in order to keep the license current.

  • Typically, appraisers are employed by lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

  • Gathering data is one of the primary roles of an appraiser. Data can be divided into Specific and General. Specific data is gathered from the home itself. Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

    General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets. And the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.

  • Anytime the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your home, an appraisal helps you set the most appropriate sales price. 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 home is often the single, largest financial asset anybody owns. Knowing its true value means you can the right financial decisions.

  • PMI stands for Private Mortgage Insurance. It insures a lender against loss on homes purchased with a down-payment of less than 20%. Once equity in the home reaches 20% you can eliminate the PMI and start saving immediately.

  • The first step in most appraisals is the home inspection. During this process, 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. 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.

    The following Items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:

    • A survey of the house and property.
    • A deed or title report showing the legal description.
    • A recent tax bill.
    • A list of personal property to be sold with the house if applicable.
    • A copy of the original plans.

  • 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: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) 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.

  • In most real estate transactions, the appraisal is ordered by the lender. While the home 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 home buyer is entitled to a copy of the report but is not entitled to use the report for any other purpose.

    The exception to this rule is when a home owner engages an appraiser directly. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.

Davis & Lagerman LLC is always prepared to handle any questions you might have about appraisals in the Twin Cities. Feel free to contact us today.