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Benchmark Appraisal Services, Inc. has answers to "Frequently Asked Questions"

Benchmark Appraisal Services, Inc. is always eager to handle any inquiries you might have about appraisals or real estate in Boca Raton and Palm Beach County. Contact Benchmark Appraisal Services, Inc. today to learn how we can help you with your valuation problems.

Describe an appraisal
What does an appraiser do?
What would cause me to require your services?
How is an appraiser different than a home inspector?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
Once the report has been delivered, how can I have a guarantee that the value indicated is legitimate?
How are appraisers certified?
Who are an appraiser's customers?
Where does an appraiser get the data used to estimate values in Palm Beach County or other areas?
How can a licensed appraiser help me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Should I do anything in advance of the appraisal inspection
Define "Market Value"
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?

Describe an appraisal   (Return to top)

The procedure of performing an appraisal report consists of an inspection which forms an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. The Cost Approach is one of the methods that appraisers use to find the value of a home; it involves finding what the improvements would cost less physical depreciation, adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns finding a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most popular approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a home. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the income produced by the property.

What does an appraiser do?   (Return to top)

An appraiser produces a fair and credible opinion of market value, often in the context of a real estate exchange. Appraisers present their analysis in appraisal reports.

What would cause me to require your services?   (Return to top)

There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an report include:
  • To receive a loan.
  • If you would like to reduce your property tax burden.
  • To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
  • To challenge inflated property taxes.
  • To handle an estate.
  • To give you a negotiating tool when purchasing a home.
  • To figure out a likely property value when putting your home on the market.
  • To defend 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.
  • If you are ever involved in a civil case.
Click here for a more extensive explanation of the process dealing with getting an appraisal.

How is an appraiser different than a home inspector?   (Return to top)

The appraiser is not a home inspector nor does he/she do a full home inspection. An inspection is a third-party investigation of the livable structure and electrical and mechanical systems of a property, from the roof to the bottom. The usual house inspector's report will contain an evaluation of the integrity 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.

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

Honestly, they share nothing in common. What the CMA relies upon are ill-defined trends. Appraisals use similar sales which are valid resources. In addition, the appraisal verifies other factors like condition, neighborhood and replacement prices. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

The credentials of the person behind the report is hands down the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, Florida licensed professional who has formed their livelihood on valuing properties in and around Palm Beach County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat fee for work they perform, regardless of their value conclusion.

What are the contents of an appraisal report?   (Return to top)

The main purpose of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
  • The client and whose purposes the appraisal is to serve.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Relevant property characteristics, including: location, physical characteristics, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible factors.
  • 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.
  • What was included in the activity of completing the job.
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the report has been delivered, how can I have a guarantee that the value indicated is legitimate?   (Return to top)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • The appraisal used analysis of the information.

  • Whether individually or collectively, there were no critical errors contained in the appraisal, nor any relevant details left out.

  • That appraisal services were rendered in a careful and conscientious fashion.

  • The final appraisal report was transparent, credible and not easily discredited.
There are intense classroom and practical experience requirements that must be adhered to in order to get an appraisal license in Florida. Likewise, appraisers must follow a meticulous 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).

   (Return to top) Licensing and certification takes coursework, tests and practical experience. Once licensed, he or she is required to complete continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (Return to top)

Commonly, appraisers are hired by mortgage lenders to estimate the value of real estate involved in a loan transaction. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Palm Beach County or other areas?   (Return to top)

One of the main activities of an appraiser is to gather data. Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is collected from a variety of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. To verify actual sales prices, we use items in the assessor's office and other public documents that are usually online nowadays. Appraisers routinely have to report when a property is 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 assimilates general data from his or her past experience in doing assignments for other properties in the same market.

How can a licensed appraiser help me?   (Return to 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. For parties settling an estate or divorce, an appraisal from Benchmark Appraisal Services, Inc. is the best documentation to ensure assets are split up properly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.

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

PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy protects the lender if a borrower doesn't pay on the loan and the value of the home is lower 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 money you keep from dropping your PMI will make up for the cost of the appraisal in no time. Benchmark Appraisal Services, Inc. stays current with real estate value trends in Boca Raton and Palm Beach County. Contact us today.

Should I do anything in advance of the appraisal inspection   (Return to top)

The first step in most appraisals is the property inspection. 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. On the home's interior, pick up any clutter and make sure 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 exterior walls.

You can make our visit go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Information on the latest purchase of the property in the last three years.
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • A list of any 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).
  • Information on "Homeowners Associations" or condominium covenants and fees.

Define "Market Value"   (Return to top)

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."

Does the appraisal belong to the bank or the consumer?   (Return to top)

For mortgage transactions, the lender orders the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the appraisal - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.

It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, 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 use the appraisal for any purpose.

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

This really depends on where the home is. 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

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.