PLM Appraisals has answers to "Frequently Asked Questions"

PLM Appraisals is always willing to reply to any inquiries you might have about appraisals in Norfolk and Norfolk City County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
What are the reasons someone would need a real estate appraisal?
How is an appraisal different than a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What does the appraisal report contain?
Once the report is done, how can I have certainty that the value conclusion is trustworthy?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in Norfolk City County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Do you need anything from me in advance?
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
How can I get the most ROI out of home improvements?



What is an appraisal?   (Back to top)

The method of performing an appraisal report deals with an investigation which leads to an opinion of value. There are three "common approaches to value" which assists the appraiser arrive at this opinion or valuation. One of them is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the approaches is the Sales Comparison Approach - which deals with making a comparison to other similar properties within a close proximity which have recently sold. The Sales Comparison Approach is normally the most definitive and best indicator of a liklely sales price for a house. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.

Describe what an appraiser does   (Back to top)

An appraiser produces a professional, unbiased determination of market value, in the support of real property exchanges. Appraisers demonstrate their expert investigation in appraisal reports.


What are the reasons someone would need a real estate appraisal?   (Back to top)

There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for getting an report include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
  • To contest high property taxes.
  • To handle an estate.
  • To give you a negotiating tool when purchasing a home.
  • To find a likely price 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.
  • It's possible you could be involved in a lawsuit - an appraisal will definitely help.
For a more extensive explanation of the appraisal process click here.


How is an appraisal different than a home inspection?   (Back to top)

Appraisers do not do complete house inspections and are not home inspectors. The purpose of a home inspection is to investigate the structure of the home from foundation to top. Commonly, a home inspection report will discuss the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

Is an appraisal the same as a comparative market analysis(CMA)?   (Back to top)

Simply put, it's apples and oranges. The CMA depends on indefinite local market trends. The appraisal is reliant on similar definite comparable sales. In addition, the appraisal verifies other factors like condition, location and construction costs. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the biggest difference is who's behind the report. 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. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no conditional interest in the property's value, unlike the agent, whose income is tied to the value of the home.

What does the appraisal report contain?   (Back to top)

Every appraisal must reflect a believable estimate of value and must document the following:
  • The client and other intended users.
  • The intended use of the report.
  • The appraisal's purpose.
  • The type of value contained and a definition of the value reported.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic attributes, the real property interest valued, 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.
  • 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 involved in the activity of completing the appraisal.
For a more comprehensive look at the work that goes into an appraisal report click here: Sample Appraisal Report


Once the report is done, how can I have certainty that the value conclusion is trustworthy?   (Back to top)

In the documentation of an appraisal, each appraiser must make sure of the following:
  • The appraisal used a suitable analysis of the information.

  • That significant errors of omission or commission were not committed individually or collectively.

  • That appraisal services were not conducted in a careless or negligent fashion.

  • The final appraisal report was easy to explain, sound and defensible.
To become a state licensed appraiser, there are extensive education requirements as well as experience that must be logged. Plus, appraisers must follow a stringent industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Regulations regarding licensing and certification are different from state to state. However, licensing and certification is most often associated with many hours of classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he or she is required to complete continuing education courses so the license stays up to date. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Back to top)

Commonly, appraisers are hired by mortgage lenders to render a value opinion on a home involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.

Where does an appraiser get the information used to estimate values in Norfolk City County or other areas?   (Back to top)

One of the primary tasks an appraiser performs is to assimilate property data. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.

General data is gathered 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. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often 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 most importantly, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.


What can a full appraisal do for me?   (Back to top)

An appraisal is a valuable tool anytime the value of your home is pertinent to a financial decision. When selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. 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 house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.


What exactly is PMI and how can I get rid of it?   (Back to top)

PMI stands for Private Mortgage Insurance. This added policy takes care of the lender if a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.

The savings from dropping your PMI will make up for the cost of the appraisal in no time. PLM Appraisals is a name you can trust when it comes to real estate value trends in Norfolk and Norfolk City County. Contact us today.

Do you need anything from me in advance?   (Back to top)

The first step in most appraisals is the home inspection. 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 amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any shrubs and relocate any items that would get in our way while we measure the structure. On the inside, make sure 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:
  • Information on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the building.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A list of "suggested" improvements when the property is being appraised "as complete".

What does "Market Value" mean?   (Back 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?   (Back to top)

In most real estate transactions, the appraisal is ordered by the lender. 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 bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.

This rule doesn't apply when a home owner hires an appraiser directly. In these cases, 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 use the appraisal for any purpose.


How can I get the most ROI out of home improvements?   (Back to top)

It really depends on the 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.

As a rule, the most value returned from renovating a home comes in the kitchen. 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, something that may not add value would be painting just for the sake of redecorating.