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


	Area Appraisal Services, Inc. is always eager to talk to you about any questions you might have about appraisals in Bethesda and Montgomery County. Don't hesitate to contact us today.

What is an appraisal?
What does an appraiser do?
Why would I require your services?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
After completing the appraisal, how can I have confidence that the final number is trustworthy?
How are appraisers certified?
Who do appraisers work for?
Where does Area Appraisal Services, Inc. get the information used to estimate values in Montgomery County or other areas?
Why do I need a professional appraisal?
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 appointment
Define "Market Value"
Once complete, who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?

What is an appraisal? (See list of FAQ's)

An appraisal report is an estimation that concludes with an opinion of value. The real estate appraiser will use a few "approaches," typically three, to draw up the estimation of market value. One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. Another of the methods is the Sales Comparison Approach - which deals with 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 is generally the most accurate and best indicator of market value for a property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the capital generated by the property.

What does an appraiser do? (See list of FAQ's)

An appraiser offers a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers summarize their expert investigation in appraisal reports.

Why would I require your services? (See list of FAQ's)

There are a lot of reasons to order an appraisal from Area Appraisal Services, Inc. with the most common reason being real estate and mortgage transactions. Some other reasons for getting an report include:

To get a loan.
If you would like to lower your property tax burden.
To demonstrate a homeowner's acquired equity and remove PMI.
To fight improperly assessed property taxes.
If you need to settle an estate.
To provide you a leg-up when purchasing real estate.
To find a likely price when selling your home.
To ensure parties are provided just compensation in eminient domain cases.
Because a government agency such as the IRS requires it.
If you are ever involved in a civil case.

For a more extensive description of the appraisal process click here.

What is the difference between an appraisal and a home inspection? (See list of FAQ's)

Appraisers do not do perform home inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the home from bottom to attic. The general property inspector's report will include an evaluation of the condition of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible 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? (See list of FAQ's)

Simply put, it's like comparing Shakespeare to reality TV. The CMA uses market trends to conduct most of their business. The appraisal depends on similar definite comparable sales. Also, the appraisal checks other factors like condition, neighborhood and construction costs. 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.

But the largest differentiator is who's doing the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for work they perform, regardless of their value conclusion.

What does the appraisal report contain? (See list of FAQ's)

Each appraisal should indicate a believable estimate of value and will document the following:

The client and whose purposes the appraisal is to serve.
How the appraisal is supposed to be used.
The reason for the assignment.
The type of value reported and a definition of the value reported.
The effective date of the value opinion.
Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible considerations.
Any 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.
What was included in the activity of completing the job.

For a more in depth look at what goes into an appraisal report click here: Sample Appraisal Report

After completing the appraisal, how can I have confidence that the final number is trustworthy? (See list of FAQ's)

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

That the information analysis implemented in the appraisal was appropriate.

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

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

That a trustworthy, defensible appraisal report was imparted.

To become a state licensed appraiser, we must satisfy intense education and experience requirements that enable us to produce an unbiased opinion. In addition, appraisers must abide by a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(See list of FAQ's) Regulations regarding licensing and certification vary from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and experience working under a supervisor. Once an appraiser is 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 do appraisers work for? (See list of FAQ's)

Most of the time, appraisers are hired by lenders to render a value opinion on property involved in a loan transaction - to make sure the subject is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does Area Appraisal Services, Inc. get the information used to estimate values in Montgomery County or other areas? (See list of FAQ's)

Compiling information is one of the main tasks an appraiser does. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is received from a variety of sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To verify actual sales prices, we look at tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, 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 creating appraisals for other houses in the same market.

Why do I need a professional appraisal? (See list of FAQ's)

An appraisal is a worthwhile anytime your home's value is relevant to some financial decision. For those selling a home, you'll want to figure out the 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. When buying, you can avoid overpaying by getting an independent appraisal. 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.

My mortgage statement has an item on it for PMI? Can I get rid of that? (See list of FAQ's)

PMI is the common abbreviation for for Private Mortgage Insurance. PMI protects the lender in case a borrower defaults on the loan and the market price of the house 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.


	Does your monthly loan payment have a lineitem for PMI?Call Area Appraisal Services, Inc. today at 301-215-7567 or send us an e-mail. A current appraisal could save you thousands.

Should I do anything in advance of the appraisal appointment (See list of FAQ's)

We begin with an inspection of the property. 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. 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 . Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to 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 or plot map of the property and building (if available).
Title policy that lists encroachments or easements.
Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
A bill for your most recent real estate taxes which should also contain a legal description of the property.

Define "Market Value" (See list of FAQ's)

In real estate appraising, Market Value (as opposed to Fair 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."

Once complete, who actually owns the appraisal report? (See list of FAQ's)

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 report - it's usually bundled with all the other closing documents - but is not entitled 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 scenarios, 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.

I want to get more for my house. Where should I spend money renovating? (See list of FAQ's)

A home's location - what city it is in and even what part of that city - is key to this popular question. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

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 were second, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.