The Appraisal Source has answers to "Frequently Asked Questions"

The Appraisal Source is ready to talk to you about any questions you might have about appraisals in Millburn and Essex County. Contact The Appraisal Source today to learn how we can help you with your valuation problems.

What is an appraisal?
Describe what an appraiser does
What would cause me to request your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What can I expect to see in my appraisal report?
Once the assignment has been completed, what assurance is there that the value indicated is trustworthy?
How hard is it to become certified?
Who hires The Appraisal Source
Where does an appraiser get the data used to estimate values in Essex 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?
Do you need anything from me in advance?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Top)

An appraisal is an evaluation allowing the appraiser to come to an opinion of value. The appraiser will use a few "approaches," typically three, to arrive at the estimation of market value. One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the house, less the depreciation and physical dilapidation, adding the land value. Another of the methods is the Sales Comparison Approach - which deals with finding a comparable analysis to other similar nearby properties which have recently sold. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to determine the market value of a property based on what an investor would pay based on the income produced by the property.

Describe what an appraiser does   (Top)

An appraiser forumlates a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers show their analysis in appraisal reports.


What would cause me to request your services?   (Top)

There are many reasons to purchase an appraisal from The Appraisal Source with the usual reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
  • If you are applying for a loan.
  • To lower your tax burden.
  • To demonstrate a homeowner's acquired equity and remove insurance.
  • To fight inflated property taxes.
  • If you need to settle an estate.
  • To give you an edge when purchasing a home.
  • To figure out the most probable price when listing your home.
  • 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 involved in getting an appraisal.


What is the difference between an appraisal and a home inspection?   (Top)

The appraiser is not a home inspector nor does he/she do a full home inspection. The purpose of a home inspection is to investigate the structure of the home from bottom to attic. The stereotypical home inspector's report will contain an evaluation of the integrity of the home'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)?   (Top)

To be blunt, it's apples and oranges. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are valid resources. The appraisal report will also include neighborhood and building values. 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 biggest difference is the person behind the report. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. 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 accept a flat sum for assignments, regardless of their outcome.

What can I expect to see in my appraisal report?   (Top)

The main objective 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 other intended users.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • The type of value contained and a definition of the value reported.
  • The effective date of the appraisal.(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 description, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible items.
  • All 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.
  • The scope of work considered when completing the job.
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report

Once the assignment has been completed, what assurance is there that the value indicated is trustworthy?   (Top)

In the documentation of an appraisal, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was suitable.

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

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

  • The final appraisal report was easy to explain, sound and not easily discredited.
To become a state licensed appraiser, there are strenuous education requirements as well as practical experience that must be logged. In addition, appraisers must follow a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Top) Licensing and certification requires coursework, tests and real world experience. Once an appraiser is licensed, he/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 hires The Appraisal Source   (Top)

Mortgage lenders are an appraiser's typical customer, needing their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does an appraiser get the data used to estimate values in Essex County or other areas?   (Top)

Collecting data is one of the primary activities of an appraiser. Data can be described as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.

General data is received from a many sources. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To double-check actual sales prices, we use items in the assessor's office and other public documents that are usually online nowadays. Appraisers often have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

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

Why do I need a professional appraisal?   (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 the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home 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?   (Top)

PMI stands for Private Mortgage Insurance. This supplemental policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than what is owed on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

Does your monthly mortgage payment include a fee for PMI?Call The Appraisal Source today at 9084476682 or send us an e-mail. A current appraisal could save you thousands.

Do you need anything from me in advance?   (Top)

We begin with an inspection of the home. 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. Indoors, make sure the appraiser can get to items like furnaces and water heaters.

You can make our visit go faster and improve the quality of the appraisal report by having the following things on hand:
  • A survey or plot map of the property and building (if readily available).
  • Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • 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.

How does an appraiser define "Market Value"?   (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?   (Top)

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 certainly entitled to a copy of the report - 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these scenarios, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.

Are some home improvements more worthwhile than others?   (Top)

This really depends on where the home is. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

As a rule, the most value returned from renovating a home comes in the kitchen. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms were second, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.