MADAppraisals
Do you need an appraisal?
Welcome to MADappraisals!! Hopefully any questions you may have regarding the appraisal process can be answered here! Let's start off with the important question: "Do I need an appraisal?". It absolutely depends on your situation. If you just want to know what your property is worth because you're getting ready to list for sale and don't know where to start, an appraisal is a great first step. Now, if you're getting ready to list for sale and intend on utilizing a realtor, an appraisal may not be totally necessary. Most realtors are very knowledgeable on the market area they reside in, though there are some incompetent individuals. Be sure to do your research before choosing a realtor to help you sell your home for market value. After all, it is YOUR home!
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Now, if you're a buyer and are obtaining a loan from a lender or you're already a borrower and are refinancing, you're most likely going to need an appraisal, BUT you may not be able to directly hire an appraiser. This is because lenders have an engagement letter that they want the appraiser to abide by. An engagement letter is just an agreement/contract between a client and the appraiser that specifies additional requests that the appraiser must follow along with typical guidelines for professional appraisal practice. Notice the word "client". Most of the time the lender will make a buyer/borrower pay for the appraisal at closing. Though the appraisal is being paid for by the buyer/borrower (indirectly), this DOES NOT make the buyer/borrower the client. In fact, the specified client in the engagement letter is the true client. Most of the time the lender will put that they are the client. In this case, any questions that a buyer/borrower has about the appraisal process cannot be answered due to confidentiality between the true client and the appraiser.
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So, if you're obtaining a loan through a lender, be sure to ask the lender before you hire an appraiser. Otherwise, you may end up paying for TWO APPRAISALS!
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Valuations for estate purposes, your portfolio, private mortgage insurance, or divorce settlement can easily be obtained directly from any appraiser you choose.
What is an appraisal?
Second question: "what is an appraisal?" An appraisal is a report that gives a professional opinion on the market value of the property in question. There are actually two main types of appraisal work: commercial and residential. MADappraisals ONLY offers residential appraisals in the specified counties (read further for list of counties covered). The appraiser considers three approaches to value in any given assignment. These approaches are the sales comparison, income, and cost approaches.
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Sales Comparison
The most common approach is the sales comparison! This is where the appraiser compares "apples to apples". The appraiser researches the defined market area for the BEST recent similar sales. What constitutes a "similar/good" sale? Well, the appraiser tries to find sales of similar size (GLA - Gross Living Area), of similar style (ranch, cottage, colonial, etc.), of same bath count, of same bedroom count, with same car storage type, etc. The appraiser also tries to find sales located in close proximity. Typically the appraiser looks for house sales within a mile of the subject if in town and within 5 miles if out of town (rural). In almost every case, the appraiser is not going to be able to find three sales (the standard amount of sales to support a professional opinion) that fully match each feature of the subject property. This is why each of the sales chosen (also known as comparables) are put on a grid to where adjustments can be made for each. Each comparable is adjusted to essentially be "equal" to the subject. This creates three indications of value. The appraiser then reconciles these three (or more) indications of value into one final indication of market value. So pretty much just comparing recent sales in the area to your home!
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Income Approach
This approach may be tougher to understand, though it is a good indicator of market value when sufficient data is available. The income approach involves the gross rent multiplier (GRM). This is a figure that is derived by taking the sales price of a home and dividing it by the market rent. In an appraisal, the GRM is calculated for a market area and then multiplied by the appraiser's opinion of monthly market rent to come to an indication of market value.
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Cost Approach
How much does it cost to build it?! The cost approach can either involve replacement cost to value or reproduction cost to value. Reproduction cost is the estimated cost to construct, at current prices as of the effective date of the appraisal, an exact duplicate or replica of the building being appraised. This means using the same materials as when the house was first constructed! Depending on the age of the home, some materials may be hard to find or not available at all! Replacement cost is the estimated cost to construct, at current prices as of the effective appraisal date, a substitute for the building being appraised, using modern materials and current standards, design, and layout. Depending on available information, either method could be used in a report.
These three indications are then reconciled into one final opinion of market value. Of course, all three approaches to value may not be necessary to develope for credible assignment results.
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What are the risks?
"You didn't tell me there would be risks!!"
Unfortunately, yes. Below are some risks of choosing an appraiser directly. So be sure to do your research!!
Low valuation
High valuation (though this sounds nice, this could lead to frustration in the future)
Risks!
Lack of data/explanation in report. Some appraisers hardly explain how they arrived at an opinion of value.
Unprofessional Behavior
Not actually licensed/certified
So why choose MADappraisals??
So that stuff doesn't happen to YOU!! An appraiser's sole responsibility is to maintain public trust. This is exactly what MADappraisals will offer to you. A very thorough report, professional behavior, competency in the market area, and yes, we're certified with the Arkansas Board of Appraisers!
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Check out some of the Google reviews left by satisfied consumers!
Macoe did a great job on our appraisal! He was very quick to respond to our calls and questions. Thank you!
Patrick G.
As a Real Estate Broker I have had great experiences working with MADappraisals. I appreciate their communication, timeliness, and work.
Brad W.
Very pleased with my appraisal!
Was prompt and professional.
Would highly recommend
Paul M.
He's very professional, efficient, and great at communicating.
Ana S.
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As our client, MADappraisals certifies to you that any appraisal assignment will be performed absolutely unbiased, that the report formed will be thorough and well descriptive, that all contact regarding the assignment will be professional and personable, and that any assignment will be completed and delivered in a timely manner. We will make sure to go over every detail of your appraisal to make sure you feel confident that you received a quality service. We also will abide by the Uniform Standard of Professional Appraisal Practice (USPAP) and the American National Standards Institute for measurement (ANSI Standard).
