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Professional Appraisal Services, LLC has answers to "Frequently Asked Questions"

Professional Appraisal Services, LLC is prepared to elaborate on any concerns you might have about appraisals or real estate in Chicago and Cook County. Feel free to contact us today.

Define the term "Appraisal"
What does an appraiser do?
Why would I require services from Professional Appraisal Services, LLC?
What is the difference between an appraisal and a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Upon completion of the report, how can I have certainty that the value indicated is valid?
What does it mean for an appraiser to be licensed?
Who are an appraiser's customers?
Where does an appraiser get the information used to estimate values in Cook County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal appointment
How does an appraiser define "Market Value"?
Who actually owns the appraisal report?
How can I get the most ROI out of home improvements?

Define the term "Appraisal"   (List of questions)

The appraisal process is an evaluation that leads to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or valuation. 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, plus the land value. The Sales Comparison Approach involves finding similar houses in the vicinity and discovering the value based on making a comparison of those houses to the house in question. The Sales Comparison Approach is normally the most accurate and clearest indicator of a liklely sales price for a residential property. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the building.

What does an appraiser do?   (List of questions)

An appraiser provides a professional, unbiased assessment of market value, often in the context of a real estate purchase. Appraisers show their conclusions in appraisal reports.

Why would I require services from Professional Appraisal Services, LLC?   (List of questions)

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.
  • To lower your property taxes.
  • To demonstrate a homeowner's acquired equity and remove insurance.
  • To fight high property taxes.
  • If you need to settle an estate.
  • To give you a negotiating tool when purchasing a home.
  • To find a likely price when selling real estate.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
Click here for a more detailed explanation of the process involved in getting an appraisal.

What is the difference between an appraisal and a home inspection?   (List of questions)

Home inspectors do not provide an opinion of value and are not appraisers. The purpose of a home inspection is to evaluate the structure of the house from basement to top. Usually, a home inspection report will explain the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

Is an appraisal the same as a comparative market analysis(CMA)?   (List of questions)

Simply put, it's night and day. The CMA utilizes market trends to conduct most of their business. An appraisal utilizes comparable sales that can be proven by public record. Also, the appraisal checks other factors like condition, location and replacement costs. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is who's behind 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 accept a flat fee for assignments, regardless of their outcome.

What's in an appraisal report?   (List of questions)

Each appraisal must reflect a supported value opinion and should clearly state 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 appraisal.
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible factors.
  • 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.
  • The scope of work considered to complete the job.
For a more comprehensive look at the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, how can I have certainty that the value indicated is valid?   (List of questions)

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

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

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

  • The final appraisal report was easy to explain, credible and conclusive.
There are rigorous education and experience requirements that must be fulfilled in order to become a licensed appraiser in Illinois. Plus, appraisers must abide by a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (List of questions) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. However, licensing and certification is commonly associated with many hours of coursework, tests and practical experience. Once licensed, he or she must then complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (List of questions)

Most of the time, appraisers are employed by mortgage lenders to render a value opinion on a home involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does an appraiser get the information used to estimate values in Cook County or other areas?   (List of questions)

One of the main things an appraiser does is to assimilate property data. Data can be divided into Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.

General data is collected from a many sources. To find out about recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely have to report when a property lies 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 collective knowledge gained from doing assignments for other houses in the same market.

Why should I hire a licensed appraiser?   (List of questions)

If you're involved in any kind of financial decision and the value of your home is relevant, you'll want a full appraisal. 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. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Professional Appraisal Services, LLC is the best way to ensure assets are divided properly. 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?   (List of questions)

PMI is short for for Private Mortgage Insurance. This added plan covers the lender in case a borrower defaults on the loan and the market price of the home is less than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Has your real estate appreciated since you first purchased? Contact Professional Appraisal Services, LLC today at 312-371-8844 to see if you can cancel your Private Mortgage Insurance premium.

Should I do anything in advance of the appraisal appointment   (List of questions)

We start 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 status of its amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would get in our way while we measure the structure. Indoors, make sure we can easily access appliances like furnaces and water heaters.

You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • A survey or plot map of the property and building (if available).
  • List of personal property to be sold with the building.
  • Title policy that describes encroachments or easements.
  • Brag sheet that lists major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • A list of "suggested" improvements if the property is to be appraised "as complete".

How does an appraiser define "Market Value"?   (List of questions)

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."

Who actually owns the appraisal report?   (List of questions)

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 entitled to a copy of the appraisal - 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.

It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may define the purpose of the appraisal; 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.

How can I get the most ROI out of home improvements?   (List of questions)

The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

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 weren't far behind, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.