ABOUT WACHTSTETTER ENTERPRISES INC REAL ESTATE APPRAISAL
Appraisals
An appraisal is an opinion of value or the act or process of estimating value. This opinion or estimate is derived by using the three common approaches, all derived from the market. They are: Cost Approach to value is what it would cost to replace or reproduce the improvements as of the date of the appraisal, less the physical deterioration, the functional obsolescence and the economic obsolescence. The remainder is added to the Land Value. Sales Comparison Approach to value makes use of other "bench mark" properties of similar size, quality and location that have recently sold. A comparison is made to the subject property. Income Approach to value is of primary importance in ascertaining the value of income producing properties, has little weight in residential type properties. This approach provides an objective estimate of what a prudent investor would pay based upon the net income the property produces.
Then, after thorough analysis of all general and specific data gathered from the market, a final estimate or opinion of value is correlated.
What does an appraiser do?
The appraiser does not create value. The appraiser interprets the market to arrive at a value estimate. As the appraiser compiles data pertinent to a report, consideration must be given to the site and amenities as well as the physical condition of the property. An appraiser may spend only a short time inspecting the property, however, this is only the beginning. Considerable research for collecting general and specific data must be accomplished before the appraiser can arrive at a final opinion of value. Due to the many types of value, such as Fair Market Value, Insurance Value, Tax Value and Value In Use, the need to precisely define the purpose of the appraisal is readily indicated.
Forms Vs. Narratives Reports
Forms: These formats are typically used by lending institutions. They are nationally approved by governmental agencies and accepted by most lenders. There forms are used for residential. commercial, agricultural land and condominiums. These reports are typically less expensive than a narrative report.
Narrative: These reports are more detailed but basically go through the same steps that are used to arrive at a conclusion in a form report. These reports are more flexible to bring out any problem areas in the subject property. These reports take more time to prepare and are therefore more expensive.Appraisals are obtained for several reasons
To settle an estate or estate planning
Taxing authorities such as the IRS often require appraisals to establish the value of an estate when a death occurs. Values for estates are typically as of the date of death to help in calculating tax owed or to step up the value of the asset when it is transferred. If assets are transferred within a family (ie family trust, etc.) the assets need to be valued so they can be transferred to other members of the family.
To establish the market value of a property to help in dissolving martial or business assets An appraisal can provide an objective opinion of value so that the partners can assets or have an idea of how much a property should sell for.
To eliminate PMI insurance
Private Mortgage Insurance (PMI) is insurance required by the lender when loan to value ratio is over 80 %. Pmi removal can be achieved by showing the insurance company that the value of the asset has increased and their risk has decreased. The PMI premium will be stopped immediately.
To contest high property taxes
If property owners feel that their property is assessed too high, they may order an appraisal from a qualified appraiser to contest the assessment. Or they can hire an appraiser as a consultant to handle the filing of the necessary papers as well as appearing before the boards to have the assessment adjusted to an equitable level. This can be handled on a contingent fee basis and if no reduction is received no fee is paid. The consultant can act as an advocate for your case. To determine an offering or selling price
Typically appraisals are made after the buyer and seller have agreed on a price. Sellers should have the property appraised prior to putting it on the market to make sure the house is not put on too high above market value (nobody will look at the property) or too low it will sell quickly and you could lose thousands of dollars. If a buyer has the property appraised prior to making an offer, they can negotiate a better price and make sure they do not over pay. The bank will only loan on what the property is worth.
To obtain a loan
These are the most common type of appraisals. When an appraisal is made for a bank the appraiser is actually working for the bank, even if the borrower is paying for the report. The bank wants to make sure they are well protected in case the borrower can not pay the loan back.
Insurance
Insurance appraisals are used to estimate to replace your existing home. If the amount your home is insured for is too low, you will not have enough insurance to rebuild your home. If your home is over-insured, you are paying too much in premium. A replacement cost appraisal will help document your homes quality and condition, and make sure yo pay for the proper amount to protect your investment.