Northland Appraisal Service has answers to "Frequently Asked Questions"


	Northland Appraisal Service is always eager to handle any concerns you might have about appraisals or real estate in Perham and Otter Tail County. Contact Northland Appraisal Service today to learn how we can help you with your specific valuation problems.

What is an appraisal?
What does an appraiser do?
Why would someone require services from Northland Appraisal Service?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Once the appraisal is done, what assurance is there that the final number is veritable?
What does it mean for an appraiser to be licensed?
Who hires Northland Appraisal Service
Where does Northland Appraisal Service get the information used to estimate values in Otter Tail 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 the homeowner in advance?
What does "Market Value" mean?
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?

What is an appraisal? (Back to top)

The process of writing an appraisal deals with an investigation which leads to an opinion of value. This opinion or estimate is arrived at through the use of a formal process that usually uses the three main "common approaches to value". One of the processes is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves searching for similar homes in close proximity and finding value based on comparing those homes to the house being appraised. The Sales Comparison Approach is normally the most definitive and best indicator of value for a residential property. One of the least common approaches in appraising houses 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? (Back to top)

An appraiser produces a professional, unbiased assessment of market value, in the support of real property transactions. Appraisers illustate their analysis in appraisal reports.

Why would someone require services from Northland Appraisal Service? (Back to top)

There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for purchasing an report include:

To receive a loan.
If you would like to lower your property tax obligations.
To build a case for a homeowner's equity and remove PMI.
To fight improperly assessed property taxes.
To settle an estate.
To offer you an edge when purchasing a home.
To find the most probable property value when listing your home.
To ensure parties are provided just compensation in eminient domain cases.
Because an official agency such as the IRS requires it.
If you are ever involved in a civil case.

If you need more information regarding the appraisal process, please click here.

How is an appraiser different than a home inspector? (Back to top)

Appraisers do not do perform house inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the house from basement to rooftop. The stereotypical home inspector's report will include an evaluation of the integrity of the house'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.

My agent performed a CMA for me. Is that the same as an appraisal? (Back to top)

Frankly, it's night and day. What the CMA depends on are superficial trends. Appraisals use comparable sales which are valid resources. The appraisal report will also include area and building prices. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

But the largest differentiator is the person behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an unbiased voice, with no conditional interest in the value conclusion, unlike the real estate agent, who gets a commission based upon the value of the home.

What does the appraisal report contain? (Back to top)

The main objective of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:

Who engaged the appraiser and whose purposes the appraisal is to serve.
How the appraisal is supposed to be used.
The purpose of the assignment.
The type of value contained and a definition of that value.
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 real property interest 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.
What was involved in the activity of completing the assignment.

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

Once the appraisal is done, what assurance is there that the final number is veritable? (Back to top)

In the documentation of an appraisal, each appraiser must make sure of the following:

That the information analysis contained in the appraisal was appropriate.

Whether individually or collectively, there were no critical errors contained in the appraisal, nor any material details left out.

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

That a believable, substantiated appraisal report was communicated.

To become a state licensed appraiser, we must satisfy intense education and experience requirements that train us to formulate an unbiased opinion. Likewise, appraisers must obey a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Back to top) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification typically translates to many hours of coursework, tests and experience working under a supervisory appraiser. Once licensed, he or she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who hires Northland Appraisal Service (Back to top)

Commonly, appraisers are hired by lenders to render a value opinion on a home involved in a loan transaction. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does Northland Appraisal Service get the information used to estimate values in Otter Tail County or other areas? (Back to top)

Gathering data is one of the primary tasks an appraiser engages in. Data can be categorized as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.

General data is collected from a many places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To double-check actual sales prices, we look at tax records and other public documents that are usually online nowadays. Appraisers often need 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 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? (Back to top)

If you're involved in some sort of financial decision and the value of your home matters, you'll want an appraisal. For those selling a home, you'll want to determine 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, be sure you're not 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? (Back to top)

PMI is the common abbreviation for for Private Mortgage Insurance. It protects the lender if a borrower defaults on the loan and the value of the house is less than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	The money you keep from getting rid of the PMI required when you got your mortgage will make up for the price of the appraisal in no time. Northland Appraisal Service has years of experience with value trends in Perham and Otter Tail County. Contact us today.

Do you need anything from the homeowner in advance? (Back to top)

We start with an inspection of the home. 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. Inside, pick up any clutter and make sure we can get to things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of exterior walls.

To help expedite our work plus ensure a more accurate report, try if possible to have the following items:

Written property agreements, such as a maintenance agreement for a shared driveway.
Title policy that describes encroachments or easements.
Information on "Homeowners Associations" or condominium covenants and fees.
Find copies of the current listing agreement, broker's data sheet and, in the event of a pending sale.
A bill for your most recent real estate taxes which should also contain a legal description of the property.

What does "Market Value" mean? (Back to 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."

Who has rights to the appraisal report? (Back to top)

In most real estate transactions, the appraisal is ordered by the lender. 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 included with all the other closing documents - but is not allowed 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 how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.

Are some home improvements more worthwhile than others? (Back to top)

It really depends on the market. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want

As a rule, the most value returned from renovating a home comes in the kitchen. 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.