RJ Larson, Inc. has answers to "Frequently Asked Questions"

RJ Larson, Inc. is always ready to handle any questions you might have about appraisals in Grand Rapids and Kent County. Feel free to contact us today.

Define the term "Appraisal"
What does an appraiser do?
What are the reasons a person would require a real estate appraisal?
Is an appraisal the same as a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What can I expect to see in my appraisal report?
Once the report has been completed, how can I have a guarantee that the value indicated is trustworthy?
What are the requirements to be a certified appraiser?
Who hires RJ Larson, Inc.
Where does RJ Larson, Inc. get the data used to estimate values in Kent County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What does "Market Value" mean?
Who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?

Define the term "Appraisal"   (Back to top)

The procedure of creating an appraisal consists of an estimation which leads to an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or estimate. The Cost Approach is one of the processes that real estate appraisers use to find value; it involves finding what the improvements would cost less physical depreciation, plus the land value. The Sales Comparison Approach involves finding similar properties nearby and discovering the value based on making a comparison of those properties to the home being appraised. The Sales Comparison Approach is normally the most accurate and best indicator of value for a home. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to determine 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 generates a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers document their expert investigation in appraisal reports.

What are the reasons a person would require a real estate appraisal?   (Back to top)

There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an appraisal include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To challenge improperly assessed property taxes.
  • If you need to take care of an estate.
  • To provide you a leg-up when purchasing real estate.
  • To figure out a reasonable sales price when selling your home.
  • 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.
  • If you ever find yourself in a civil case.
If you need more information regarding the appraisal process, please click here.

Is an appraisal the same as a home inspection?   (Back to top)

Appraisers do not do provide house inspections and are not home inspectors. The point of a home inspection is to investigate the structure of the property from foundation to rooftop. Commonly, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

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

Honestly, they have nothing in common. The CMA utilizes market trends to generate most of their business. The appraisal is based on similar verifiable comparable sales. The appraisal report will also contain area and building prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the most significant factor is the person doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. A certified, state licensed professional who bases their livelihood on valuing real estate in and around Kent County creates the appraisal. Further, the appraiser is an independent party, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.

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

Each report should indicate a supported estimate of value and must clearly state the following:
  • The client and other intended users.
  • The intended use of the report.
  • The purpose of the appraisal.
  • The type of value reported 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 characteristics, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible items.
  • Any 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 included in the process of completing the assignment.
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the report has been completed, how can I have a guarantee that the value indicated is trustworthy?   (Back to top)

In communicating an appraisal report, 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 significant errors contained in the report, nor any relevant details left out.

  • That appraisal services were delivered in a careful and cognizant manner.

  • The final appraisal report was easy to explain, sound and defensible.
To become a state licensed appraiser, there are intense education requirements as well as on the jobexperience that must be attained - all with the objective of gaining the skills required to render unbiased value opinions. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for carrying out an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Back to top) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification is commonly associated with many hours of classroom study, tests and real world experience. Once an appraiser is 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 RJ Larson, Inc.   (Back to top)

Mortgage lenders are an appraiser's most likely client, requesting their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does RJ Larson, Inc. get the data used to estimate values in Kent County or other areas?   (Back to top)

One of the most important things an appraiser does is to collect property data. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is received from a numerous sources. 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 items in the assessor's office and other public documents that are usually online nowadays. Appraisers often need 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 past experience in creating appraisals for other properties in the same market.

Why should I hire a licensed appraiser?   (Back to top)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, an appraisal helps you set the most appropriate price. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from RJ Larson, Inc. is the best way to ensure assets are divided fairly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that?   (Back to top)

PMI is short for for Private Mortgage Insurance. It guards the lender in the event a borrower is unable to pay on the loan and the value of the house is lower 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 savings from cancelling your PMI pays for the appraisal in no time. Nobody is more qualified than RJ Larson, Inc. when it comes to analyzing real estate appreciation in Grand Rapids and Kent County. Contact us today.

How do I get ready for the appraiser?   (Back to top)

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 condition of its features. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any shrubs and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.

To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
  • Any information on the purchase of the property for the last three years.
  • Written property agreements, such as a maintenance agreement for a shared driveway.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
  • A list of "suggested" improvements when the property is being appraised "as complete".

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 actually owns the appraisal report?   (Back to top)

For mortgage transactions, the lender orders the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate how the appraisal can be used; 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.

I want to get more for my house. Where should I spend money renovating?   (Back to top)

This really depends on where the home is. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.