MJ Valuations has answers to "Frequently Asked Questions"


	MJ Valuations is eager to reply to any inquiries you might have about residential real estate appraisals. Don't hesitate to contact us today.

What is an appraisal?
What does an appraiser do?
What are the reasons I would need your services?
How is an appraisal different than a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What can I expect to see in my appraisal report?
Once the assignment has been delivered, how can I have confidence that the value indicated is accurate?
What are the requirements to be a certified appraiser?
Who are an appraiser's customers?
Where does MJ Valuations get the data used to estimate market values?
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 is "Market Value?"
Does the appraisal belong to the bank or the consumer?
How can I get the most ROI out of home improvements?

What is an appraisal? (See list of FAQ's)

The method of performing an appraisal report consists of an estimation which forms an opinion of value. This opinion or estimate is found through a formal process that commonly utilizes three "common approaches to value". One of the methods in use is the Cost Approach, which is what it would cost to replace the improvements to the property, minus age and physical dilapidation, adding the land value. Easily the most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which concerns making a comparison to similar houses close by. Being the most common approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residence. One of the least common approaches in appraising homes is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do? (See list of FAQ's)

An appraiser generates a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers illustrate their professional investigation in appraisal reports.

What are the reasons I would need your services? (See list of FAQ's)

There are a lot of reasons to get an appraisal from MJ Valuations with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal report include:

To receive a loan.
If you would like to reduce your property tax obligations.
To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
To contest high property taxes.
If you need to settle an estate.
To give you a leg-up when purchasing a home.
To figure out a reasonable sales price when listing your home.
To ensure parties are provided just compensation in eminent domain cases.
Because a government agency such as the IRS requires it.
It's possible you could be involved in a lawsuit - an appraisal will definitely help.

If you need a more detailed explanation of the appraisal process, please click here.

How is an appraisal different than a home inspection? (See list of FAQ's)

Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the accessible structure and appliances of a home, from the roof to the foundation. The standard property inspector's report will include an evaluation of the integrity of the home'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.

Is an appraisal the same as a comparative market analysis(CMA)? (See list of FAQ's)

Simply put, it's apples and oranges. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are verifiable resources. In addition, the appraisal checks other factors like condition, area and construction prices. All a CMA does is generate a "ballpark figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the largest differentiator is the person doing the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A Certified Residential Appraiser who made their livelihood on valuing homes in your area is behind the appraisal. 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 collect only a flat sum for assignments, regardless of their outcome.

What can I expect to see in my appraisal report? (See list of FAQ's)

Every appraisal should indicate a credible value opinion and should document 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 reported and a definition of that value.
The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
Relevant property attributes, including: location, physical characteristics, legal attributes, economic attributes, the real property interest valued, 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.
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 entailed in the process of completing the appraisal.

For a more in depth view of all that goes into an appraisal report click here: Sample Appraisal Report

Once the assignment has been delivered, how can I have confidence that the value indicated is accurate? (See list of FAQ's)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:

That the information analysis implemented in the appraisal was suitable.

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

That appraisal services were rendered in a careful and conscientious manner.

The final appraisal report was easy to explain, sound and conclusive.

To become a state licensed appraiser, we must meet considerable education and experience requirements that enable us to formulate an unbiased opinion. In addition, appraisers must obey a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(See list of FAQ's) Regulations regarding licensing and certification vary from state to state. In general, licensing and certification typically translates to many hours of classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he/she is required to engage in continuing education courses so the license remains up to date. To see the specific requirements for any state click here.

Who are an appraiser's customers? (See list of FAQ's)

Mortgage lenders are an appraiser's most likely client, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does MJ Valuations get the data used to estimate market values? (See list of FAQ's)

One of the primary tasks an appraiser must accomplish is to collect data. Data can be described as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is collected from a many sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.

And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.

Why should I hire a licensed appraiser? (See list of FAQ's)

An appraisal is a valuable tool whenever your home's value is pertinent to some financial decision. If you're selling your home, an appraisal will help you determine the most appropriate price. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from MJ Valuations is the best documentation to ensure assets are divided evenly. 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? (See list of FAQ's)

PMI is the common abbreviation for Private Mortgage Insurance (PMI). PMI protects the lender in the event a borrower defaults on the loan and the market price of the home is lower than what is owed on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.


	Does your monthly mortgage payment have a line item for PMI? Call MJ Valuations today at 720-262-5249 or send us an e-mail. A current appraisal could save you thousands.

How do I get ready for the appraiser? (See list of FAQ's)

The first step in most appraisals is the property inspection. 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. On the home's interior, 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.

You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:

Information on the latest purchase of the property in the last three years.
Written property agreements, such as a maintenance agreement for a shared driveway.
Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
A list of any 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 copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".

What is "Market Value?" (See list of FAQ's)

In real estate appraising, Market Value (as opposed to Fair 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."

Does the appraisal belong to the bank or the consumer? (See list of FAQ's)

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 report - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.

The exception to this rule is when a homeowner engages an appraiser directly. In these scenarios, the appraiser may stipulate the purpose of the appraisal, for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the homeowner can do whatever they want with the appraisal.

How can I get the most ROI out of home improvements? (See list of FAQ's)

A home's location - what city it is in and even what part of that city - is key to this popular question. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size. Of course, these figures represent national averages and may vary in your particular market segment. But that's what we're here for - to find the answer!