With mortgage rates at an all-time low, now is the time to refinance your mortgage or to apply for a second mortgage. And when you do, your banker or broker is sure to ask if you have a recent appraisal.
And that brings up questions like "just what is an appraisal" and "how do I select an appraiser"? Arleen E. Goscinski, ASA, a New York State Certified Real Estate Appraiser (and Licensed Real Estate Broker) answers these and other frequently asked questions below. Email her if your question about appraisals isn't answered here.
Frequently Asked Questions.
What is an appraisal?
An appraisal is a written professional opinion of the market value of a property, such as a home, as of a specific date. An appraisal prepared by a qualified appraiser represents an independent and impartial analysis of relevant market data. Because market value is not apparent just by inspection, an appraisal is usually required when a property is sold, taxed, insured, or financed. Top
Do I need an appraisal?
There many times when an appraisal may be needed.
- Selling your home. If you have a unique property, such as the oldest house or the largest house in the area, knowing the current market value can help you negotiate a sale more quickly. If you've done any renovations, an appraisal will reflect the increased value of your home, justifying a higher selling price. An appraisal is a must if you're relocating and need to sell quickly but at a fair price. (Selling? Read Ms. Goscinski's Tips on Selling.)
- Buying a new home. When you've found the house you want, you can avoid paying too much by getting an appraisal to determine its current market value. (Buying? Read Ms. Goscinski's Tips on Buying.)
- Buying real estate insurance. Property values have risen dramatically over the last decade. To make sure you purchase sufficient insurance coverage, it's a good idea to get an appraisal to establish the current market value of your property.
- Filing an insurance claim. When filing for a casualty loss, an appraisal provides a no-quibble way to determine property replacement costs.
- Applying for a home equity loan. To get a loan you need to know the amount of equity you have in your home. An appraisal can establish that for you.
- Property Tax Grievance. Your property taxes are based on the assessed value of your home. An appraisal can help you challenge your taxes by showing that your assessment is too high.
- Refinancing. If you decide to refinance, an appraisal can establish the market value of your property and that will determine the amount of your new mortgage.
- Removing Private Mortgage Insurance (PMI). Most lenders are willing to drop their requirement for PMI when your home equity reaches a certain level. A current market value appraisal can provide the evidence necessary to determine the equity in your home.(Still paying PMI? Read Ms. Goscinski's Tips on PMI.)
- Bankruptcy. An appraisal may be necessary to determine the equity of a property in a bankruptcy proceeding.
- Divorce Settlements. If the parties to a divorce can't agree on division of the assets, the judge often requests an appraisal to help him decide on an equitable settlement.
- Probate Purposes. When a will is probated, an appraisal may be ordered to determine the value of an estate. Top
How much does an appraisal cost?
As with any profession, fees vary depending on the complexity of the assignment, and also with the experience, education and ability of the appraiser. Appraisals for smaller residential properties are frequently completed using standardized forms and are the least expensive. Appraisals for complex residential properties, for larger multi-family residential properties, and for non-residential properties(e.g., commercial and industrial) are usually prepared in narrative report format and the fees for this work are higher. As a rough guideline, the average fee for an appraisal of a single family residential property is about $375. Top
How do I find a qualified appraiser?
At the very least, the appraiser you select should be licensed or certified by the state. This will insure that the appraiser has the education and experience necessary to appraise your property. A licensed or certified appraiser must conform to the Uniform Standards of Professional Appraisal Practice (USPAP) adopted by the Appraisal Standards Board of the Appraisal Foundation. A state's license and certification laws are reviewed by the Appraisal Subcommittee, which maintains a roster of state licensed and certified appraisers.
To be sure an appraiser is competent, ask if the appraiser is a designated member of a recognized appraisal organization such as the American Society of Appraisers. Standards for accreditation go well beyond those established by the state. Recognized appraisal organizations are sponsors of the Appraisal Foundation. Top
What is market value?
It is the most probable price which a property would bring in an open and competitive market when a buyer and seller who were unrelated to each other
each acted prudently and knowledgeably. It is assumed that all the conditions necessary for a fair sale would be met and the price would not be influenced by unusual circumstances.
In practice, the market value of a residential property is typically determined by the method of comparable sale. The property is compared to homes which have sold within the past six months on similar terms. A good "comparable" is a home of similar style, age, size, condition, and quality with many of the same features. Dissimilar homes, homes offered For Sale or those still Under Contract are not considered. Top
Arleen E. Goscinski, ASA, New York State Certified Real Estate Appraiser
New York City, Queens, Nassau, Suffolk New York Real Estate Appraisals
149 Ketay Drive South East Northport, NY 11731-5031
Phone: 631-368-0519 Fax: 631-486-6360