Cole Appraisal & Consulting, LLC has answers to "Frequently Asked Questions"


	Cole Appraisal & Consulting, LLC is always eager to handle any questions you might have about appraisals or real estate in Saint Louis County. Contact us today to see how we can help you with your valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
Why would a person request your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
Once the appraisal has been delivered, how can I have a guarantee that the value indicated is valid?
What goes into an appraiser's certification?
Who engages the services of appraisers?
Where does an appraiser get the data used to estimate values in Saint Louis County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Do you need anything from the homeowner in advance?
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
How can I get the most ROI out of home improvements?

Define the term "Appraisal" (Return to top)

The method of writing an appraisal consists of an investigation which forms an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or estimate. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which deals with figuring a comparison to comparable homes close by. The Sales Comparison Approach is normally the most definitive and clearest indicator of value for a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the capital produced by the property.

Describe what an appraiser does (Return to top)

An appraiser offers a fair and credible assessment of market value, in the support of real estate exchanges. Appraisers document their professional investigation in appraisal reports.

Why would a person request your services? (Return to top)

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

To get a loan.
To reduce your property taxes.
To build a case for a homeowner's equity and remove PMI.
To fight improperly assessed property taxes.
If you need to settle an estate.
To offer you a negotiating tool when purchasing real estate.
To find the most probable sales price when putting your home on the market.
To ensure parties are provided just compensation in eminient domain cases.
Because an official agency such as the IRS requires it.
It's possible you could be involved in a lawsuit - an appraisal will definitely help.

Click here for a more extensive explanation of the process involved in getting an appraisal.

What is the difference between an appraisal and a home inspection? (Return to top)

The appraiser is not a home inspector and he or she does not do a complete home inspection. The purpose of a home inspection is to evaluate the structure of the home from foundation to attic. The stereotypical home inspector's report will contain 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.

What is the difference between an appraisal and a comparative market analysis (CMA)? (Return to top)

Simply, they have nothing in common. What the CMA relies upon are ill-defined trends. The appraisal depends on similar valid comparable sales. Also, the appraisal checks other factors like condition, location and replacement costs. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the most significant factor is the person creating the report. A CMA is written 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, Minnesota licensed professional who has formed their livelihood on valuing real estate in and around Saint Louis County creates the appraisal. Moreover, the appraiser is an unbiased party, with no vested 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? (Return to top)

The main purpose of an appraisal report 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:

The client and other intended users.
The intended use of the report.
The appraisal's purpose.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the appraiser's opinions and conclusions.
Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic factors, 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 considerations.
All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and other items of a similar nature.
Division of interest, such as fractional interest, physical segment and partial holding.
What was involved in the process of completing the assignment.

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

Once the appraisal has been delivered, how can I have a guarantee that the value indicated is valid? (Return to top)

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

That the information analysis implemented in the appraisal was appropriate.

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

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

That a believable, substantiated appraisal report was conferred.

There are rigorous classroom and experience requirements that must be met in order to get an appraisal license in Minnesota. In addition, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Return to top) Licensing and certification takes classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he/she is required to complete continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who engages the services of appraisers? (Return to top)

Most of the time, appraisers are hired by mortgage lenders to render a value opinion on property involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Saint Louis County or other areas? (Return to top)

One of the primary tasks an appraiser engages in is to compile data. Data can be split into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.

General data is gathered from a variety of places. To research recent sales to be used as "comps", we often go to the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.

And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other properties in the same market.

What can a full appraisal do for me? (Return to top)

An appraisal is a worthwhile anytime your home's value is pertinent to some financial decision. If you're selling your home, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.

What exactly is PMI and how can I get rid of it? (Return to top)

PMI stands for Private Mortgage Insurance. This added plan covers the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the balance of 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.


	The savings from cancelling the PMI required when you got your mortgage pays for the appraisal in no time. Nobody is more qualified than Cole Appraisal & Consulting, LLC when it comes to analyzing real estate appreciation in Eveleth and Saint Louis County. Contact us today.

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

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 features. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside walls.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:

A plot plan or survey of the house and land (if available).
Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
Information on "Homeowners Associations" or condominium covenants and fees.
Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
Most recent real estate tax bill from Saint Louis and or legal description of the property.

What does "Market Value" mean? (Return to top)

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."

Once complete, who actually owns the appraisal report? (Return 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 report - it's usually included with all the other closing documents - but is not entitled 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 cases, 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 home owner can do whatever they want with the appraisal.

How can I get the most ROI out of home improvements? (Return to top)

Like all things real estate, this is dependent on a home's location. 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 move. 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 weren't far behind, yielding 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 an oddball for your neighborhood in terms of size.