Spencer Appraisal, Inc. has answers to "Frequently Asked Questions"

Spencer Appraisal, Inc. is always eager to elaborate on any concerns you might have about appraisals or real estate in Berea and Madison County. Contact Spencer Appraisal, Inc. today to talk about how we can help solve your valuation problems.

Describe an appraisal
Describe what an appraiser does
Why would a person request services from Spencer Appraisal, Inc.?
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?
Upon completion of the appraisal, how can I have confidence that the final number is veritable?
What does it mean for an appraiser to be licensed?
Who do appraisers work for?
Where does an appraiser get the data used to estimate values in Madison County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What does "Market Value" mean?
Who has rights to the appraisal report?
How can I get the most ROI out of home improvements?



Describe an appraisal   (Back to top)

An appraisal report is a thought process leading to an opinion of value. The appraiser must use a several "approaches," typically three, to come to the estimation of market 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, plus the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which involves figuring a comparison to comparable homes nearby. Being the most common approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a residence. The Income Approach is generally used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.

Describe what an appraiser does   (Back to top)

An appraiser produces an unprejudiced and well substantiated assessment of market value, often in the context of a real estate sale. Appraisers reveal the details of their investigation in appraisal reports.


Why would a person request services from Spencer Appraisal, Inc.?   (Back to top)

There are a lot of reasons to purchase an appraisal from Spencer Appraisal, Inc. with the most common reason being real estate and mortgage transactions. A few other reasons for getting an appraisal report include:
  • To get a loan.
  • To lower your tax burden.
  • To show a homeowner has 30% equity and remove PMI.
  • To contest inflated property taxes.
  • To handle an estate.
  • To give you a leg-up when purchasing a home.
  • To find a likely price when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because a government agency such as the IRS requires it.
  • If you are ever involved in a civil case.
For a more detailed explanation of the appraisal process click here.


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

Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. A third-party home inspector will evaluate the structure of the home, from the roof to the foundation. Usually, a home inspection report will explain the amenities and the necessities 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 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. What the CMA relies upon are vague trends. The appraisal depends on similar proven comparable sales. Area and building costs are also important in an appraisal. All a CMA does is generate a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

The person creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, Kentucky licensed professional who made their livelihood on valuing homes in and around Madison County 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 accept a previously agreed upon sum for assignments, regardless of their outcome.

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

Every report should indicate a believable value opinion and will document the following:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • 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!)
  • Pertinent property attributes, including: location, physical description, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible factors.
  • 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 activity of completing the appraisal.
For a more detailed view of the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the appraisal, how can I have confidence that the final number is veritable?   (Back to top)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
  • That the information analysis utilized in the appraisal was proper.

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

  • That appraisal services were not rendered in a careless or negligent manner.

  • The final appraisal report was easy to explain, sound and not easily discredited.
There are rigorous education and experience requirements that must be met in order to get an appraisal license in Kentucky. Plus, appraisers must abide by a strict industry code of ethics and respect national standards of practice for real estate appraisal. The rules for working up an appraisal and documenting 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 typically translates to many hours of coursework, tests and experience working under a supervisor. Once licensed, he or she must then take continuing education courses so the license stays current. To see the specific requirements for any state click here.

Who do appraisers work for?   (Back to top)

Commonly, appraisers are hired by lenders to estimate the value of property involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

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

One of the primary tasks an appraiser performs is to assimilate property data. Data can be categorized as either Specific or General. Specific data is gathered 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 variety of sources. To look up recent sales to be used as "comps", we typically use the local Multiple Listing Service. To double-check actual sales prices, we research tax records and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.

And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.

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

If you're involved in any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your house, an appraisal assists you in setting the most appropriate price. 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 is essential to making the right financial decisions.

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

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

Does your monthly mortgage payment have a lineitem for PMI?Call Spencer Appraisal, Inc. today at 859-358-2114 or send us an e-mail. A current appraisal could save you thousands.

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

The first step in most appraisals is the home 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house . Trim any bushes and relocate any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can easily access appliances like furnaces and water heaters.

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).
  • A list of any personal property that will be left behind and sold with the home, such as a oven, or a washer and dryer, if applicable.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • Information on "Homeowners Associations" or condominium covenants and fees.

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

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

For mortgage transactions, the lender requests 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.

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 stated otherwise, the home owner can use the appraisal for any purpose.

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

The answer to this is different depending upon the location of the home. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

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, returning 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.