Neu Real Estate has answers to "Frequently Asked Questions"


	Neu Real Estate is always prepared to address any questions you might have about appraisals in Big Stone County. Contact us today to learn how we can help solve your valuation problems.

What is an appraisal?
Describe what an appraiser does
What are the reasons a person would request a real estate appraisal?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
After completing the report, how can I have a guarantee that the final number is valid?
What goes into an appraiser's certification?
Who employs appraisers?
Where does an appraiser get the data used to estimate values in Big Stone County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
What is "Market Value?"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?

What is an appraisal? (Return to top)

An appraisal report is an investigation leading to an opinion of value. The real estate appraiser must use a few "approaches," typically three, to arrive at the estimation of market value. The Cost Approach is one of the approaches that appraisers use to find the value of a home; it involves discerning what the improvements would cost minus physical deterioration, adding the land value. Easily the most common approach in finding the value of a house is the Sales Comparison Approach which deals with making a comparison to similar homes nearby. Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property. One of the least common approaches in appraising houses is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the income produced by the property.

Describe what an appraiser does (Return to top)

An appraiser offers a professional, unbiased determination of market value, often in the context of a real estate sale. Appraisers reveal the details of their expert findings in appraisal reports.

What are the reasons a person would request a real estate appraisal? (Return to top)

There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:

To obtain a loan.
To reduce your property taxes.
To demonstrate a homeowner's acquired equity and remove insurance.
To fight improperly assessed property taxes.
To deal with an estate.
To give you a negotiating tool when purchasing real estate.
To find a reasonable sales price when listing your home.
To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
Government agencies such as the IRS require an appraisal on every home.
If you ever find yourself in a lawsuit.

For a more extensive explanation of the appraisal process click here.

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

Appraisers do not do perform home inspections and are not home inspectors. An inspection is a third-party investigation of the available structure and electrical and mechanical systems of a home, from the roof to the bottom. Commonly, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed 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? (Return to top)

Simply put, it's like comparing Shakespeare to reality TV. What the CMA depends on are vague trends. Appraisals use similar sales which are valid resources. The appraisal report will also contain area and construction prices. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

The person creating the report is actually the biggest difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for assignments, regardless of their outcome.

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

Each report must demonstrate a supported estimate of value and must identify 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.
Precisely what "value" attribute is being reported and what that value means.
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 attributes, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible considerations.
Any 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 entailed in the activity of completing the assignment.

For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have a guarantee that the final number is valid? (Return to top)

In communicating an appraisal report, each appraiser must ensure the following:

The appraisal contained an appropriate analysis of the information.

Whether individually or collectively, there were no critical errors contained in the report, nor any material details left out.

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

That a solid, defensible appraisal report was imparted.

To become a state licensed appraiser, there are education requirements as well as real world experience that must be logged. In addition, appraisers must stick to a strict industry code of ethics and observe national standards of practice for real estate appraisal. The rules for working up 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 is achieved through coursework, tests and experience working under a supervisory appraiser. Once an appraiser is licensed, he or she must then complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who employs appraisers? (Return to top)

Mortgage lenders are an appraiser's most likely client, needing their services to ensure property 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 an appraiser get the data used to estimate values in Big Stone County or other areas? (Return to top)

One of the main activities of an appraiser is to assimilate property data. Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is gathered from a variety of places. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To verify actual sales prices, we use items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.

And most importantly, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other properties in the same market.

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

If you're making some sort of financial decision and the value of your home is relevant, you'll want a full appraisal. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Neu Real Estate 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 means you can make informed financial decisions.

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

PMI is short for for Private Mortgage Insurance. PMI takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.


	The amount you keep from getting rid of your PMI pays for the appraisal in no time. Nobody is more qualified than Neu Real Estate when it comes to analyzing real estate appreciation in Ortonville and Big Stone County. Contact us today.

Should I do anything in advance of the appraisal inspection (Return to top)

The first step in most appraisals is the home inspection. During this process, we will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can get to appliances like furnaces and water heaters.

To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:

Any records on the purchase of the property for the last three years.
Title policy that lists encroachments or easements.
Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
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).
A bill for your most recent real estate taxes which should also contain a legal description of the property.

What is "Market Value?" (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."

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

In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is 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.

It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may define 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 do whatever they want with the appraisal.

Are some home improvements more worthwhile than others? (Return to top)

This really depends on where the home is. 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.

As a rule, the most value returned from renovating a home comes in the kitchen. 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.