Mid-South Appraisal Service of Memphis, Inc. has answers to "Frequently Asked Questions"

Mid-South Appraisal Service of Memphis, Inc. is always eager to answer any questions you might have about appraisals in Bartlett and Shelby County. Don't hesitate to contact us today.

Define the term "Appraisal"
Describe what an appraiser does
What would cause me to need a real estate appraisal?
What is the difference between an appraisal and a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What does the appraisal report contain?
Once the assignment has been delivered, how can I have a guarantee that the value conclusion is legitimate?
How difficult is it to become certified?
Who engages the services of appraisers?
Where does Mid-South Appraisal Service of Memphis, Inc. get the data used to estimate values in Shelby County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Should I do anything in advance of the appraisal appointment
What does "Market Value" mean?
Who has rights to the appraisal report?
How can I get the most ROI out of home improvements?

Define the term "Appraisal"   (See list of FAQ's)

The appraisal process is an evaluation that generates an opinion of value. This opinion or estimate is discerned using a formal process that generally uses the three main "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the house, less the age and physical dilapidation, plus the land value. The most common approach in finding the likely sales price of a house is the Sales Comparison Approach which deals with concluding a comparison to similar houses nearby. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a house. One of the least common approaches in appraising houses is the Income Approach, which is commonly used to figure the value of a property based on what an investor would pay based on the capital produced by the property.

Describe what an appraiser does   (See list of FAQ's)

An appraiser offers a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers show their expert findings in appraisal reports.

What would cause me to need a real estate appraisal?   (See list of FAQ's)

There are many reasons to get an appraisal from Mid-South Appraisal Service of Memphis, Inc. with the most common reason being real estate and mortgage transactions. Some other reasons for getting an report include:
  • If you are applying for a loan.
  • To lower your property taxes.
  • To show a homeowner has 30% equity and remove PMI.
  • To contest inflated property taxes.
  • If you need to settle an estate.
  • To offer you a negotiating tool when purchasing a home.
  • To find the most probable property value when listing your home.
  • To defend 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 property.
  • If you ever find yourself in a civil case.
Click here for a more detailed explanation of the process of getting an appraisal.

What is the difference between an appraisal and a home inspection?   (See list of FAQ's)

Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers. The point of a home inspection is to evaluate the structure of the house from foundation to rooftop. For the most part, a home inspection report will explain the amenities and the requirements of the home: air conditioning (weather permitting), electrical systems, 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.

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

To be honest, they have nothing in common. The CMA uses market trends to generate most of their business. The appraisal depends on similar valid comparable sales. Also, the appraisal looks at other factors like condition, neighborhood and building costs. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

Who's behind the report is hands down the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, state licensed professional who has formed their livelihood on valuing real estate in and around Shelby County is behind the appraisal. Moreover, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the price of the home.

What does the appraisal report contain?   (See list of FAQ's)

The main objective of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
  • The client and other intended users.
  • The intended use of the report.
  • The purpose of the assignment.
  • The type of value reported and a definition of the value reported.
  • The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible considerations.
  • 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 assignment.
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 a guarantee that the value conclusion is legitimate?   (See list of FAQ's)

In the documentation of an appraisal, each appraiser must ensure the following:
  • The appraisal contained a suitable analysis of the data.

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

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

  • The final appraisal report was transparent, legitimate and defensible.
To become a state licensed appraiser, we must meet intense education and experience requirements that give us the background to formulate an unbiased opinion. Likewise, appraisers must follow a stringent 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).

   (See list of FAQ's) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification is commonly associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, he/she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (See list of FAQ's)

Mortgage lenders are an appraiser's most likely client, using their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does Mid-South Appraisal Service of Memphis, Inc. get the data used to estimate values in Shelby County or other areas?   (See list of FAQ's)

One of the primary tasks an appraiser must accomplish is to collect property data. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.

General data is collected from a variety of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.

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

If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. For those selling a home, you'll want to figure out the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Mid-South Appraisal Service of Memphis, Inc. is the best way to ensure assets are divided evenly. Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.

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 for Private Mortgage Insurance. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan. 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.

Has your home value appreciated since you first purchased? Call Mid-South Appraisal Service of Memphis, Inc. today at 901-682-0700 to see if you can save money by removing your Private Mortgage Insurance payment.

Should I do anything in advance of the appraisal appointment   (See list of FAQ's)

We begin with an inspection of the property. During this process, the appraiser 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any landscaping and move any items that would get in our way while we measure the structure. On the inside, make sure we can easily access items 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:
  • Records on the latest purchase of the property in the last three years.
  • Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
  • Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
  • Find copies of the current listing agreement, broker's data sheet and, in the event of a pending sale.
  • A list of "proposed" improvements if the property is to be appraised "as complete".

What does "Market Value" mean?   (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."

Who has rights to the appraisal report?   (See list of FAQ's)

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 certainly entitled to a copy of the report - 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 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.

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

It really depends on the market. 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. 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 increase 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.