Rossebo & Associates Inc. has answers to "Frequently Asked Questions"

Rossebo & Associates Inc. is always willing to handle any concerns you might have about appraisals or real estate in Minnetonka and Hennepin County. Don't hesitate to contact us today.

What is an appraisal?
Describe what an appraiser does
Why would someone request services from Rossebo & Associates Inc.?
How is an appraisal different than a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Upon completion of the report, what assurance is there that the value conclusion is valid?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in Hennepin County or other areas?
Why do I need a professional appraisal?
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 inspection
Define "Market Value"
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?

What is an appraisal?   (Top)

The appraisal process is an estimation that generates an opinion of value. This opinion or estimate is figured using a formal process that generally uses three "common approaches to value". One of the methods in use is the Cost Approach, which finds what it would cost to replace the improvements to the property, minus depreciation and physical dilapidation, adding the land value. Another of the methods is the Sales Comparison Approach - which deals with making a comparable analysis to other similar properties within a close vicinity which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the capital produced by the building.

Describe what an appraiser does   (Top)

An appraiser offers a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers present their professional investigation in appraisal reports.

Why would someone request services from Rossebo & Associates Inc.?   (Top)

There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal report include:
  • If you are applying for a loan.
  • If you would like to lower your property tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To contest high property taxes.
  • If you need to take care of an estate.
  • To give you an edge when purchasing real estate.
  • To find a likely sales 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 ever find yourself in a civil case.
If you need more information about the appraisal process, please click here.

How is an appraisal different than a home inspection?   (Top)

Appraisers do not do complete residential property inspections and are not home inspectors. The purpose of a home inspection is to evaluate the structure of the house from basement to top. For the most part, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

Is an appraisal the same as a comparative market analysis(CMA)?   (Top)

Honestly, they have nothing in common. What the CMA relies upon are vague trends. An appraisal relies on comparable sales that can be proven by records. Area and architectural costs are also important in an appraisal. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

The person behind the report is actually the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. 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 accept a previously agreed upon fee for work they perform, regardless of their value conclusion.

What's in an appraisal report?   (Top)

Each report should demonstrate a believable estimate of value and will identify the following:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraiser's opinions and conclusions.
  • Pertinent property characteristics, 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, trade fixtures 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.
  • The scope of work used to complete the assignment.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, what assurance is there that the value conclusion is valid?   (Top)

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

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

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

  • That a trustworthy, substantiated appraisal report was imparted.
To become a state licensed appraiser, we must satisfy extensive education and experience requirements that train us to formulate an unbiased opinion. In addition, appraisers must stick to a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for working up an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Top) Licensing and certification is achieved through classroom study, tests and real world experience. Once licensed, he/she must then complete continuing education courses so the license remains current. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Top)

Typically, appraisers are hired by mortgage lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does an appraiser get the information used to estimate values in Hennepin County or other areas?   (Top)

Compiling information is one of the primary tasks an appraiser engages in. Data can be described as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is gathered from a number of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other public documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.

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

Why do I need a professional appraisal?   (Top)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your home, an appraisal will help you determine the most appropriate price. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Rossebo & Associates Inc. is the best way to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that?   (Top)

PMI stands for Private Mortgage Insurance. It guards the lender if a borrower is unable to pay on the loan and the value of the home is less than what is owed on 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 house payment have a lineitem for PMI?Call Rossebo & Associates Inc. today at 952.975.1879 or send us an e-mail. Documentation of your home's present value could save you thousands.

Should I do anything in advance of the appraisal inspection   (Top)

We begin with an inspection of the property. 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. Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.

You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
  • Written property agreements, such as a maintenance easement for a shared driveway.
  • List of personal property to be sold with the building.
  • Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
  • Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A list of "suggested" improvements when the property is being appraised "as complete".

Define "Market Value"   (Top)

In real estate appraising, 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."

Does the appraisal belong to the bank or the consumer?   (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 certainly 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.

The exception to this rule is when a home owner engages an appraiser directly. In these cases, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.

Are some home improvements more worthwhile than others?   (Top)

This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 were second, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.