Porter Appraisal Inc. has answers to "Frequently Asked Questions"

Porter Appraisal Inc. is happy to talk to you about any concerns you might have about appraisals or real estate in Flathead County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
What are the reasons I would request services from Porter Appraisal Inc.?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Once the report is done, what assurance is there that the value indicated is trustworthy?
How are appraisers certified?
Who hires Porter Appraisal Inc.
Where does an appraiser get the information used to estimate values in Flathead 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?
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?

What is an appraisal?   (Back to top)

The procedure of creating an appraisal deals with an evaluation which leads to an opinion of value. The appraiser will use a number of "approaches," typically three, to come to the estimation of market value. One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves finding similar houses in the vicinity and discovering the value based on making a comparison of those properties to the home being appraised. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.

Describe what an appraiser does   (Back to top)

An appraiser provides a professional, unbiased opinion of market value, often in the context of a real estate purchase. Appraisers show their professional analysis in appraisal reports.

What are the reasons I would request services from Porter Appraisal Inc.?   (Back to top)

There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
  • To obtain a loan.
  • To reduce your property taxes.
  • To show a homeowner has 30% equity and remove Primary Mortgage Insurance.
  • To fight high property taxes.
  • If you need to settle an estate.
  • To offer you an edge when purchasing a home.
  • To figure out a likely price when putting your home on the market.
  • To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because a government agency such as the IRS requires it.
  • If you are ever involved in a civil case.
For a more extensive description of the appraisal process click here.

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

Appraisers do not do complete home inspections and are not home inspectors. A third-party home inspector will investigate the structure of the property, from the top to the bottom. The archetypal property inspector's report will include an evaluation of the integrity of the house's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.

Is an appraisal the same as a comparative market analysis(CMA)?   (Back to top)

Simply put, it's apples and oranges. What the CMA relies upon are superficial trends. The appraisal relies on specific proven comparable sales. Location and building values are also a priority in an appraisal. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

Who's creating the report is actually the most significant difference between a CMA and an appraisal. 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. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an unbiased party, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.

What's in an appraisal report?   (Back to top)

The main purpose of an appraisal report is to give a value opinion, 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 appraisal.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Pertinent property characteristics, including: location, physical attributes, 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 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 entailed in the activity of completing the appraisal.
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the report is done, what assurance is there that the value indicated is trustworthy?   (Back to top)

In communicating an appraisal report, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was suitable.

  • That significant 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 conferred.
There are intense classroom and experience requirements that must be fulfilled in order to get an appraisal license in Montana. Plus, appraisers must abide by a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Back to top) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. However, licensing and certification is commonly associated with many hours of coursework, tests and experience working under a supervisor. Once an appraiser is 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 hires Porter Appraisal Inc.   (Back to top)

Mortgage lenders are an appraiser's most likely client, needing their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

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

One of the most important tasks an appraiser engages in is to collect data. Data can be described as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.

General data is received from a variety of sources. To find out about recent sales to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we use tax records 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 servers.

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

Why should I hire a licensed appraiser?   (Back to top)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to determine a 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. 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. 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?   (Back to top)

PMI stands for Private Mortgage Insurance. PMI protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the loan balance. 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 amount you keep from cancelling your PMI pays for the appraisal in no time. Nobody is more qualified than Porter Appraisal Inc. when it comes to analyzing real estate appreciation in Kalispell and Flathead County. Contact us today.

How do I get ready for the appraiser?   (Back to 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 condition of its features. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.

To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
  • Any information on the purchase of the property for the last three years.
  • List of personal property to be sold with the building.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • A list of any 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 list of "suggested" improvements if the property is to be appraised "as complete".

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

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

For mortgage transactions, the lender orders 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 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 hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may define the purpose of the appraisal; 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)

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. 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.