Michael Smith Appraisals, Inc has answers to "Frequently Asked Questions"

Michael Smith Appraisals, Inc is always willing to talk to you about any inquiries you might have about appraisals in Floyd County. Contact us today to talk about how we can help solve your valuation problems.

What is an appraisal?
Describe what an appraiser does
Why would someone request services from Michael Smith Appraisals, Inc?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What does the appraisal report contain?
Once the appraisal has been completed, what assurance is there that the value indicated is valid?
How are appraisers certified?
Who employs appraisers?
Where does Michael Smith Appraisals, Inc get the information used to estimate values in Floyd 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?
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Back to top)

An appraisal is an estimation that concludes with an opinion of value. This opinion or estimate is found using a formal method that usually uses three "common approaches to value". One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the house, less the age and physical deterioration, adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most common approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a property. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to determine 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   (Back to top)

An appraiser generates an impartial and well substantiated determination of market value, in the support of real estate transactions. Appraisers summarize their professional findings in appraisal reports.


Why would someone request services from Michael Smith Appraisals, Inc?   (Back to top)

There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an report include:
  • If you are applying for a loan.
  • To lower your property taxes.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
  • To fight inflated property taxes.
  • If you need to settle an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To figure out the most probable sales price when selling real estate.
  • To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because an official agency such as the IRS requires it.
  • If you ever find yourself in a lawsuit.
If you need more information about the appraisal process, please click here.


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

Home inspectors do not generate an opinion of value and do not use the same forms as appraisers. An inspection is a third-party evaluation of the livable structure and mechanical systems of a home, from the top to the foundation. The general home inspector's report will include an evaluation of the condition of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible 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)

To be blunt, it's like comparing sugar and saccharin. What the CMA relies upon are vague trends. The appraisal is based on specific proven comparable sales. Location and building prices 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. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for assignments, regardless of their value conclusion.

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

Every report should indicate a believable estimate of value and should identify the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • The type of value contained 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!)
  • Relevant property attributes, including: location, physical characteristics, legal attributes, economic factors, the property rights valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible items.
  • 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 while working up the appraisal.
For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal has been completed, what assurance is there that the value indicated is valid?   (Back to top)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal used analysis of the information.

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

  • That appraisal services were rendered in a careful and conscientious manner.

  • The final appraisal report was easy to explain, credible and defensible.
There are intense classroom and on the job experience requirements that must be met in order to become a licensed appraiser in Georgia. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines 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) Licensing and certification takes coursework, tests and practical experience. Once an appraiser is licensed, he or 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 employs appraisers?   (Back to top)

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

Where does Michael Smith Appraisals, Inc get the information used to estimate values in Floyd County or other areas?   (Back to top)

One of the main things an appraiser does is to collect property data. Data can be categorized as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.

General data is gathered from a number of places. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To verify actual sales prices, we research 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 creating appraisals for other houses in the same market.

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

An appraisal is a valuable tool whenever your home's value is relevant to some financial decision. For those selling a home, you'll want to figure out 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. When buying, you can avoid overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from Michael Smith Appraisals, Inc is the best documentation to ensure assets are split up fairly. A home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

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

PMI is the common abbreviation for for Private Mortgage Insurance. PMI guards the lender in case a borrower defaults on the loan and the market price of the home is less than what is owed 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.

The savings from dropping the PMI required when you got your mortgage will make up for the cost of the appraisal in no time. Michael Smith Appraisals, Inc is a name you can trust when it comes to real estate value trends in Rome and Floyd County. Contact us today.

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

We start with an inspection of the home. 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 amenities. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any shrubs and move any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can get to items like furnaces and water heaters.

You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Records on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the building.
  • Most recent real estate tax bill from Floyd and or legal description of the property.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .

How does an appraiser define "Market Value"?   (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 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 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.

The exception to this rule is when a home owner engages an appraiser directly. In these situations, the appraiser may stipulate 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.

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

The answer to this is different depending upon the location of the home. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!

As a rule, the best ROI from renovating a home comes in the kitchen. 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, an improvement that may not add value would be painting just for the sake of redecorating.