R. A. Knight Appraisal Service has answers to "Frequently Asked Questions"

R. A. Knight Appraisal Service is always ready to reply to any inquiries you might have about appraisals or real estate in Laurel County. Contact R. A. Knight Appraisal Service today to learn how we can help you with your valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
What would cause me to request your services?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
After completing the report, how can I have a guarantee that the value conclusion is trustworthy?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does R. A. Knight Appraisal Service get the information used to estimate values in Laurel 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?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?

Define the term "Appraisal"   (List of questions)

The procedure of performing an appraisal report consists of an inspection which forms an opinion of value. This opinion or estimate is concluded by a formal method that typically uses the three main "common approaches to value". One of the processes is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves searching for comparable houses nearby and figuring out the value based on comparing those properties to the property being investigated. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the money generated by the property.

Describe what an appraiser does   (List of questions)

An appraiser forumlates a fair and credible opinion of market value, in the support of real estate transactions. Appraisers show their professional investigation in appraisal reports.

What would cause me to request your services?   (List of questions)

There are many reasons to order an appraisal from R. A. Knight Appraisal Service with the usual reason being real estate and mortgage transactions. Other reasons for obtaining an report include:
  • To get a loan.
  • If you would like to reduce your property tax burden.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To challenge improperly assessed property taxes.
  • If you need to take care of an estate.
  • To offer you a leg-up when purchasing real estate.
  • To find the most probable 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.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
For a more detailed explanation of the appraisal process click here.

Is an appraisal the same as a home inspection?   (List of questions)

Appraisers do not do complete house inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the property, from the roof to the bottom. For the most part, a home inspection report will evaluate the amenities and the requirements of the home: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (List of questions)

Frankly, it's night and day. The CMA utilizes market trends to generate most of their business. The appraisal relies on similar valid comparable sales. Location and architectural prices are also important in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

The person creating the report is hands down the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, Kentucky licensed professional who made a career on valuing properties in and around Laurel County creates the appraisal. Moreover, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.

What does the appraisal report contain?   (List of questions)

Each appraisal must indicate a supported estimate of value and must identify the following:
  • The client and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • 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!)
  • Relevant property characteristics, including: location, physical characteristics, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible factors.
  • 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 included in the activity of completing the appraisal.
For a more comprehensive view of all that goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have a guarantee that the value conclusion is trustworthy?   (List of questions)

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

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

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

  • The final appraisal report was easy to explain, credible and not easily discredited.
There are rigorous education and practical experience requirements that must be fulfilled in order to achieve the designation of "licensed appraiser" in Kentucky. Plus, appraisers must abide by a strict industry code of ethics and respect 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).

   (List of questions) Licensing and certification requires classroom study, tests and real world experience. Once licensed, he/she must then engage in continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (List of questions)

Mortgage lenders are an appraiser's most likely client, using their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does R. A. Knight Appraisal Service get the information used to estimate values in Laurel County or other areas?   (List of questions)

One of the primary tasks an appraiser performs is to gather 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 specifics are documented by the appraiser while on site.

General data is collected from a many places. To research recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service. 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, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

And most importantly, 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?   (List of questions)

If you're making some sort of financial decision and the value of your home matters, you'll want a full appraisal. For those selling a home, you'll want to determine a price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, be sure you're not overpaying by getting an independent appraisal. For parties settling an estate or divorce, an appraisal from R. A. Knight Appraisal Service is the best documentation 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?   (List of questions)

PMI is an acronym for Private Mortgage Insurance. It protects the lender if a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

The money you keep from cancelling the PMI required when you got your mortgage pays for the appraisal in no time. R. A. Knight Appraisal Service has years of experience with value trends in London and Laurel County. Contact us today.

How do I get ready for the appraiser?   (List of questions)

The first step in most appraisals is the home inspection. 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. 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 relocate any items that would make it difficult to measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.

You can make our visit 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.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • A list of any major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
  • Most recent real estate tax bill and or legal description of the property.

How does an appraiser define "Market Value"?   (List of questions)

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."

Once complete, who actually owns the appraisal report?   (List of questions)

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 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 situations, the appraiser may stipulate the purpose of the appraisal; 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?   (List of questions)

The added value of a particular amenity truly depends on the local market. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.

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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.