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Appraisal One of Illinois, Inc has answers to "Frequently Asked Questions"

Appraisal One of Illinois, Inc is always happy to answer any questions you might have about appraisals or real estate in Lake County. Contact Appraisal One of Illinois, Inc today to see how we can help solve your specific valuation problems.

Define the term "Appraisal"
What does an appraiser do?
What are the reasons someone would need a real estate appraisal?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
After completing the report, how can I have assurance that the final number is legitimate?
How hard is it to become certified?
Who engages the services of appraisers?
Where does Appraisal One of Illinois, Inc get the data used to estimate values in Lake County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
Define "Market Value"
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



Define the term "Appraisal"   (Go to list of  questions)

The process of creating an appraisal report deals with an inspection which forms an opinion of value. This opinion or estimate is figured by a formal method that typically uses three "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 home, less the depreciation and physical dilapidation, adding the land value. Another of the approaches is the Sales Comparison Approach - which deals with discovering a comparison to other similar nearby properties which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. One of the least common approaches in appraising homes is the Income Approach, which is generally used to find the value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?   (Go to list of  questions)

An appraiser forumlates a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert investigation in appraisal reports.


What are the reasons someone would need a real estate appraisal?   (Go to list of  questions)

There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:
  • If you are applying for a loan.
  • If you would like to lower your property tax obligations.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
  • To contest high property taxes.
  • To settle an estate.
  • To offer you a negotiating tool when purchasing real estate.
  • To figure out a reasonable property value when listing your home.
  • To protect 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 home.
  • It's possible you could be involved in a lawsuit - an appraisal will help.
Click here for a more extensive explanation of the process of getting an appraisal.


What is the difference between an appraisal and a home inspection?   (Go to list of  questions)

Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. A third-party home inspector will inspect the structure of the home, from the roof to the bottom. The standard home inspector's report will include an evaluation of the condition of the home'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.

My agent performed a CMA for me. Is that the same as an appraisal?   (Go to list of  questions)

To be honest, they have nothing in common. What the CMA relies upon are superficial trends. Appraisals use similar sales which are valid resources. Area and construction values are also important in an appraisal. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear 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. A certified, Illinois licensed professional who has formed a career on valuing homes in and around Lake County creates the appraisal. 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 collect only a flat fee for work they perform, regardless of their outcome.

What does the appraisal report contain?   (Go to list of  questions)

The main objective of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
  • The client and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraiser's opinions and conclusions.
  • Relevant property attributes, including: location, physical description, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible factors.
  • 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 when completing the assignment.
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report


After completing the report, how can I have assurance that the final number is legitimate?   (Go to list of  questions)

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

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

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

  • The final appraisal report was understandable, credible and defensible.
There are rigorous classroom and experience requirements that must be adhered to in order to achieve the title of "licensed appraiser" in Illinois. In addition, appraisers must follow a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for carrying out an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Go to list of  questions) Regulations regarding licensing and certification are different from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and real world experience. Once an appraiser is licensed, he or she must then engage in continuing education courses so the license stays current. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Go to list of  questions)

Commonly, appraisers are called upon by mortgage lenders to render a value opinion on a home involved in a loan transaction - to make sure the house is truly adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.

Where does Appraisal One of Illinois, Inc get the data used to estimate values in Lake County or other areas?   (Go to list of  questions)

Compiling information is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.

General data is received from a number of sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. Tax records and other public 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 gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.


What can a full appraisal do for me?   (Go to list of  questions)

An appraisal is a worthwhile whenever the value of your home is relevant to a financial decision. For those selling a home, you'll want to determine 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. When buying, you can avoid overpaying by getting an independent appraisal. 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.


What exactly is PMI and how can I get rid of it?   (Go to list of  questions)

PMI is short for for Private Mortgage Insurance. PMI covers the lender in the event a borrower defaults on the loan and the market price of the house is lower than the balance of the loan. 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.

Did you secure your mortgage with less than 20% down? Contact Appraisal One of Illinois, Inc today at 847-338-0328. You may be able to get rid of your Private Mortgage Insurance premium.

Should I do anything in advance of the appraisal inspection   (Go to list of  questions)

We begin with an inspection of the property. During this process, we 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 bushes and move any items that would make it difficult to measure the structure. On the inside, make sure we can get to 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.
  • List of personal property to be sold with the home.
  • Title policy that describes encroachments or easements.
  • A list of any major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • A list of "proposed" improvements when the property is being appraised "as complete".

Define "Market Value"   (Go to list of  questions)

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."



Once complete, who actually owns the appraisal report?   (Go to list of  questions)

For mortgage transactions, the lender requests 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 allowed to use the report for any other purpose without permission from the lender.

This rule doesn't apply when a home owner hires an appraiser directly. In these cases, 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 do whatever they want with the appraisal.


Are some home improvements more worthwhile than others?   (Go to list of  questions)

The answer to this is different depending upon the location of the home. 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.

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.