Valuation Management Systems has answers to "Frequently Asked Questions"

Valuation Management Systems is always eager to elaborate on any questions you might have about appraisals or real estate in Dunellen and Middlesex County. Don't hesitate to contact us today.

Describe an appraisal
Describe what an appraiser does
Why would someone request your services?
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?
Once the assignment is done, what assurance is there that the final number is veritable?
What goes into an appraiser's certification?
Who employs appraisers?
Where does an appraiser get the information used to estimate values in Middlesex 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?
Do you need anything from the homeowner in advance?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?



Describe an appraisal   (See list of FAQ's)

An appraiser provides an evaluation that generates an opinion of value. This opinion or estimate is found by a formal process that commonly utilizes three "common approaches to value". One of the three is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the methods is the Sales Comparison Approach - which concerns making a comparison to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the income produced by the property.

Describe what an appraiser does   (See list of FAQ's)

An appraiser forumlates a professional, unbiased determination of market value, often in the context of a real estate purchase. Appraisers show their findings in appraisal reports.


Why would someone request your services?   (See list of FAQ's)

There are many reasons to get an appraisal from Valuation Management Systems with the usual reason being real estate and mortgage transactions. Other reasons for getting an report include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax obligations.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To contest high property taxes.
  • If you need to settle an estate.
  • To provide you an edge when purchasing a home.
  • To figure out an honest price when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because an official agency such as the IRS requires it.
  • If you ever find yourself in a civil case.
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?   (See list of FAQ's)

The appraiser is not a home inspector and does not do a complete home inspection. The point of a home inspection is to investigate the structure of the property from foundation to top. The usual house inspector's report will contain an evaluation of the integrity of the home's heating systems, 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.

My agent performed a CMA for me. Is that the same as an appraisal?   (See list of FAQ's)

Honestly, they have nothing in common. What the CMA relies upon are vague trends. Appraisals use comparable sales which are valid resources. Area and construction costs are also important in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the most significant factor is the person creating the report. A CMA is created 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 independent voice, with no conditional interest in the value conclusion, unlike the real estate agent, whose income is tied to the price of the home.

What does the appraisal report contain?   (See list of FAQ's)

The main objective of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
  • The client and other intended users.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • 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!)
  • Pertinent property characteristics, including: location, physical characteristics, legal attributes, economic attributes, the property rights valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
  • 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 assignment.
For a more detailed view of what goes into an appraisal report click here: Sample Appraisal Report


Once the assignment is done, what assurance is there that the final number is veritable?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • The appraisal used a suitable analysis of the data.

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

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

  • That a believable, defensible appraisal report was communicated.
To become a state licensed appraiser, there are strenuous education requirements as well as practical experience that must be attained - all with the objective of being able to provide unbiased value opinions. Plus, appraisers must obey a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (See list of FAQ's) Licensing and certification takes coursework, tests and practical experience. Once licensed, he or she is required to complete continuing education courses so the license stays up to date. To see the specific requirements for any state click here.

Who employs appraisers?   (See list of FAQ's)

Mortgage lenders are an appraiser's typical customer, requiring their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does an appraiser get the information used to estimate values in Middlesex County or other areas?   (See list of FAQ's)

One of the most important things an appraiser does is to collect data. Data can be categorized as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is gathered from a many places. To research recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers often need to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.


Why do I need a professional appraisal?   (See list of FAQ's)

If you're involved in any kind of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to figure out 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. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Valuation Management Systems is the best way to ensure assets are divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making smart financial decisions.


My mortgage statement has an item on it for PMI? Can I get rid of that?   (See list of FAQ's)

PMI is an acronym for Private Mortgage Insurance. This additional policy takes care of the lender in the event a borrower defaults on the loan and the value of the property 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.

Did you secure your mortgage with less than 20% down? Contact Valuation Management Systems today at 9087579113. You may be able to get rid of your Private Mortgage Insurance premium.

Do you need anything from the homeowner in advance?   (See list of FAQ's)

We begin with an inspection of the property. 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 (gates aren't locked, etc). Trim any shrubs and move any items that would make it difficult to measure the structure. On the inside, make sure we can easily access appliances like furnaces and water heaters.

To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
  • A survey or plot map of the property and building (if readily available).
  • List of personal property to be sold with the home.
  • Title policy that lists 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 central air conditioning or roof repairs) and permit confirmation (if available).
  • Information on "Homeowners Associations" or condominium covenants and fees.

How does an appraiser define "Market Value"?   (See list of FAQ's)

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."



Does the appraisal belong to the bank or the consumer?   (See list of FAQ's)

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 entitled to a copy of the report - it's usually included with all the other closing documents - but is not allowed 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 scenarios, the appraiser may stipulate 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?   (See list of FAQ's)

The added value of a particular amenity truly depends on the local market. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

As a rule, the most value returned 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 were second, returning 85%. On the contrary, something that may not increase your value would be painting just for the sake of redecorating.
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