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Joe Johnson Appraisals has answers to "Frequently Asked Questions"

Joe Johnson Appraisals is willing to reply to any questions you might have about appraisals in Frankfort and Franklin County. Contact Joe Johnson Appraisals today to see how we can help solve your valuation problems.

Define the term "Appraisal"
What does an appraiser do?
What would cause me to need a real estate appraisal?
What is the difference between an appraisal and a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Upon completion of the report, what guarantee is there that the value conclusion is trustworthy?
What goes into an appraiser's certification?
Who do appraisers work for?
Where does Joe Johnson Appraisals get the data used to estimate values in Franklin 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?
Should I do anything in advance of the appraisal appointment
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?



Define the term "Appraisal"   (Back to top)

The appraisal process is an estimation that produces an opinion of value. The appraiser will typically use a few "approaches," typically three, to come to the estimation of market value. One of the methods 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 most common approach in finding the likely sales price of a home is the Sales Comparison Approach which concerns figuring a comparison to comparable homes nearby. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the income produced by the building.

What does an appraiser do?   (Back to top)

An appraiser offers a professional, unbiased determination of market value, often in the context of a real estate exchange. Appraisers present their professional investigation in appraisal reports.


What would cause me to need a real estate appraisal?   (Back to top)

There are a lot of reasons to order an appraisal from Joe Johnson Appraisals with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an appraisal report include:
  • To receive a loan.
  • If you would like to lower your property tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To contest inflated property taxes.
  • If you need to settle an estate.
  • To offer you a negotiating tool when purchasing a home.
  • To find the most probable sales price when listing your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS need an appraisal on every property.
  • If you are ever involved 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?   (Back to top)

The appraiser is not a home inspector and does not do a full home inspection. The point of a home inspection is to investigate the structure of the property from basement to top. The general house inspector's report will contain an evaluation of the condition of the home's heating system, 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)

Frankly, it's like comparing opera to country. The CMA depends on vague market trends. Appraisals use comparable sales which are valid resources. Location and construction prices are also a priority in an appraisal. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is the person behind the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, Kentucky licensed professional who made their livelihood on valuing properties in and around Franklin County is behind the appraisal. Moreover, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the price of the home.

What are the contents of an appraisal report?   (Back to top)

Each report should reflect a supported value opinion and must clearly state the following:
  • The client and other intended users.
  • 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.
  • Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the valuation, such as personal property, trade fixtures 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.
  • What was included in the process of completing the job.
For a more comprehensive view of all that goes into an appraisal report click here: Sample Appraisal Report


Upon completion of the report, what guarantee is there that the value conclusion is trustworthy?   (Back to top)

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

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

  • That appraisal services were provided in a careful and judicious manner.

  • That a solid, supportable appraisal report was imparted.
There are intense classroom and real world experience requirements that must be met in order to get an appraisal license in Kentucky. Plus, appraisers must stick to a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for developing an appraisal and reporting 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 vary from state to state. In general, licensing and certification is most often associated with many hours of classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he or she must then complete continuing education courses so the license stays up to date. To see the specific requirements for any state click here.

Who do appraisers work for?   (Back to top)

Mortgage lenders are an appraiser's typical customer, using their services to ensure real estate 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 Joe Johnson Appraisals get the data used to estimate values in Franklin County or other areas?   (Back to top)

One of the most important tasks an appraiser must accomplish is to collect property data. Data can be categorized as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is gathered from a numerous sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. To double-check actual sales prices, we research tax records and other public documents. Appraisers routinely need 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 service.

And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other properties in the same market.


Why do I need a professional appraisal?   (Back to top)

An appraisal is a valuable tool whenever your home's value is pertinent to a financial decision. When selling your home, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided 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. This supplemental plan protects the lender in case a borrower doesn't pay on the loan and the market price of the home is lower 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.

Does your monthly loan payment include a fee for PMI?Call Joe Johnson Appraisals today at (502) 319-4754 or send us an e-mail. Documentation of your home's current value could save you thousands.

Should I do anything in advance of the appraisal appointment   (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 amenities. 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 relocate any items that would make it difficult to measure the structure. Indoors, 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, attempt if possible to have the following items:
  • A plot plan or survey of the house and land (if readily available).
  • Information on any written private easements, such as a shared driveway with a neighbor.
  • Title policy that describes encroachments or easements.
  • Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • A list of "suggested" improvements when the property is being 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."



Does the appraisal belong to the bank or the consumer?   (Back to top)

In most real estate transactions, the appraisal is ordered by the lender. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is certainly 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.

It's different when it's the homeowner hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.


I want to get more for my house. Where should I spend money renovating?   (Back to top)

It really depends on the market. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want

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 were second, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.