Needs Appraisals has answers to "Frequently Asked Questions"

Needs Appraisals is ready to talk to you about any concerns you might have about appraisals in Wilmington and New Castle County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
Why would I request services from Needs Appraisals?
How is an appraisal different than a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Upon completion of the report, how can I have certainty that the final number is accurate?
What are the requirements to be a certified appraiser?
Who are an appraiser's customers?
Where does an appraiser get the information used to estimate values in New Castle County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
What is "Market Value?"
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Back to top)

An appraiser provides an estimation that generates an opinion of value. This opinion or estimate is figured by using a formal method that typically uses three "common approaches to value". One of the three is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which involves concluding a comparison to comparable houses close by. The Sales Comparison Approach is commonly the most accurate and clearest indicator of a liklely sales price for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the building.

Describe what an appraiser does   (Back to top)

An appraiser offers a professional, unbiased opinion of market value, in the support of real estate exchanges. Appraisers summarize their conclusions in appraisal reports.


Why would I request services from Needs Appraisals?   (Back to top)

There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
  • If you are applying for a loan.
  • If you would like to lower your property tax obligations.
  • To show a homeowner has 30% equity and remove PMI.
  • To contest high property taxes.
  • To handle an estate.
  • To give you a leg-up when purchasing real estate.
  • To figure out a reasonable price when selling 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 need an appraisal on every home.
  • If you are ever involved in a civil case.
If you need more information regarding the appraisal process, please click here.


How is an appraisal different than a home inspection?   (Back to top)

The appraiser is not a home inspector and does not do a complete home inspection. The point of a home inspection is to evaluate the structure of the property from basement to rooftop. The stereotypical property inspector's report will include an evaluation of the integrity of the house'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.

My agent performed a CMA for me. Is that the same as an appraisal?   (Back to top)

Simply put, it's like comparing sugar and saccharin. The CMA depends on vague market trends. An appraisal is based on comparable sales that can be validated by public record. The appraisal report will also include area and construction values. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the most significant factor is who's doing the report. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent voice, with no vested interest in the property's value, unlike the real estate agent, who gets a commission based upon the price of the home.

What's in an appraisal report?   (Back to top)

The main purpose 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, you'll usually see the following:
  • The client and whose purposes the appraisal is to serve.
  • The intended use of the report.
  • The appraisal's purpose.
  • The type of value contained and a definition of the value reported.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Relevant property attributes, including: location, physical attributes, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible factors.
  • 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.
  • The scope of work used while working up the assignment.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, how can I have certainty that the final number is accurate?   (Back to top)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • 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 not conducted in a careless or negligent fashion.

  • That a credible, substantiated appraisal report was imparted.
To become a state licensed appraiser, we must fulfill considerable education and experience requirements that train us to formulate an unbiased opinion. Plus, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Back to top) Licensing and certification takes coursework, tests and real world experience. Once licensed, he or she must then engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (Back to top)

Typically, appraisers are called upon by lenders to render a value opinion on a house involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.

Where does an appraiser get the information used to estimate values in New Castle County or other areas?   (Back to top)

One of the main tasks an appraiser performs is to collect data. Data can be categorized as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.

General data is collected from a number of places. Local Multiple Listing Services (MLS) have data on recently sold homes that might be used as comparables. To verify actual sales prices, we research tax records and other public documents that are usually online nowadays. Appraisers often 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 product.

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

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

An appraisal is a worthwhile whenever the value of your home 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 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.

What exactly is PMI and how can I get rid of it?   (Back to top)

PMI stands for Private Mortgage Insurance. This supplementary plan protects the lender in the event a borrower defaults on the loan and the market price of the home is less than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Is PMI something increasing your monthly mortgage payment?Call Needs Appraisals today at 302-893-5174 or send us an e-mail. A new appraisal could save you thousands.

Should I do anything in advance of the appraisal inspection   (Back to top)

The first step in most appraisals is the home inspection. 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 features. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.

You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Any records on the purchase of the property for the last three years.
  • Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • 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 if the property is to be appraised "as complete".

What is "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."

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. 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 engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may define how the appraisal can be used; 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?   (Back to top)

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.

As a rule, the best ROI 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 weren't far behind, returning 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.