ARV, Inc. has answers to "Frequently Asked Questions"

ARV, Inc. is always willing to handle any concerns you might have about appraisals or real estate in Wayne County. Contact ARV, Inc. today to talk about how we can help you with your specific valuation problems.

What is an appraisal?
Describe what an appraiser does
Why would I require a real estate appraisal?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What can I expect to see in my appraisal report?
After completing the report, how can I have a guarantee that the value indicated is veritable?
What does it mean for an appraiser to be licensed?
Who do appraisers work for?
Where does an appraiser get the information used to estimate values in Wayne County or other areas?
How can a licensed appraiser help me?
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?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Return to top)

An appraiser performs an estimation that leads to an opinion of value. The appraiser will use a number of "approaches," typically three, to conclude the estimation of market 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 Sales Comparison Approach deals with finding similar homes nearby and figuring out the value based on making a comparison of those houses to the house being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. One of the least common approaches in appraising houses is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the capital produced by the building.

Describe what an appraiser does   (Return to top)

An appraiser offers a professional, unbiased opinion of market value, in the support of real property transactions. Appraisers reveal the details of their professional conclusions in appraisal reports.


Why would I require a real estate appraisal?   (Return to top)

There are a lot of reasons to order an appraisal from ARV, Inc. with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
  • To obtain a loan.
  • To reduce your tax burden.
  • To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
  • To contest inflated property taxes.
  • If you need to take care of an estate.
  • To provide you an edge when purchasing real estate.
  • To figure out an honest 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.
  • Government agencies such as the IRS require an appraisal on every house.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
Click here for a more extensive explanation of the process about getting an appraisal.


How is an appraiser different than a home inspector?   (Return to top)

Appraisers do not do provide house inspections and are not home inspectors. The point of a home inspection is to evaluate the structure of the home from basement to attic. The general property inspector's report will include an evaluation of the condition of the house'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.

Is an appraisal the same as a comparative market analysis(CMA)?   (Return to top)

Frankly, they have nothing in common. The CMA depends on vague local market trends. The appraisal is reliant on similar valid comparable sales. Location and architectural costs are also a priority in an appraisal. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

But the largest differentiator is who's 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. A certified, state licensed professional who bases their livelihood on valuing homes in and around Wayne County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat sum for assignments, regardless of their outcome.

What can I expect to see in my appraisal report?   (Return to top)

The main objective of an appraisal report is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
  • The client and other intended users.
  • 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 appraisal.
  • Pertinent property attributes, 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, 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.
  • The scope of work considered to complete the appraisal.
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have a guarantee that the value indicated is veritable?   (Return to top)

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

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

  • That appraisal services were provided in a careful and conscientious fashion.

  • The final appraisal report was easy to explain, legitimate and not easily discredited.
There are intense education and practical experience requirements that must be met in order to achieve the designation of "licensed appraiser" in Michigan. Likewise, appraisers must stick to 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).


    (Return to top) Licensing and certification is achieved through classroom study, tests and practical experience. Once licensed, he or she must then complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for?   (Return to top)

Typically, appraisers are hired by mortgage lenders to estimate the value of a home involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

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

Collecting data is one of the primary things an appraiser engages in. Data can be divided into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.

General data is gathered from a variety of sources. To research recent sales to be used as "comps", an appraiser will often 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 lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.

How can a licensed appraiser help me?   (Return to top)

An appraisal is a valuable tool whenever the value of your home is pertinent to some financial decision. 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, you can avoid overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from ARV, Inc. is the best way to ensure assets are split up properly. Simply put, 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?   (Return to top)

PMI is the common abbreviation for for Private Mortgage Insurance. This supplemental policy covers the lender if a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on 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.

The savings from cancelling the PMI required when you got your mortgage will make up for the price of the appraisal in a matter of months. ARV, Inc. is a name you can trust when it comes to real estate value trends in Dearborn and Wayne County. Contact us today.

Should I do anything in advance of the appraisal appointment   (Return to top)

We begin with an inspection of the home. 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 status of its amenities. Inside, pick up any clutter and make sure we can get to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.

You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
  • 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 central air conditioning or roof repairs) and permit confirmation (if available).
  • A list of "proposed" improvements if the property is to be appraised "as complete".

What does "Market Value" mean?   (Return 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?   (Return 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 entitled to a copy of the appraisal - 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 situations, the appraiser may state 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 use the appraisal for any purpose.

Are some home improvements more worthwhile than others?   (Return to top)

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 best ROI 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.