Suburban Appraisal Associates, Inc. has answers to "Frequently Asked Questions"

Suburban Appraisal Associates, Inc. is more than happy to handle any questions you might have about appraisals or real estate in Gaithersburg and Montgomery County. Don't hesitate to contact us today.

Describe an appraisal
Describe what an appraiser does
What are the reasons a person would need a real estate appraisal?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
After completing the appraisal, how can I have assurance that the value conclusion is veritable?
What goes into an appraiser's certification?
Who employs appraisers?
Where does an appraiser get the information used to estimate values in Montgomery County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What does "Market Value" mean?
Who actually owns the appraisal report?
Which home renovations add the most to the price?



Describe an appraisal   (See list of FAQ's)

An appraiser performs an estimation that leads to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. One of the methods is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves finding comparable houses in the vicinity and finding value based on comparing those properties to the property being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.

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

An appraiser produces a fair and credible opinion of market value, in the support of real estate exchanges. Appraisers summarize their expert conclusions in appraisal reports.


What are the reasons a person would need a real estate appraisal?   (See list of FAQ's)

There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an appraisal include:
  • If you are applying for a loan.
  • If you would like to lower your property tax burden.
  • To show a homeowner has 30% equity and remove PMI.
  • To fight high property taxes.
  • If you need to settle an estate.
  • To offer you a leg-up when purchasing real estate.
  • To find an honest property value when putting your home on the market.
  • 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 have to deal with being in a lawsuit - an appraisal will definitely help.
If you need a more detailed explanation of the appraisal process, please click here.


Is an appraisal the same as a home inspection?   (See list of FAQ's)

Home inspectors do not provide an opinion of value and are not appraisers. An inspection is a third-party investigation of the livable structure and systems of a property, from the top to the bottom. The archetypal home inspector's report will contain 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.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (See list of FAQ's)

Simply, they have nothing in common. What the CMA depends on are ill-defined trends. Appraisals use comparable sales which are valid resources. Area and construction values are also precedent in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

The credentials of the person behind the report is actually the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, state licensed professional who has formed their livelihood on valuing properties in and around Montgomery County is behind the appraisal. Moreover, the appraiser is an unbiased party, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the price of the home.

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

Every report must reflect a believable value opinion and must clearly state the following:
  • Who engaged the appraiser and other intended users.
  • How the appraisal is supposed to be used.
  • The reason for the assignment.
  • The type of value reported and a definition of that value.
  • The effective date of the appraisal.
  • Relevant property attributes, including: location, physical attributes, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations 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.
  • The scope of work used when completing the assignment.
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report

After completing the appraisal, how can I have assurance that the value conclusion is veritable?   (See list of FAQ's)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
  • That the information analysis contained in the appraisal was proper.

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

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

  • That a solid, supportable appraisal report was conferred.
There are rigorous education and on the job experience requirements that must be satisfied in order to become a licensed appraiser in Maryland. Likewise, appraisers must abide by a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (See list of FAQ's) Regulations regarding licensing and certification vary from state to state. However, licensing and certification is most often associated with many hours of classroom study, tests and experience working under a supervisory appraiser. Once an appraiser is licensed, he or she must then complete continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

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

Typically, appraisers are hired by mortgage lenders to render a value opinion on property involved in a loan transaction - to make sure the house is indeed adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

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

Collecting information is one of the primary roles of an appraiser. Data can be described as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.

General data is collected from a many places. To research recent sales to be used as "comps", we often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.

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

Why should I hire a licensed appraiser?   (See list of FAQ's)

If you're making any kind of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. 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, be sure you're not overpaying by commissioning 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?   (See list of FAQ's)

PMI is short for for Private Mortgage Insurance. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the property is less 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.

The money you keep from getting rid of your PMI will make up for the cost of the appraisal in no time. Suburban Appraisal Associates, Inc. is in the business of tracking real estate value trends in Gaithersburg and Montgomery County. Contact us today.

How do I get ready for the appraiser?   (See list of FAQ's)

The first step in most appraisals is the property 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, pick up any clutter and make sure 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 exterior walls.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • A plot plan or survey of the house and land (if available).
  • A list of any personal property that will be left behind and sold with the home, such as a oven, or a washer and dryer, if applicable.
  • Title policy that describes encroachments or easements.
  • A list of any major home improvements and enhancements, 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".

What does "Market Value" mean?   (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."

Who actually owns the appraisal report?   (See list of FAQ's)

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 appraisal - it's usually included with all the other closing documents - but is not entitled 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 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 use the appraisal for any purpose.

Which home renovations add the most to the price?   (See list of FAQ's)

A home's location - what city it is in and even what part of that city - is key to this popular question. 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 investment. 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, returning 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.