Appraisal Associates of Algona has answers to "Frequently Asked Questions"

Appraisal Associates of Algona is willing to answer any concerns you might have about appraisals or real estate in Algona and Kossuth County. Contact Appraisal Associates of Algona today to see how we can help solve your specific valuation problems.

Describe an appraisal
What does an appraiser do?
What are the reasons I would require services from Appraisal Associates of Algona?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
Upon completion of the report, how can I have certainty that the final number is valid?
What does it mean for an appraiser to be licensed?
Who are an appraiser's customers?
Where does an appraiser get the information used to estimate values in Kossuth County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?



Describe an appraisal   (Back to top)

An appraisal is a thought process allowing the appraiser to come to an opinion of value. This opinion or estimate is discerned by a formal method that commonly utilizes the three main "common approaches to value". One of them 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. Easily the most common approach in finding the likely sales price of a home is the Sales Comparison Approach which concerns making a comparison to comparable properties nearby. Being the most commonly used approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residence. The Income Approach is generally used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property produce.

What does an appraiser do?   (Back to top)

An appraiser produces an unbiased and well supported assessment of market value, to be used in making real estate transactions. Appraisers demonstrate their professional findings in appraisal reports.


What are the reasons I would require services from Appraisal Associates of Algona?   (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 obtaining an appraisal report include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax burden.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To challenge high property taxes.
  • If you need to settle an estate.
  • To offer you an edge when purchasing a home.
  • To determine an honest sales price when selling your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because an official agency such as the IRS requires it.
  • It's possible you could be involved in a lawsuit - an appraisal will help.
If you need more information regarding the appraisal process, please click here.


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

Home inspectors do not estimate an opinion of value and are not appraisers. The point of a home inspection is to investigate the structure of the home from basement to attic. Generally, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Back to top)

Simply put, it's apples and oranges. The CMA relies on indefinite local market trends. An appraisal is based on comparable sales that can be verified by public record. Location and architectural 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.

The credentials of the person creating the report is frankly the most significant difference between a CMA and an appraisal. A CMA is written 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 produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for assignments, regardless of their value conclusion.

What does the appraisal report contain?   (Back to top)

The main purpose of an appraisal document is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • The type of value reported 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!)
  • Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible factors.
  • 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 appraisal.
For a more detailed look at what 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 valid?   (Back to top)

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

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

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

  • The final appraisal report was easy to explain, legitimate and defensible.
To become a state licensed appraiser, there are intense education requirements as well as real world experience that must be logged - all with the objective of being able to render unbiased value opinions. Plus, appraisers must abide by a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Licensing and certification requires coursework, tests and real world experience. Once licensed, he/she must then take 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)

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

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

Gathering information is one of the primary roles of an appraiser. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is received from a many places. To research recently sold homes to be used as "comps", we typically go to the local Multiple Listing Service. To double-check actual sales prices, we look at tax records and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.

And most importantly, the appraiser assembles general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.


What can a full appraisal do for me?   (Back to top)

If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. When selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from Appraisal Associates of Algona is the best way to ensure assets are divided properly. A home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.


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

PMI is short for for Private Mortgage Insurance. PMI protects the lender in the event a borrower defaults on the loan and the value of the home is lower than the balance of the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.

Has your real estate appreciated since you first purchased? Call Appraisal Associates of Algona today at (515) 395-8000 to see if you can get rid of your Private Mortgage Insurance premium.

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 status of its features. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house . Trim any bushes and move any items that would make it difficult to measure the structure. Indoors, make sure the appraiser can get to appliances like furnaces and water heaters.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Information on the latest purchase of the property in the last three years.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Brag sheet that lists major home improvements and enhancements, the date of their installation and their cost (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".

How does an appraiser define "Market Value"?   (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 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.

The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate 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.


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, 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 are right up there with kitchens, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.