LightHouse Appraisals has answers to "Frequently Asked Questions"


	LightHouse Appraisals is ready to handle any inquiries you might have about appraisals or real estate in Tippecanoe County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
What are the reasons someone would need your services?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What can I expect to see in my appraisal report?
Once the assignment has been completed, what assurance is there that the final number is trustworthy?
What are the requirements to be a certified appraiser?
Who employs appraisers?
Where does LightHouse Appraisals get the data used to estimate values in Tippecanoe 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?
Do you need anything from me in advance?
Define "Market Value"
Who has rights to the appraisal report?
Which home renovations add the most to the price?

Describe an appraisal (Return to top)

The process of producing an appraisal deals with an estimation which leads to an opinion of value. This opinion or estimate is found using a formal process that generally uses the three main "common approaches to value". One of the methods is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Easily the most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which concerns figuring a comparison to comparable properties nearby. 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 money generated by the property.

What does an appraiser do? (Return to top)

An appraiser provides a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert investigation in appraisal reports.

What are the reasons someone would need your services? (Return to top)

There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an appraisal 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 challenge high property taxes.
To handle an estate.
To give you an edge when purchasing real estate.
To figure out an honest sales price when listing your home.
To defend 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 property.
It's possible you could have to deal with being in a lawsuit - an appraisal will help.

For a more extensive description of the appraisal process click here.

How is an appraiser different than a home inspector? (Return 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 investigate the structure of the property from foundation to top. The stereotypical home inspector's report will include an evaluation of the integrity of the property'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.

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

To be honest, they have nothing in common. What the CMA relies upon are superficial trends. An appraisal is based on comparable sales that can be verified by records. The appraisal report will also contain neighborhood and building prices. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

Who's behind the report is actually the biggest difference between a CMA and an appraisal. 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 has formed a career on valuing real estate in and around Tippecanoe County creates the appraisal. 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 outcome.

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

Each appraisal should demonstrate a credible value opinion and will document the following:

Who engaged the appraiser and other intended users.
How the appraisal is supposed to be used.
The purpose of the assignment.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Pertinent property attributes, including: location, physical characteristics, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
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.
What was involved in the process of completing the job.

For a more in depth view of the work that goes into an appraisal report click here: Sample Appraisal Report

Once the assignment has been completed, what assurance is there that the final number is trustworthy? (Return to top)

In the documentation of an appraisal, each appraiser must make sure of the following:

The appraisal used an apropos analysis of the information.

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

That appraisal services were delivered in a careful and judicious fashion.

The final appraisal report was understandable, legitimate and defensible.

There are intense education and experience requirements that must be adhered to in order to achieve the title of "licensed appraiser" in Indiana. In addition, appraisers must obey a strict industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for developing an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Return to top) Licensing and certification is achieved through coursework, tests and real world experience. Once an appraiser is licensed, he or she must then engage in 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? (Return to top)

Mortgage lenders are an appraiser's most likely customer, using their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does LightHouse Appraisals get the data used to estimate values in Tippecanoe County or other areas? (Return to top)

Compiling data is one of the main tasks an appraiser performs. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.

General data is received from a many sources. To find out about recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers often have 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 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.

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

An appraisal is a valuable tool 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 doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. 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 is essential to making smart financial decisions.

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 additional plan guards the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	Does your monthly house payment include a fee for PMI?Call LightHouse Appraisals today at (765) 477-5975 or send us an e-mail. Documentation of your home's current value could save you thousands.

Do you need anything from me in advance? (Return to top)

We start with an inspection of the home. During this process, we will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. On the inside, make sure we can get to items like furnaces and water heaters.

To help speed things along plus ensure a more accurate report, try if possible to have the following items:

A survey or plot map of the property and building (if available).
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.
Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
Most recent real estate tax bill from Tippecanoe and or legal description of the property.

Define "Market Value" (Return 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."

Who has rights to the appraisal report? (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 entitled 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 scenarios, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.

Which home renovations add the most to the price? (Return to top)

This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

As a rule, the most value returned 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 were second, yielding 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.