C. A. Klemme has answers to "Frequently Asked Questions"


	C. A. Klemme is eager to handle any inquiries you might have about appraisals in FISHERS and Marion County. Contact C. A. Klemme today to learn how we can help you with your valuation problems.

What is an appraisal?
Describe what an appraiser does
What would cause me to need a real estate appraisal?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
Once the report has been completed, how can I have certainty that the value indicated is legitimate?
How difficult is it to become certified?
Who hires an appraiser?
Where does an appraiser get the data used to estimate values in Marion County or other areas?
Why do I need a professional appraisal?
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"?
Who actually owns the appraisal report?
Which home renovations add the most to the price?

What is an appraisal? (Top)

The appraisal process is an estimation that leads to an opinion of value. This opinion or estimate is discerned by using a formal method that usually uses the three main "common approaches to value". The Cost Approach is one of the approaches that real estate appraisers use to find value; it involves finding what the improvements would cost less physical depreciation, adding the land value. The Sales Comparison Approach deals with finding similar houses in close proximity and figuring out the value based on comparing those homes to the home being investigated. Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the capital generated by the property.

Describe what an appraiser does (Top)

An appraiser forumlates a fair and credible opinion of market value, in the support of real estate transactions. Appraisers document their expert findings in appraisal reports.

What would cause me to need a real estate appraisal? (Top)

There are many reasons to obtain an appraisal from C. A. Klemme with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal report include:

To receive a loan.
To lower your property taxes.
To demonstrate a homeowner's acquired equity and remove PMI.
To fight high property taxes.
If you need to take care of an estate.
To give you a leg-up when purchasing a home.
To determine the most probable price when selling real estate.
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 home.
If you are ever involved in a civil case.

If you need a more detailed explanation of the appraisal process, please click here.

How is an appraisal different than a home inspection? (Top)

The appraiser is not a home inspector and does not do a comprehensive home inspection. An inspection is a third-party evaluation of the livable structure and mechanical systems of a property, from the top to the foundation. For the most part, a home inspection report will evaluate the amenities and the necessities of the home: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible 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)? (Top)

Simply, they have nothing in common. The CMA uses market trends to create most of their business. The appraisal depends on specific valid comparable sales. Location and construction costs are also important in an appraisal. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

But the biggest difference is the person behind the report. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce 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 value of a home, unlike the real estate agent, whose income is tied to the price of the home.

What are the contents of an appraisal report? (Top)

Every appraisal must demonstrate a credible value opinion and will identify the following:

The client and other intended users.
How the appraisal is supposed to be used.
The reason for the appraisal.
The type of value reported and a definition of the value reported.
The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
Relevant property characteristics, including: location, physical characteristics, legal attributes, economic attributes, the property rights valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed 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.
What was included in the activity of completing the job.

For a more comprehensive look at the work that goes into an appraisal report click here: Sample Appraisal Report

Once the report has been completed, how can I have certainty that the value indicated is legitimate? (Top)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:

That the information analysis contained in the appraisal was appropriate.

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

That appraisal services were rendered in a careful and conscientious fashion.

The final appraisal report was clear, sound and conclusive.

To become a state licensed appraiser, there are education requirements as well as real world experience that must be logged - all with the objective of gaining the skills required to render unbiased value opinions. Likewise, appraisers must abide by a strict industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Top) Licensing and certification takes classroom study, tests and experience working under a supervisory appraiser. Once licensed, he/she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who hires an appraiser? (Top)

Commonly, appraisers are hired by lenders to render a value opinion on a home involved in a loan transaction. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does an appraiser get the data used to estimate values in Marion County or other areas? (Top)

Collecting information is one of the primary functions of an appraiser. Data can be classified as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser during an inspection.

General data is gathered from a variety of places. To find out about recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And last but not least, the appraiser assimilates general data from his or her past experience in doing assignments for other properties in the same market.

Why do I need a professional appraisal? (Top)

An appraisal is a valuable tool whenever the value of your home is pertinent to a financial decision. When selling your home, an appraisal assists you in setting the most appropriate price. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from C. A. Klemme is the best documentation to ensure assets are divided fairly. Simply put, a house 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? (Top)

PMI is the common abbreviation for for Private Mortgage Insurance. It takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	The money you keep from cancelling the PMI required when you got your mortgage pays for the appraisal in a matter of months. C. A. Klemme is in the business of tracking value trends in FISHERS and Marion County. Contact us today.

Should I do anything in advance of the appraisal inspection (Top)

We start with an inspection of the home. During this process, the appraiser 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. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. In the yard, trim any bushes 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 readily available).
Title policy that lists 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).
Most recent real estate tax bill from Marion and or legal description of the property.

How does an appraiser define "Market Value"? (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 actually owns the appraisal report? (Top)

For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.

Which home renovations add the most to the price? (Top)

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.

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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also increase 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.