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Harbor Appraisals, LLC has answers to "Frequently Asked Questions"

Harbor Appraisals, LLC is always prepared to answer any concerns you might have about appraisals or real estate in Duluth and Saint Louis County. Contact us today to see how we can help you with your specific valuation problems.

What is an appraisal?
What does an appraiser do?
What would cause me to need a real estate appraisal?
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 report has been delivered, how can I have a guarantee that the value conclusion is trustworthy?
How are appraisers certified?
Who engages the services of appraisers?
Where does Harbor Appraisals, LLC get the information used to estimate values in Saint Louis 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?
Define "Market Value"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Return to top)

An appraisal report is an estimation allowing the appraiser to come to an opinion of value. The appraiser must use a several "approaches," typically three, to draw up the estimation of market value. One of the methods in use is the Cost Approach, which is what it would cost to replace the improvements to the property, minus age and physical deterioration, adding the land value. The Sales Comparison Approach involves searching for comparable houses in the vicinity and discerning value based on comparing those prior sales to the home in question. 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 generally used to find the value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?   (Return to top)

An appraiser offers an unprejudiced and well supported assessment of market value, often in the context of a real estate sale. Appraisers document their expert findings in appraisal reports.


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

There are a lot of reasons to obtain an appraisal from Harbor Appraisals, LLC with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal include:
  • To obtain a loan.
  • If you would like to reduce your property tax obligations.
  • To demonstrate a homeowner's acquired equity and remove PMI.
  • To fight improperly assessed property taxes.
  • If you need to settle an estate.
  • To give you a negotiating tool when purchasing a home.
  • To find the most probable property value when selling real estate.
  • 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 help.
Click here for a more extensive explanation of the process dealing with getting an appraisal.


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

Appraisers do not do complete residential property inspections and are not home inspectors. The point of a home inspection is to investigate the structure of the property from foundation to attic. The archetypal property 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 accessible 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)

Frankly, they share nothing in common. The CMA uses market trends to create most of their business. Appraisals use comparable sales which are valid resources. In addition, the appraisal looks at other factors like condition, location and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

Who's behind the report is hands down the most significant difference between a CMA and an appraisal. 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 created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent party, with no vested interest in the property's value, unlike the agent, who gets a commission based upon the value of the home.

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

The main point of an appraisal document is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
  • The client and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The reason for the assignment.
  • The type of value contained and a definition of that value.
  • 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 characteristics, including: location, physical characteristics, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the valuation, such as personal property, trade fixtures 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 involved in the activity of completing the job.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report


Once the report has been delivered, how can I have a guarantee that the value conclusion is trustworthy?   (Return to top)

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

  • Whether individually or collectively, there were no major errors contained in the report, 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, credible and defensible.
There are rigorous classroom and on the job experience requirements that must be satisfied in order to achieve the designation of "licensed appraiser" in Minnesota. In addition, appraisers must follow a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for working up 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 requires coursework, tests and real world experience. Once an appraiser is licensed, he or 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 engages the services of appraisers?   (Return to top)

Commonly, appraisers are called upon by mortgage lenders to render a value opinion on a home involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.

Where does Harbor Appraisals, LLC get the information used to estimate values in Saint Louis County or other areas?   (Return to top)

One of the most important things an appraiser does is to assimilate property data. Data can be classified 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 while on site.

General data is received from a variety of sources. To find out about recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To verify actual sales prices, we use tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood product.

And last but not least, the appraiser assimilates 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?   (Return to top)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out the 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, 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 house 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 an acronym for Private Mortgage Insurance. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Did you secure your mortgage with less than 20% down? Call Harbor Appraisals, LLC today at 218-626-1422 to see if you can get rid of your Private Mortgage Insurance premium.

How do I get ready for the appraiser?   (Return to top)

We start with an inspection of the property. 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. Inside, make sure it is clutter free and that we can find our way to 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.

You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
  • A plot plan or survey of the house and land (if available).
  • Information on any written private easements, such as a shared driveway with a neighbor.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
  • A list of "suggested" improvements when the property is being appraised "as complete".

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)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. Even though it's the buyer that eventually pays for the report, the lender is the intended user. 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.

The exception to this rule is when a home owner hires an appraiser directly. In these situations, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.


Are some home improvements more worthwhile than others?   (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 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 were second, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.