Farmer Appraisal Services has answers to "Frequently Asked Questions"

Farmer Appraisal Services is willing to reply to any concerns you might have about appraisals in Midland and Midland County. Contact Farmer Appraisal Services today to talk about how we can help solve your valuation problems.

What is an appraisal?
Describe what an appraiser does
What would cause me to require a real estate appraisal?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
Once the appraisal is done, how can I have certainty that the value conclusion is valid?
How hard is it to become certified?
Who employs appraisers?
Where does Farmer Appraisal Services get the data used to estimate values in Midland County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What is "Market Value?"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Go to list of  questions)

An appraisal is an estimation that concludes with an opinion of value. This opinion or estimate is concluded through a formal method that generally utilizes the three main "common approaches to value". One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Another of the approaches is the Sales Comparison Approach - which involves discovering a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a residential property. The Income Approach is primarily used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.

Describe what an appraiser does   (Go to list of  questions)

An appraiser produces an unprejudiced and well supported opinion of market value, in the support of real estate exchanges. Appraisers show their professional findings in appraisal reports.


What would cause me to require a real estate appraisal?   (Go to list of  questions)

There are a lot of reasons to purchase an appraisal from Farmer Appraisal Services with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an report include:
  • If you are applying for a loan.
  • To reduce your tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To challenge inflated property taxes.
  • To deal with an estate.
  • To offer you a negotiating tool when purchasing real estate.
  • To figure out an honest price when selling real estate.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will help.
If you need more information regarding the appraisal process, please click here.


What is the difference between an appraisal and a home inspection?   (Go to list of  questions)

The appraiser is not a home inspector nor does he/she do a complete home inspection. A third-party home inspector will judge the structure of the house, from the roof to the bottom. The stereotypical home inspector's report will contain an evaluation of the integrity of the home's heating system, 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)?   (Go to list of  questions)

Honestly, they have nothing in common. The CMA relies on vague trends in the market. The appraisal is based on similar definite comparable sales. Location and architectural prices are also important in an appraisal. 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.

But the largest differentiator is who's behind the report. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, who gets a commission based upon the price of the home.

What does the appraisal report contain?   (Go to list of  questions)

The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • 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 characteristics, including: location, physical description, 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 factors.
  • 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 included in the process of completing the appraisal.
For a more in depth look at what goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal is done, how can I have certainty that the value conclusion is valid?   (Go to list of  questions)

In the documentation of an appraisal, each appraiser must make sure of the following:
  • The appraisal used an appropriate analysis of the information.

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

  • That appraisal services were not rendered in a careless or negligent fashion.

  • That a solid, supportable appraisal report was communicated.
To become a state licensed appraiser, there are strenuous education requirements as well as practical experience that must be attained - all with the end goal of being able to render unbiased value opinions. In addition, appraisers must stick to a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Go to list of  questions) Licensing and certification takes classroom study, tests and practical experience. Once an appraiser is licensed, he or she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who employs appraisers?   (Go to list of  questions)

Mortgage lenders are an appraiser's most likely customer, needing their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does Farmer Appraisal Services get the data used to estimate values in Midland County or other areas?   (Go to list of  questions)

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

General data is gathered from a many places. To find out about recently sold homes to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we research items in the assessor's office and other public documents. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.

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 do I need a professional appraisal?   (Go to list of  questions)

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. When selling your home, 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 those settling an estate or divorce, an appraisal from Farmer Appraisal Services is the best documentation to ensure assets are divided fairly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

What exactly is PMI and how can I get rid of it?   (Go to list of  questions)

PMI is an acronym for Private Mortgage Insurance. It protects the lender in case a borrower defaults on the loan and the value of the home is less 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.

Is PMI something increasing your monthly mortgage payment?Call Farmer Appraisal Services today at 432-254-2442 or send us an e-mail. Documentation of your home's current value could save you thousands.

How do I get ready for the appraiser?   (Go to list of  questions)

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 status of its amenities. Inside, pick up any clutter and make sure we can access things like furnaces and water heaters. On the outside, 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:
  • Records on the latest purchase of the property in the last three years.
  • 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.
  • Brag sheet that lists major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • A list of "suggested" improvements if the property is to be appraised "as complete".

What is "Market Value?"   (Go to list of  questions)

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?   (Go to list of  questions)

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 report - 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these situations, 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.

Are some home improvements more worthwhile than others?   (Go to list of  questions)

This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

As a rule, the most value returned 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 are right up there with kitchens, yielding 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.