Michael Hodges Appraisals, Inc. has answers to "Frequently Asked Questions"

Michael Hodges Appraisals, Inc. is always willing to reply to any concerns you might have about appraisals in Dardanelle and Pope County. Contact us today to learn how we can help you with your valuation problems.

What is an appraisal?
What does an appraiser do?
What would cause me to need your services?
Is an appraisal the same as a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Upon completion of the report, what assurance is there that the value indicated is veritable?
What goes into an appraiser's certification?
Who engages the services of appraisers?
Where does an appraiser get the data used to estimate values in Pope 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?
Should I do anything in advance of the appraisal inspection
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



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

An appraisal report is an evaluation leading to an opinion of value. The appraiser will typically use a number of "approaches," typically three, to draw up the estimation of market value. The Cost Approach is one of the processes that real estate appraisers use to find the value of a home; it involves concluding what the improvements would cost minus physical degradation, plus the land value. Easily the most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which deals with making a comparison to comparable houses close by. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.

What does an appraiser do?   (Go to list of  questions)

An appraiser offers a fair and credible assessment of market value, in the support of real property transactions. Appraisers present their professional conclusions in appraisal reports.


What would cause me to need your services?   (Go to list of  questions)

There are many reasons to order an appraisal from Michael Hodges Appraisals, Inc. with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
  • To obtain a loan.
  • To lower your tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To fight improperly assessed property taxes.
  • If you need to settle an estate.
  • To offer you an edge when purchasing real estate.
  • To find the most probable sales price when selling your home.
  • 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 property.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
Click here for a more extensive explanation of the process involved in getting an appraisal.


Is an appraisal the same as a home inspection?   (Go to list of  questions)

The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. An inspection is a third-party evaluation of the livable structure and mechanical systems of a house, from the top to the bottom. The stereotypical house inspector's report will contain 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?   (Go to list of  questions)

Honestly, they have nothing in common. The CMA relies on indefinite market trends. The appraisal relies on specific verifiable comparable sales. In addition, the appraisal looks at other factors like condition, area and replacement costs. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

But the biggest difference is the person 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. A certified, Arkansas licensed professional who made their livelihood on valuing homes in and around Pope County is behind the appraisal. Further, the appraiser is an unbiased party, with no vested interest in the property's value, unlike the agent, who gets a commission based upon the price of the home.

What's in an appraisal report?   (Go to list of  questions)

Every appraisal should demonstrate a believable estimate of value and must clearly state the following:
  • Who engaged the appraiser and other intended users.
  • How the appraisal is supposed to be used.
  • The reason for the assignment.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Pertinent property characteristics, including: location, physical description, legal attributes, economic attributes, the property rights in question, 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 the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work used to complete the appraisal.
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report


Upon completion of the report, what assurance is there that the value indicated is veritable?   (Go to list of  questions)

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

  • Whether individually or collectively, there were no critical errors contained in the report, nor any relevant details left out.

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

  • That a credible, defensible appraisal report was communicated.
There are rigorous education and practical experience requirements that must be adhered to in order to achieve the title of "licensed appraiser" in Arkansas. Plus, appraisers must stick to a strict industry code of ethics and observe national standards of practice for real estate appraisal. The rules for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Go to list of  questions) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification is commonly associated with many hours of classroom study, tests and practical experience. Once an appraiser is licensed, he/she is required to engage in 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?   (Go to list of  questions)

Most of the time, appraisers are hired by mortgage lenders to estimate the value of real estate involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does an appraiser get the data used to estimate values in Pope County or other areas?   (Go to list of  questions)

Compiling data is one of the primary occupations of an appraiser. Data can be divided into Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.

General data is received from a numerous places. To research recent sales to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.

And most importantly, the appraiser assimilates general data from his or her past experience in doing assignments for other houses in the same market.


Why should I hire a licensed appraiser?   (Go to list of  questions)

If you're involved in some sort of financial decision and the value of your home matters, you'll want an appraisal. For those selling a home, you'll want to determine 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, you can avoid overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.


My mortgage statement has an item on it for PMI? Can I get rid of that?   (Go to list of  questions)

PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy covers the lender in case a borrower doesn't pay on the loan and the market price of the property is less than what the borrower still owes on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

The amount you keep from cancelling the PMI required when you got your mortgage pays for the appraisal in no time. Nobody is more qualified than Michael Hodges Appraisals, Inc. when it comes to analyzing real estate appreciation in Dardanelle and Pope County. Contact us today.

Should I do anything in advance of the appraisal inspection   (Go to list of  questions)

We start with an inspection of the home. 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. The best thing you can do to help is make 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. On the inside, make sure we can easily access 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:
  • Any information on the purchase of the property for the last three years.
  • List of personal property to be sold with the building.
  • Any paperwork, 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, septic systems and your well.
  • A list of "suggested" improvements when the property is being appraised "as complete".

What does "Market Value" mean?   (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."



Once complete, who actually owns 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 appraisal - it's usually bundled 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 engages an appraiser directly. In these situations, the appraiser may define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.


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

This really depends on where the home is. For example, putting in 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. 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 weren't far behind, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.