H.J. Ford & Associates has answers to "Frequently Asked Questions"

H.J. Ford & Associates is eager to talk to you about any concerns you might have about appraisals in the Detroit-Metro Area, SE Michigan, & greater Michigan . Don't hesitate to contact us today.

What is an appraisal?
Describe what an appraiser does
Why would I require services from H.J. Ford & Associates?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
After completing the report, how can I have assurance that the value indicated is valid?
How difficult is it to become certified?
Who do appraisers work for?
Where does H.J. Ford & Associates get the information used to estimate values in Wayne 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?
Does the appraiser need anything from the homeowner in advance?
Define "Market Value"
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?



What is an appraisal?   (Return to top)

An appraisal report is an estimation leading to an opinion of value. This opinion or estimate is discerned using a formal method that generally uses three "common approaches to value". The Cost Approach is one of the methods that real estate appraisers use to find value; it involves discerning what the improvements would cost less physical depreciation, plus the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which deals with making a comparison to similar properties close by. Usually, the Sales Comparison Approach is the most definite indicator of market value of a house. 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 income generated by the property.

Describe what an appraiser does   (Return to top)

An appraiser produces a professional, unbiased opinion of market value, in the support of real property transactions. Appraisers exhibit their analysis in appraisal reports.


Why would I require services from H.J. Ford & Associates?   (Return to top)

There are a lot of reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for getting an report include:
  • If you are applying for a loan.
  • If you would like to lower your property tax obligations.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
  • To fight inflated property taxes.
  • To handle an estate.
  • To offer you an edge when purchasing real estate.
  • To determine the most probable property value when putting your home on the market.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • 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 definitely help.
Click here for a more detailed explanation of the process involved in getting an appraisal.


How is an appraisal different than a home inspection?   (Return to top)

The appraiser is not a home inspector and he or she does not do a full home inspection. The purpose of a home inspection is to evaluate the structure of the house from basement to attic. Commonly, a home inspection report will evaluate the amenities and the requirements of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Return to top)

Simply put, it's like comparing Shakespeare to reality TV. The CMA uses market trends to generate most of their business. Appraisals use comparable sales which are verifiable resources. The appraisal report will also contain location and building prices. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

Who's creating the report is actually the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for work they perform, regardless of their outcome.

What's in an appraisal report?   (Return to top)

The main purpose of an appraisal document is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
  • The client and other intended users.
  • The intended use of the report.
  • The appraisal's purpose.
  • The type of value reported and a definition of that value.
  • The effective date of the appraisal.
  • Pertinent property attributes, including: location, physical characteristics, legal attributes, economic attributes, the property rights valued, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed and even intangible factors.
  • Any 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.
  • The scope of work used when completing the assignment.
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have assurance that the value indicated is valid?   (Return to top)

In communicating an appraisal report, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was proper.

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

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

  • The final appraisal report was understandable, credible and defensible.
There are intense education and real world experience requirements that must be adhered to in order to achieve the status of "licensed appraiser" in Michigan. Likewise, appraisers must follow a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Return to top)

Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification is commonly associated with many hours of classroom study, tests and real world 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 do appraisers work for?   (Return to top)

Mortgage lenders are an appraiser's most likely client, using their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does H.J. Ford & Associates get the information used to estimate values in Wayne County or other areas?   (Return to top)

Gathering data is one of the primary activities of an appraiser. Data can be described as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.

General data is received from a many sources. Local Multiple Listing Services (MLS) have information on recently sold homes that could be used as comparables. To double-check actual sales prices, we use items in the assessor's office and other public documents. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.

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

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

An appraisal is a valuable tool anytime your home's value 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a home 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 the common abbreviation for for Private Mortgage Insurance. PMI protects the lender if a borrower doesn't pay on the loan and the value of the property is lower than the balance of 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.

Does your monthly loan payment include a fee for PMI? Call H.J. Ford & Associates today at (313)345-4066 or send us an e-mail. Documentation of your home's current value could save you thousands.

Does the appraiser need anything from the homeowner in advance?   (Return to top)

We begin 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 condition of its amenities. On the home's interior, pick up any clutter and make sure we can get 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 our visit 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).
  • 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, septic systems and wells.
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
  • A list of "proposed" improvements if the property is to be appraised "as complete".

Define "Market Value"   (Return to top)

In real estate appraising, 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."

Does the appraisal belong to the bank or the consumer?   (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 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 cases, the appraiser may state 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)

The added value of a particular amenity truly depends on the local market. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want

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, an improvement that may not add value would be painting just for the sake of redecorating.