MKD Appraising & Consulting has answers to "Frequently Asked Questions"

MKD Appraising & Consulting is ready to reply to any questions you might have about appraisals in Knoxville and Knox County. Contact us today to talk about how we can help you with your valuation problems.

Define the term "Appraisal"
What does an appraiser do?
Why would someone request a real estate appraisal?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Upon completion of the report, what guarantee is there that the value indicated is trustworthy?
What goes into an appraiser's certification?
Who employs appraisers?
Where does an appraiser get the information used to estimate values in Knox County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What does "Market Value" mean?
Who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?



Define the term "Appraisal"   (Go to list of  questions)

The procedure of performing an appraisal consists of an evaluation which forms an opinion of value. This opinion or estimate is arrived at using a formal process that generally uses three "common approaches to value". One of the methods is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves finding comparable homes in close proximity and finding value based on making a comparison of those houses to the property being investigated. The Sales Comparison Approach is normally the most definitive and best indicator of a liklely sales price for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the income produced by the building.

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

An appraiser provides an impartial and well justified determination of market value, in the support of real estate exchanges. Appraisers reveal the details of their expert conclusions in appraisal reports.


Why would someone request a real estate appraisal?   (Go to list of  questions)

There are many reasons to order an appraisal from MKD Appraising & Consulting with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
  • If you are applying for a loan.
  • To reduce your property taxes.
  • To show a homeowner has 30% equity and remove insurance.
  • To fight high property taxes.
  • If you need to settle an estate.
  • To give you a leg-up when purchasing real estate.
  • To determine a likely property value when listing your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because a government agency such as the IRS requires it.
  • If you are ever involved in a civil case.
For a more detailed explanation of the appraisal process click here.


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

Appraisers do not do perform house inspections and are not home inspectors. A third-party home inspector will judge the structure of the home, from the top to the foundation. The stereotypical property inspector's report will include 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.

My agent performed a CMA for me. Is that the same as an appraisal?   (Go to list of  questions)

Frankly, it's night and day. The CMA relies on vague market trends. The appraisal is based on similar valid comparable sales. The appraisal report will also contain area and building costs. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the biggest difference is who's behind the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, state licensed professional who bases a career on valuing real estate in and around Knox County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat fee for assignments, regardless of their value conclusion.

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

Each report should demonstrate a supported estimate of value and will clearly state the following:
  • The client and other intended users.
  • The intended use of the report.
  • The purpose of the appraisal.
  • The type of value contained and a definition of the value reported.
  • 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 attributes, including: location, physical characteristics, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
  • 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 to complete the job.
For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report

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

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • That the information analysis utilized in the appraisal was proper.

  • Whether individually or collectively, there were no crucial errors contained in the appraisal, nor any material details left out.

  • That appraisal services were done in a careful and conscientious manner.

  • The final appraisal report was understandable, credible and not easily discredited.
To become a state licensed appraiser, there are extensive education requirements as well as practical experience that must be attained - all with the objective of gaining the skills required to render unbiased value opinions. In addition, appraisers must abide by a strict industry code of ethics and respect national standards of practice for real estate appraisal. The rules for carrying out an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Go to list of  questions) Regulations regarding licensing and certification are different from state to state. In general, licensing and certification typically translates to many hours of classroom study, tests and practical experience. Once an appraiser is licensed, he/she is required to take continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who employs appraisers?   (Go to list of  questions)

Most of the time, appraisers are called upon by mortgage lenders to render a value opinion on a house involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

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

Gathering data is one of the primary occupations of an appraiser. Data can be categorized as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.

General data is received from a many sources. To research recent sales to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And most importantly, 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?   (Go to list of  questions)

If you're involved in any kind of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. For those selling a home, you'll want to figure out the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. 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.

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

PMI is short for for Private Mortgage Insurance. This supplemental plan protects the lender in case a borrower is unable to pay on the loan and the value of the property is less 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.

Has your real estate appreciated since you first purchased? Contact MKD Appraising & Consulting today at (865) 548-4555. You may be able to get rid of your Private Mortgage Insurance payment.

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

We begin with an inspection of the home. During this process, we 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 get to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of outside walls.

You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
  • Any information on the purchase of the property for the last three years.
  • A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • Most recent real estate tax bill and or legal description of the property.

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

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."

Who actually owns the appraisal report?   (Go to list of  questions)

In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is entitled to a copy of the report - it's usually bundled 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 engaging the appraiser for things outside securing a mortgage. 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 noted otherwise, the home owner can use the appraisal for any purpose.

I want to get more for my house. Where should I spend money renovating?   (Go to list of  questions)

This really depends on where the home is. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become atypical for your neighborhood in terms of size.