Duffy Appraisals has answers to "Frequently Asked Questions"

Duffy Appraisals is willing to reply to any concerns you might have about appraisals or real estate in Sioux Falls and Minnehaha County. Don't hesitate to contact us today.

Define the term "Appraisal"
Describe what an appraiser does
What are the reasons a person would need your services?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Once the appraisal is done, how can I have confidence that the value indicated is legitimate?
What does it mean for an appraiser to be licensed?
Who employs appraisers?
Where does an appraiser get the information used to estimate values in Minnehaha 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?
Once complete, who actually owns the appraisal report?
How can I get the most ROI out of home improvements?



Define the term "Appraisal"   (See list of FAQ's)

An appraisal is a thought process allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. One of the processes in use is the Cost Approach, which is what it would cost to replace the improvements to the property, minus depreciation and physical dilapidation, adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns discovering a comparable analysis to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital generated by the property.

Describe what an appraiser does   (See list of FAQ's)

An appraiser provides a professional, unbiased opinion of market value, often in the context of a real estate exchange. Appraisers demonstrate their expert investigation in appraisal reports.


What are the reasons a person would need your services?   (See list of FAQ's)

There are a lot of reasons to get an appraisal from Duffy Appraisals with the usual reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal report include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax obligations.
  • To show a homeowner has 30% equity and remove PMI.
  • To contest inflated property taxes.
  • If you need to take care of an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To figure out the most probable sales price 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.
  • Government agencies such as the IRS require an appraisal on every home.
  • If you are ever involved in a lawsuit.
Click here for a more extensive explanation of the process of getting an appraisal.


How is an appraiser different than a home inspector?   (See list of FAQ's)

Home inspectors do not come to an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to evaluate the structure of the home from foundation to attic. For the most part, a home inspection report will discuss the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

Is an appraisal the same as a comparative market analysis(CMA)?   (See list of FAQ's)

To be blunt, it's apples and oranges. The CMA uses market trends to generate most of their business. The appraisal is based on specific definite comparable sales. Also, the appraisal checks other factors like condition, area and building costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

The credentials of the person creating the report is frankly the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, generate CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent voice, with no vested interest in the value conclusion, unlike the real estate agent, who gets a commission based upon the price of the home.

What's in an appraisal report?   (See list of FAQ's)

Each appraisal must demonstrate a believable estimate of value and will clearly state the following:
  • The client and other intended users.
  • The intended use of the appraisal.
  • The purpose of the assignment.
  • The type of value contained and a definition of the value reported.
  • The effective date of the value opinion.
  • Relevant property characteristics, including: location, physical characteristics, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations 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.
  • What was involved in the activity of completing the assignment.
For a more detailed look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal is done, how can I have confidence that the value indicated is legitimate?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal used an apropos analysis of the data.

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

  • That appraisal services were rendered in a careful and cognizant manner.

  • The final appraisal report was easy to explain, credible and conclusive.
To become a state licensed appraiser, there are extensive education requirements as well as on the jobexperience that must be logged - all with the objective of being able to provide unbiased value opinions. Likewise, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (See list of FAQ's) 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 experience working under a supervisor. 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 employs appraisers?   (See list of FAQ's)

Typically, appraisers are hired by lenders to estimate the value of real estate involved in a loan transaction - to make sure the real estate is indeed 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 Minnehaha County or other areas?   (See list of FAQ's)

Gathering data is one of the main things an appraiser does. 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 collected from a numerous sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.

And last but not least, the appraiser assembles 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?   (See list of FAQ's)

An appraisal is a valuable tool whenever the value of your home is pertinent to a financial decision. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting 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. Knowing its true value is essential to making informed financial decisions.

What exactly is PMI and how can I get rid of it?   (See list of FAQ's)

PMI is short for for Private Mortgage Insurance. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Did you have less than 20% to put down on your mortgage? Call Duffy Appraisals today at (605) 334-5454 to see if you can save money by removing your Private Mortgage Insurance payment.

How do I get ready for the appraiser?   (See list of FAQ's)

The first step in most appraisals is the home inspection. 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house . Trim any landscaping and relocate any items that would make it difficult to measure the structure. On the inside, make sure we can get to items 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:
  • Information on the latest purchase of the property in the last three years.
  • A list of any personal property that is part of the home and you intend to be sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • A list of any major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
  • A list of "proposed" improvements if the property is to be appraised "as complete".

What does "Market Value" mean?   (See list of FAQ's)

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?   (See list of FAQ's)

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 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.

It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these cases, the appraiser may stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.

How can I get the most ROI out of home improvements?   (See list of FAQ's)

It really depends on the 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, work that may not increase your value would be painting just for the sake of redecorating.