Frequently Asked Questions
Describe an appraisal Describe an appraisal (See list of FAQ's)The appraisal process is an evaluation that produces an opinion of value. This opinion or estimate is found through a formal method that generally uses three "common approaches to value". The Cost Approach is one of the approaches that appraisers use to find value; it involves discerning what the improvements would cost without physical deterioration, plus the land value. The Sales Comparison Approach involves finding comparable houses in the vicinity and discerning value based on comparing those properties to the property being investigated. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. The Income Approach is primarily used for finding the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.What does an appraiser do? (See list of FAQ's)An appraiser provides a fair and credible assessment of market value, in the support of real property exchanges. Appraisers exhibit their analysis in appraisal reports.Why would I require your services? (See list of FAQ's)There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an appraisal report include:
What is the difference between an appraisal and a home inspection? (See list of FAQ's)The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. The point of a home inspection is to investigate the structure of the house from foundation to attic. The standard home inspector's report will include an evaluation of the condition of the home's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible 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)? (See list of FAQ's)To be honest, they have nothing in common. What the CMA depends on are superficial trends. An appraisal relies on comparable sales that can be validated by public record. Area and construction values are also a priority in an appraisal. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.But the largest differentiator is the person behind the report. 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 party, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the value of the home. What are the contents of an appraisal report? (See list of FAQ's)The main point of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
Once the appraisal has been completed, what assurance is there that the value conclusion is legitimate? (See list of FAQ's)In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who do appraisers work for? (See list of FAQ's)Mortgage lenders are an appraiser's typical client, using their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.Where does an appraiser get the data used to estimate values in Los Angeles County or other areas? (See list of FAQ's)One of the main tasks an appraiser performs is to compile data. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.General data is collected from a variety of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To verify actual sales prices, we look at items in the assessor's office and other public documents that are usually online nowadays. 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 last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other houses in the same market. Why do I need a professional appraisal? (See list of FAQ's)Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out a 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. 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? (See list of FAQ's)PMI stands for Private Mortgage Insurance. It takes care of the lender in the event a borrower defaults on the loan and the market price of the property 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.Should I do anything in advance of the appraisal appointment (See list of FAQ's)We start with an inspection of the home. During this process, the appraiser 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. On the home's interior, make sure it is clutter free and that we can get to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of outside walls.To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:
Define "Market Value" (See list of FAQ's)In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who actually owns the appraisal report? (See list of FAQ's)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 bundled with all the other closing documents - but is not allowed 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 stipulate 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 do whatever they want with the appraisal. I want to get more for my house. Where should I spend money renovating? (See list of FAQ's)It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homesNo matter where you go, however, renovating a kitchen is almost always a safe investment. 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, returning 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating. |