WalshStreet Appraisals has answers to "Frequently Asked Questions"
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Define the term "Appraisal"
What does an appraiser do?
Why would a person require a real estate appraisal?
How is an appraisal different than a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
After completing the report, what guarantee is there that the value conclusion is valid?
How hard is it to become certified?
Who are an appraiser's customers?
Where does WalshStreet Appraisals get the data used to estimate values in Los Angeles County or other areas?
How can a licensed appraiser help me?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
Which home renovations add the most to the price?
Define the term "Appraisal" (Go to list of questions)
The procedure of performing an appraisal report consists of an evaluation which forms an opinion of value.
The real estate appraiser will typically use a number of "approaches," typically three, to arrive at the estimation of market value.
The Cost Approach is one of the methods that appraisers use to find the value of a property; it involves concluding what the improvements would cost without physical degradation, plus the land value.
The Sales Comparison Approach deals with searching for similar houses in the vicinity and discerning value based on comparing those houses to the house being appraised.
Being the most common approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residence.
The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the income produced by the property.
What does an appraiser do? (Go to list of questions)
An appraiser produces an unprejudiced and well supported determination of market value, in the support of real estate exchanges.
Appraisers document their analysis in appraisal reports.
Why would a person require a real estate appraisal? (Go to list of questions)
There are many reasons to obtain an appraisal from WalshStreet Appraisals with the most common reason being real estate and mortgage transactions.
Other reasons for purchasing an report include:
Click here for a more extensive explanation of the process involved in getting an appraisal.
- 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 PMI.
- To fight improperly assessed property taxes.
- If you need to settle an estate.
- To provide you an edge when purchasing a home.
- To figure out a reasonable 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.
- Because a government agency such as the IRS requires it.
- If you are ever involved in a lawsuit.
Home inspectors do not come to an opinion of value and are not appraisers.
A third-party home inspector will evaluate the structure of the home, from the top to the bottom.
The general property inspector's report will include an evaluation of the condition of the property's heating system, 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.
My agent performed a CMA for me. Is that the same as an appraisal? (Go to list of questions)
Frankly, they have nothing in common.
What the CMA depends on are ill-defined trends.
An appraisal utilizes comparable sales that can be proven by public record.
The appraisal report will also include neighborhood and construction costs.
A CMA delivers a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
The person creating the report is frankly the most significant difference between a CMA and an appraisal.
A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts.
The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties.
Moreover, the appraiser is an unbiased voice, with no conditional interest in the value of a home, unlike the agent, who gets a commission based upon the price of the home.
The main point of an appraisal document 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:
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report
- Who engaged the appraiser and whose purposes the appraisal is to serve.
- The intended use of the report.
- The appraisal's purpose.
- The type of value contained and a definition of that value.
- The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
- Relevant property attributes, including: location, physical attributes, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible considerations.
- 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.
After completing the report, what guarantee is there that the value conclusion is valid? (Go to list of questions)
In the documentation of an appraisal, each appraiser must make sure of the following:
To become a state licensed appraiser, we must fulfill considerable education and experience requirements that give us the background to formulate an unbiased opinion.
In addition, appraisers must abide by a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- The appraisal used an apropos analysis of the information.
- That significant errors of omission or commission were not committed individually or collectively.
- That appraisal services were delivered in a careful and cognizant fashion.
- That a trustworthy, substantiated appraisal report was communicated.
(Go to list of questions)
Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification typically translates to many hours of classroom study, tests and real world experience.
Once an appraiser is licensed, he/she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.
Who are an appraiser's customers? (Go to list of questions)
Most of the time, appraisers are employed by mortgage lenders to estimate the value of a home involved in a loan transaction - to make sure the real estate is indeed adequate collateral for the loan.
Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
Where does WalshStreet Appraisals get the data used to estimate values in Los Angeles County or other areas? (Go to list of questions)
One of the primary activities of an appraiser is to gather data.
Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is collected from a numerous sources.
To find out about recent sales to be used as "comps", we typically use the local Multiple Listing Service.
To verify actual sales prices, we research tax records and other public documents that are usually online nowadays.
Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me? (Go to list of questions)
An appraisal is a worthwhile whenever your home's value is pertinent to some financial decision.
For those selling a home, you'll want to determine 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.
When buying, be sure you're not overpaying by commissioning an independent appraisal.
If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly.
Simply put, a house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.
What exactly is PMI and how can I get rid of it? (Go to list of questions)
PMI is an acronym for Private Mortgage Insurance.
PMI takes care of the lender if a borrower defaults on the loan and the value of the property is less than the loan balance.
You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
The amount you keep from dropping your PMI will make up for the price of the appraisal in no time. WalshStreet Appraisals stays current with value trends in Los Angeles and Los Angeles County. Contact us today.
How do I get ready for the appraiser? (Go to list of questions)
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 (gates aren't locked, etc). Trim any landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can easily access 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:
- A survey or plot map of the property and building (if readily available).
- List of personal property to be sold with the home.
- Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
- A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
- A list of "suggested" improvements when the property is being appraised "as complete".
How does an appraiser define "Market Value"? (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."
Who has rights to the appraisal report? (Go to list of questions)
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 entitled to a copy of the appraisal - 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.
This rule doesn't apply when a home owner engages an appraiser directly.
In these cases, the appraiser may stipulate 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? (Go to list of questions)
This really depends on where the home is.
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 most value returned from renovating a home comes in the kitchen.
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, an improvement that may not increase your value would be painting just for the sake of redecorating.