WalshStreet Appraisals has answers to "Frequently Asked Questions"
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Define the term "Appraisal"
Describe what an appraiser does
What are the reasons a person would request your services?
How is an appraisal different than a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What can I expect to see in my appraisal report?
Once the assignment has been delivered, what assurance is there that the value conclusion is veritable?
How are appraisers certified?
Who hires an appraiser?
Where does WalshStreet Appraisals get the data used to estimate values in Los Angeles County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
I want to get more for my house. Where should I spend money renovating?
Define the term "Appraisal" (Back to top)
The appraisal process is an estimation that generates an opinion of value.
There are three "common approaches to value" which assists the appraiser conclude this opinion or valuation.
One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the property, less the age and physical deterioration, plus the land value.
Easily the most common approach in finding the value of a house is the Sales Comparison Approach which deals with making a comparison to comparable homes close by.
Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a home.
One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to figure the market value of a property based on what an investor would pay based on the income produced by the building.
Describe what an appraiser does (Back to top)
An appraiser offers a professional, unbiased opinion of market value, in the support of real property transactions.
Appraisers illustate their conclusions in appraisal reports.
What are the reasons a person would request your services? (Back to top)
There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions.
Some other reasons for getting an report include:
Click here for a more extensive explanation of the process dealing with getting an appraisal.
- To get a loan.
- If you would like to reduce your property tax burden.
- To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
- To contest inflated property taxes.
- If you need to take care of an estate.
- To provide you a leg-up when purchasing real estate.
- To figure out a reasonable property value when listing your home.
- To defend 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.
- It's possible you could have to deal with being in a lawsuit - an appraisal will help.
Home inspectors do not come to an opinion of value and do not do appraisal reports.
A third-party home inspector will evaluate the structure of the property, from the roof to the bottom.
Usually, a home inspection report will discuss the amenities and the necessities of the house: 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)? (Back to top)
Honestly, they have nothing in common.
The CMA relies on indistinct trends in the market.
The appraisal is reliant on specific verifiable comparable sales.
Location and architectural values are also a priority in an appraisal.
All a CMA does is generate a "ball park figure."
Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
The person creating the report is frankly the most significant difference between a CMA and an appraisal.
Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's.
A certified, California licensed professional who bases a career on valuing properties in and around Los Angeles County creates the appraisal.
Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for assignments, regardless of their value conclusion.
The main point of an appraisal document is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report
- The client and whose purposes the appraisal is to serve.
- How the appraisal is supposed to be used.
- The appraisal's purpose.
- The type of value contained and a definition of the value reported.
- The effective date of the value opinion.
- Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
- All known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
- Division of interest, such as fractional interest, physical segment and partial holding.
- What was included in the activity of completing the assignment.
Once the assignment has been delivered, what assurance is there that the value conclusion is veritable? (Back to top)
In the documentation of an appraisal, each appraiser must ensure the following:
There are intense classroom and real world experience requirements that must be fulfilled in order to become a licensed appraiser in California.
Likewise, appraisers must abide by a strict industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis contained in the appraisal was appropriate.
- That grave errors of omission or commission were not committed individually or collectively.
- That appraisal services were provided in a careful and conscientious fashion.
- That a solid, substantiated appraisal report was imparted.
(Back to top)
Licensing and certification is achieved through classroom study, tests and experience working under a supervisory appraiser.
Once licensed, he/she must then complete continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.
Who hires an appraiser? (Back to top)
Mortgage lenders are an appraiser's typical client, using their services to ensure real estate involved in a mortgage transaction is adequate collateral for a 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? (Back to top)
One of the primary things an appraiser does is to gather property data.
Data can be described as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is received from a many places.
To find out about recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service.
To verify actual sales prices, we use tax records and other public documents that are usually online nowadays.
Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her past experience in creating appraisals for other properties in the same market.
Why do I need a professional appraisal? (Back to top)
If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal.
If you're 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 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? (Back to top)
PMI is the common abbreviation for for Private Mortgage Insurance.
It protects the lender if a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
The money you keep from getting rid of the PMI required when you got your mortgage pays for the appraisal in a matter of months. Nobody is more qualified than WalshStreet Appraisals when it comes to analyzing real estate appreciation in Los Angeles and Los Angeles County. Contact us today.
Should I do anything in advance of the appraisal inspection (Back to top)
The first step in most appraisals is the property inspection.
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 features.
Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would get in our way while we measure the structure. Indoors, 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:
- A survey or plot map of the property and building (if readily available).
- A list of any personal property that is part of the home and you intend to be sold with the home, such as a oven, or a washer and dryer, if applicable.
- Most recent real estate tax bill from Los Angeles and or legal description of the property.
- Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
- A list of "suggested" improvements when the property is being appraised "as complete".
How does an appraiser define "Market Value"? (Back 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."
Who has rights to the appraisal report? (Back 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 report - it's usually included 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 engages an appraiser directly.
In these cases, the appraiser may define the purpose of the appraisal; 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? (Back to top)
A home's location - what city it is in and even what part of that city - is key to this popular question.
while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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, yielding 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 overbuilt for your neighborhood in terms of size.