WalshStreet Appraisals has answers to "Frequently Asked Questions"
||WalshStreet Appraisals is always ready to reply to any questions you might have about appraisals or real estate in Los Angeles County.
Contact us today to see how we can help you with your specific valuation problems.
Define the term "Appraisal"
Describe what an appraiser does
Why would someone request services from WalshStreet Appraisals?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
Upon completion of the appraisal, how can I have assurance that the value indicated is valid?
How hard is it to become certified?
Who engages the services of appraisers?
Where does WalshStreet Appraisals get the information 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?
Do you need anything from the homeowner in advance?
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?
Define the term "Appraisal" (Return to top)
An appraiser performs an estimation that generates an opinion of value.
This opinion or estimate is found through the use of a formal process that typically uses three "common approaches to value".
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, plus the land value.
Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which deals with concluding a comparison to comparable houses nearby.
The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a residential property.
The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the capital produced by the property.
Describe what an appraiser does (Return to top)
An appraiser offers an unbiased and well justified determination of market value, to be used in making real estate transactions.
Appraisers demonstrate their professional analysis in appraisal reports.
Why would someone request services from WalshStreet Appraisals? (Return to top)
There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions.
A few other reasons for purchasing an report include:
If you need more information regarding the appraisal process, please click here.
- To get a loan.
- To reduce your property taxes.
- To show a homeowner has 30% equity and remove Primary Mortgage Insurance.
- To fight high property taxes.
- To deal with an estate.
- To offer you a leg-up when purchasing real estate.
- To find the most probable sales price when selling real estate.
- To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
- Because an official agency such as the IRS requires it.
- If you ever find yourself in a lawsuit.
The appraiser is not a home inspector nor does he/she do a complete home inspection.
A third-party home inspector will judge the structure of the home, from the top to the foundation.
The general house inspector's report will include an evaluation of the integrity of the property'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)? (Return to top)
To be blunt, it's night and day.
The CMA utilizes market trends to conduct most of their business.
Appraisals use comparable sales which are verifiable resources.
Area and building values are also important in an appraisal.
A CMA delivers a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
Who's behind the report is hands down the biggest 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 created by a licensed, certified professional who has made a career out of valuing properties.
Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their outcome.
The main objective 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, you'll usually see the following:
For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report
- Who engaged the appraiser and other intended users.
- The intended use of the appraisal.
- The purpose of the appraisal.
- The type of value reported 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!)
- Pertinent property characteristics, including: location, physical description, legal attributes, economic factors, 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 factors.
- Any 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.
- The scope of work considered while working up the assignment.
Upon completion of the appraisal, how can I have assurance that the value indicated is valid? (Return to top)
In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
There are intense classroom and practical experience requirements that must be fulfilled in order to become a licensed appraiser in California.
Likewise, appraisers must stick to a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- The appraisal used analysis of the data.
- Whether individually or collectively, there were no critical errors contained in the report, nor any material details left out.
- That appraisal services were not executed in a careless or negligent manner.
- That a believable, substantiated appraisal report was communicated.
(Return to top)
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 experience working under a supervisor.
Once licensed, he/she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.
Who engages the services of appraisers? (Return to top)
Commonly, appraisers are employed by mortgage lenders to estimate the value of property involved in a loan transaction.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does WalshStreet Appraisals get the information used to estimate values in Los Angeles County or other areas? (Return to top)
One of the primary tasks an appraiser engages in is to collect property data.
Data can be split into Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.
General data is collected from a variety of places.
Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables.
Tax records and other courthouse documents verify actual sales prices in a market.
Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.
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.
Why do I need a professional appraisal? (Return to top)
Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps.
When selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market.
If you're buying, it makes sure you don't overpay.
For those settling an estate or divorce, an appraisal from WalshStreet Appraisals is the best way to ensure assets are 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? (Return to top)
PMI is an acronym for Private Mortgage Insurance.
PMI protects the lender in the event a borrower defaults on the loan and the market price of the house is less than the loan balance.
Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
The savings from getting rid of your PMI pays for the appraisal in no time. 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.
Do you need anything from the homeowner in advance? (Return to top)
We begin with an inspection of the property.
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.
The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would get in our way while we measure the structure. Indoors, make sure the appraiser can get to appliances 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 will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
- Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
- 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 if the property is to be appraised "as complete".
What does "Market Value" mean? (Return to top)
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."
Does the appraisal belong to the bank or the consumer? (Return to top)
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 included 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 scenarios, the appraiser may define 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 do whatever they want with the appraisal.
Which home renovations add the most to the price? (Return to top)
The answer to this is different depending upon the location of the home.
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 are right up there with kitchens, returning 85%.
Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.