WalshStreet Appraisals has answers to "Frequently Asked Questions"
||WalshStreet Appraisals is always prepared to elaborate on any concerns you might have about appraisals in Los Angeles County.
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Define the term "Appraisal"
What does an appraiser do?
What are the reasons someone would request a real estate appraisal?
How is an appraiser different than a home inspector?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What can I expect to see in my appraisal report?
After completing the report, how can I have assurance that the value indicated is veritable?
What does it mean for an appraiser to be licensed?
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?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What does "Market Value" mean?
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" (Go to list of questions)
The procedure of writing an appraisal report consists of an evaluation which leads to an opinion of value.
This opinion or estimate is concluded through the use of a formal method that usually 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 home, minus depreciation and physical dilapidation, plus the land value.
Another of the methods is the Sales Comparison Approach - which deals with discovering a comparison to other similar properties within a close proximity which have recently sold.
Being the most popular approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residence.
The Income Approach is primarily used for determining 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? (Go to list of questions)
An appraiser provides an unprejudiced and well supported determination of market value, to be used in making real estate transactions.
Appraisers show their professional conclusions in appraisal reports.
What are the reasons someone would request a real estate appraisal? (Go to list of questions)
There are a lot of reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions.
Some other reasons for ordering an report include:
For a more detailed explanation of the appraisal process click here.
- If you are applying for a loan.
- If you would like to lower 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 challenge inflated property taxes.
- If you need to take care of an estate.
- To give you an edge when purchasing real estate.
- To determine a reasonable price when selling your home.
- To defend 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 civil case.
The appraiser is not a home inspector and does not do a complete home inspection.
The purpose of a home inspection is to investigate the structure of the house from bottom to top.
The standard property inspector's report will contain an evaluation of the integrity of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible 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)? (Go to list of questions)
Frankly, it's night and day.
What the CMA relies upon are vague trends.
Appraisals use similar sales which are valid resources.
The appraisal report will also include area and construction costs.
All a CMA does is generate a "ball park figure."
Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The credentials of the person creating the report is frankly the biggest difference between a CMA and an appraisal.
A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts.
A certified, state licensed professional who made a career on valuing real estate in and around Los Angeles County creates the appraisal.
Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for work they perform, regardless of their outcome.
The main purpose of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
For a more comprehensive view of all that 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.
- Precisely what "value" attribute is being reported and what that value means.
- The effective date of the appraisal.
- Relevant property attributes, including: location, physical description, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the valuation, 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 considered while working up the assignment.
After completing the report, how can I have assurance that the value indicated is veritable? (Go to list of questions)
In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
To become a state licensed appraiser, there are intense education requirements as well as real world experience that must be attained - all with the objective of being able to render unbiased value opinions.
In addition, appraisers must follow a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis utilized in the appraisal was suitable.
- That grave errors of omission or commission were not committed individually or collectively.
- That appraisal services were provided in a careful and judicious fashion.
- The final appraisal report was clear, legitimate and not easily discredited.
(Go to list of questions)
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification typically translates to many hours of coursework, tests and real world experience.
Once an appraiser is licensed, he or she must then engage in continuing education courses so the license stays up to date. To see the specific requirements for any state click here.
Who hires an appraiser? (Go to list of questions)
Typically, appraisers are hired by mortgage lenders to estimate the value of real estate involved in a loan transaction.
Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
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 main things an appraiser does is to collect property data.
Data can be classified as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.
General data is collected from a variety of sources.
To find out about recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service.
Tax records and other courthouse documents reveal actual sales prices in a market.
Appraisers routinely 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 most importantly, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why do I need a professional appraisal? (Go to list of questions)
Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps.
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. Knowing its true value is essential to making wise financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that? (Go to list of questions)
PMI is the common abbreviation for for Private Mortgage Insurance.
PMI covers the lender in case a borrower doesn't pay on the loan and the value of the home 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 savings from dropping your PMI will make up for the cost of the appraisal in no time. WalshStreet Appraisals has years of experience 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 property inspection.
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.
Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
- A survey or plot map of the property and building (if available).
- List of personal property to be sold with the building.
- Title policy that lists encroachments or easements.
- Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
- Information on "Homeowners Associations" or condominium covenants and fees.
What does "Market Value" mean? (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)
For mortgage transactions, the lender orders 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 entitled to a copy of the report - 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage.
In these situations, the appraiser may stipulate the purpose of the appraisal; 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.
I want to get more for my house. Where should I spend money renovating? (Go to list of questions)
This really depends on where the home is.
if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
As a rule, the best ROI 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%.
On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.