WalshStreet Appraisals has answers to "Frequently Asked Questions"

WalshStreet Appraisals is always ready to talk to you about any inquiries you might have about appraisals or real estate in Los Angeles County. Contact us today to see how we can help solve your valuation problems.

Define the term "Appraisal"
What does an appraiser do?
Why would someone require your services?
Is an appraisal the same as a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Upon completion of the appraisal, what guarantee is there that the final number is veritable?
What goes into an appraiser's certification?
Who do appraisers work for?
Where does an appraiser 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?
Does the appraiser need anything from the homeowner in advance?
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"   (See list of FAQ's)

An appraisal is an estimation that concludes with an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or estimate. The Cost Approach is one of the processes that appraisers use to find value; it involves figuring what the improvements would cost less physical degradation, adding the land value. The most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which concerns making a comparison to comparable homes close by. The Sales Comparison Approach is commonly the most accurate and best indicator of a liklely sales price for a house. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?   (See list of FAQ's)

An appraiser generates a fair and credible determination of market value, often in the context of a real estate sale. Appraisers demonstrate their expert analysis in appraisal reports.

Why would someone require your services?   (See list of FAQ's)

There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an report include:
  • To get a loan.
  • If you would like to lower your property tax obligations.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
  • To challenge improperly assessed property taxes.
  • To settle an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To figure out a likely price when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because an official agency such as the IRS requires it.
  • If you ever find yourself in a civil case.
Click here for a more detailed explanation of the process of getting an appraisal.

Is an appraisal the same as a home inspection?   (See list of FAQ's)

Appraisers do not do provide home inspections and are not home inspectors. The purpose of a home inspection is to evaluate the structure of the home from bottom to rooftop. For the most part, a home inspection report will discuss the amenities and the necessities of the home: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

My agent performed a CMA for me. Is that the same as an appraisal?   (See list of FAQ's)

Honestly, they have nothing in common. The CMA utilizes market trends to create most of their business. Appraisals use similar sales which are valid resources. Area and building prices are also important in an appraisal. All a CMA does is generate 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 written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, California licensed professional who has formed their livelihood on valuing real estate in and around Los Angeles County is behind the appraisal. Moreover, the appraiser is an independent party, with no vested interest in the value conclusion, unlike the agent, who gets a commission based upon the value of the home.

What does the appraisal report contain?   (See list of FAQ's)

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:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The purpose of the assignment.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraiser's opinions and conclusions.
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights in question, 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 the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work considered when completing the appraisal.
For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the appraisal, what guarantee is there that the final number is veritable?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was proper.

  • Whether individually or collectively, there were no grave errors contained in the appraisal, nor any material details left out.

  • That appraisal services were not carried out in a careless or negligent manner.

  • The final appraisal report was understandable, credible and defensible.
To become a state licensed appraiser, we must fulfill intense education and experience requirements that train us to formulate an unbiased opinion. Likewise, appraisers must abide by 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 guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (See list of FAQ's) Regulations regarding licensing and certification are different from state to state. However, licensing and certification is commonly associated with many hours of classroom study, tests and practical experience. Once licensed, he or 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 do appraisers work for?   (See list of FAQ's)

Mortgage lenders are an appraiser's typical client, using their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Los Angeles County or other areas?   (See list of FAQ's)

Compiling information is one of the primary occupations of an appraiser. Data can be split into Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.

General data is received from a variety of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. To double-check actual sales prices, we research items in the assessor's office and other public documents. Appraisers routinely need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

And most importantly, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other houses in the same market.

How can a licensed appraiser help me?   (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 the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. 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?   (See list of FAQ's)

PMI is an acronym for Private Mortgage Insurance. It covers the lender if a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Did you have less than 20% to put down on your mortgage? Call WalshStreet Appraisals today at 323-936-9970. You may be able to cancel your Private Mortgage Insurance payment.

Does the appraiser need anything from the homeowner in advance?   (See list of FAQ's)

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. 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 . Trim any shrubs and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.

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 readily available).
  • List of personal property to be sold with the building.
  • Title policy that describes encroachments or easements.
  • Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Insulation 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"?   (See list of FAQ's)

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?   (See list of FAQ's)

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 certainly entitled to a copy of the appraisal - 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may state 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.

Which home renovations add the most to the price?   (See list of FAQ's)

A home's location - what city it is in and even what part of that city - is key to this popular question. For example, 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 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 weren't far behind, returning 85%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.