WalshStreet Appraisals has answers to "Frequently Asked Questions"
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Describe an appraisal
Describe what an appraiser does
Why would I require a real estate appraisal?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Once the assignment is done, what guarantee is there that the value indicated is trustworthy?
How difficult is it to become certified?
Who employs appraisers?
Where does an appraiser get the data used to estimate values in Los Angeles County or other areas?
Why should I hire a licensed appraiser?
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?
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?
Describe an appraisal (See list of FAQ's)
An appraisal report is a thought process allowing the appraiser to come to an opinion of value.
There are three "common approaches to value" which assists the appraiser come to this opinion or valuation.
One of the methods in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, minus age and physical dilapidation, adding the land value.
Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which deals with figuring a comparison to similar houses nearby.
Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property.
One of the least common approaches in appraising houses is the Income Approach, which is commonly used to determine the market value of a property based on what an investor would pay based on the income produced by the property.
Describe what an appraiser does (See list of FAQ's)
An appraiser provides a professional, unbiased opinion of market value, often in the context of a real estate exchange.
Appraisers document their professional analysis in appraisal reports.
Why would I require a real estate appraisal? (See list of FAQ's)
There are a lot of reasons to get an appraisal with the usual reason being real estate and mortgage transactions.
Some other reasons for purchasing an appraisal report include:
Click here for a more extensive explanation of the process of getting an appraisal.
- If you are applying for 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 challenge high property taxes.
- To handle an estate.
- To provide you an edge when purchasing a home.
- To determine an honest sales price when listing 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 ever find yourself in a civil case.
Appraisers do not do provide house inspections and are not home inspectors.
The point of a home inspection is to investigate the structure of the house from bottom to rooftop.
The usual 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 visible 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? (See list of FAQ's)
Frankly, it's night and day.
The CMA relies on indefinite market trends.
An appraisal is based on comparable sales that can be proven by records.
The appraisal report will also include area and building costs.
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.
Who's creating the report is actually the biggest difference between a CMA and an appraisal.
Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation.
A certified, California licensed professional who bases their livelihood on valuing real estate in and around Los Angeles County is behind the appraisal.
Further, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the agent, whose income is tied to the value of the home.
The main purpose of an appraisal document is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
For a more in depth view of all that goes into an appraisal report click here: Sample Appraisal Report
- The client and other intended users.
- How the appraisal is supposed to be used.
- The reason for the appraisal.
- Precisely what "value" attribute is being reported and what that value means.
- The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
- Relevant property characteristics, including: location, physical description, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, trade fixtures 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 involved in the activity of completing the appraisal.
Once the assignment is done, what guarantee is there that the value indicated is trustworthy? (See list of FAQ's)
In the documentation of an appraisal, each appraiser must ensure the following:
There are rigorous classroom and on the job experience requirements that must be fulfilled in order to become a licensed appraiser in California.
Plus, appraisers must follow a stringent industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis implemented in the appraisal was suitable.
- That major errors of omission or commission were not committed individually or collectively.
- That appraisal services were done in a careful and conscientious fashion.
- That a trustworthy, supportable appraisal report was communicated.
(See list of FAQ's)
Licensing and certification takes coursework, tests and real world experience.
Once an appraiser is 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 employs appraisers? (See list of FAQ's)
Most of the time, appraisers are called upon by lenders to estimate the value of a home involved in a loan transaction.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Los Angeles County or other areas? (See list of FAQ's)
One of the main activities of an appraiser is to gather property data.
Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is received from a many places.
Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables.
Tax records and other public documents verify actual sales prices in a market.
Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser gathers general data from his or her past experience in doing assignments for other properties in the same market.
Why should I hire a licensed appraiser? (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 determine 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 commissioning an independent appraisal.
For parties settling an estate or divorce, an appraisal from WalshStreet Appraisals is the best documentation to ensure assets are divided properly.
A home 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 short for for Private Mortgage Insurance.
This supplementary policy protects the lender if a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
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.
Does your monthly loan payment include a fee for PMI?Call WalshStreet Appraisals today at 323-936-9970 or send us an e-mail. Documentation of your home's present value could save you thousands.
Do you 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, 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.
On the home's interior, make sure it is clutter free and that we can get to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
- Records on the latest purchase of the property in the last three years.
- Written property agreements, such as a maintenance easement for a shared driveway.
- Title policy that describes encroachments or easements.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
- Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
What does "Market Value" mean? (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)
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 appraisal - 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage.
In these cases, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.
Are some home improvements more worthwhile than others? (See list of FAQ's)
The added value of a particular amenity truly depends on the local market.
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.
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 were second, yielding 85%.
On the contrary, something that may not increase your value would be painting just for the sake of redecorating.