WalshStreet Appraisals has answers to "Frequently Asked Questions"
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Define the term "Appraisal"
Describe what an appraiser does
Why would someone request services from WalshStreet Appraisals?
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 are the contents of an appraisal report?
Once the report has been delivered, what guarantee is there that the value indicated is trustworthy?
What goes into an appraiser's certification?
Who do appraisers work for?
Where does an appraiser 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?
How do I get ready for the appraiser?
What is "Market Value?"
Does the appraisal belong to the bank or the consumer?
How can I get the most ROI out of home improvements?
Define the term "Appraisal" (See list of FAQ's)
An appraiser performs an evaluation that produces an opinion of value.
The appraiser must use a number of "approaches," typically three, to conclude the estimation of market value.
One of the methods in use is the Cost Approach, which finds what it would cost to restore the improvements to the home, minus depreciation and physical deterioration, adding the land value.
The most common approach in finding the likely sales price of a home is the Sales Comparison Approach which deals with making a comparison to similar homes nearby.
Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property.
The Income Approach is mainly used for finding the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does (See list of FAQ's)
An appraiser offers a fair and credible assessment of market value, often in the context of a real estate sale.
Appraisers demonstrate their professional analysis in appraisal reports.
Why would someone request services from WalshStreet Appraisals? (See list of FAQ's)
There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions.
Other reasons for obtaining an appraisal report include:
For a more detailed explanation of the appraisal process click here.
- To get a loan.
- If you would like to lower your property tax obligations.
- To build a case for a homeowner's equity and remove insurance.
- To fight high property taxes.
- If you need to settle an estate.
- To offer you an edge when purchasing real estate.
- To determine a likely property value when selling real estate.
- To ensure parties are provided just compensation in eminient domain cases.
- Government agencies such as the IRS require an appraisal on every home.
- If you ever find yourself in a civil case.
The appraiser is not a home inspector nor does he/she do a full home inspection.
The purpose of a home inspection is to evaluate the structure of the property from bottom to rooftop.
Commonly, a home inspection report will discuss the amenities and the necessities of the property: air conditioning (weather permitting), electrical systems, 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.
My agent performed a CMA for me. Is that the same as an appraisal? (See list of FAQ's)
Simply put, it's night and day.
The CMA relies on indistinct market trends.
The appraisal is based on similar proven comparable sales.
In addition, the appraisal looks at other factors like condition, neighborhood and replacement prices.
The CMA will provide a non-specific figure.
Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.
But the biggest difference is the person behind the report.
Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's.
The appraisal is created by a licensed, certified professional who makes a living out of valuing properties.
Moreover, the appraiser is an unbiased voice, with no vested interest in the value of a home, unlike the real estate agent, who gets a commission based upon the value of the home.
The main objective of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
For a more comprehensive look at the work 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 purpose of the assignment.
- The type of value contained and a definition of that value.
- The effective date of the appraiser's opinions and conclusions.
- Relevant property attributes, including: location, physical attributes, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible considerations.
- 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.
- The scope of work used while working up the appraisal.
Once the report has been delivered, what guarantee is there that the value indicated is trustworthy? (See list of FAQ's)
In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
To become a state licensed appraiser, we must fulfill extensive education and experience requirements that train us to produce an unbiased opinion.
Likewise, appraisers must stick to a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for developing an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis utilized in the appraisal was suitable.
- That substantial errors of omission or commission were not committed individually or collectively.
- That appraisal services were done in a careful and cognizant fashion.
- The final appraisal report was transparent, legitimate and not easily discredited.
(See list of FAQ's)
Licensing and certification takes classroom study, tests and real world experience.
Once an appraiser is licensed, he/she must then complete 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, requiring their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in Los Angeles County or other areas? (See list of FAQ's)
Compiling data is one of the main tasks an appraiser does.
Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.
General data is gathered from a numerous places.
To look up recent sales to be used as "comps", an appraiser will typically use the local Multiple Listing Service.
Tax records and other public documents verify actual sales prices in a market.
Appraisers often have to report when a property lies in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assembles general data from his or her past experience in doing assignments for other houses in the same market.
Why do I need a professional appraisal? (See list of FAQ's)
An appraisal is a valuable tool anytime your home's value is pertinent to some financial decision.
For those selling a home, you'll want to figure out a 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, be sure you're not overpaying by getting an independent appraisal.
For parties settling an estate or divorce, an appraisal from WalshStreet Appraisals is the best way to ensure assets are divided properly.
Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making informed financial decisions.
What exactly is PMI and how can I get rid of it? (See list of FAQ's)
PMI is the common abbreviation for for Private Mortgage Insurance.
This supplemental policy guards the lender in the event a borrower is unable to pay on the loan and the value of the property is less 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.
The money you keep from dropping the PMI required when you got your mortgage will make up for the price of 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.
How do I get ready for the appraiser? (See list of FAQ's)
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 status of its features.
The best thing you can do to help is make sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and move any items that would make it difficult to measure the structure. Indoors, make sure we can get to items like furnaces and water heaters.
You can make the inspection 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 home.
- Any paperwork, such as a title policy with information on encroachments or easements encroachments or easements.
- Brag sheet that lists major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
- Information on "Homeowners Associations" or condominium covenants and fees.
What is "Market Value?" (See list of FAQ's)
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."
Does the appraisal belong to the bank or the consumer? (See list of FAQ's)
For mortgage transactions, the lender requests the appraisal, either directly or through a third party.
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 bundled 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 stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.
How can I get the most ROI out of home improvements? (See list of FAQ's)
The added value of a particular amenity truly depends on the local market.
adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.
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 weren't far behind, returning 85%.
On the contrary, work that may not increase your value would be painting just for the sake of redecorating.