WalshStreet Appraisals has answers to "Frequently Asked Questions"
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Define the term "Appraisal"
Describe what an appraiser does
Why would someone need a real estate appraisal?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
Once the appraisal is done, how can I have confidence that the final number is valid?
What are the requirements to be a certified appraiser?
Who do appraisers work for?
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?
How do I get ready for the appraiser?
What is "Market Value?"
Who actually owns the appraisal report?
How can I get the most ROI out of home improvements?
Define the term "Appraisal" (See list of FAQ's)
The appraisal process is an estimation that leads to an opinion of value.
This opinion or estimate is concluded by using a formal method that typically utilizes the three main "common approaches to value".
One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the house, less the age and physical deterioration, plus the land value.
The most common approach in finding the likely sales price of a house is the Sales Comparison Approach which deals with making a comparison to comparable houses close by.
Being the most popular approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a home.
One of the least common approaches in appraising houses is the Income Approach, which is commonly used to determine the value of a property based on what an investor would pay based on the income produced by the building.
Describe what an appraiser does (See list of FAQ's)
An appraiser offers an impartial and well justified determination of market value, to be used in making real estate transactions.
Appraisers illustate their professional findings in appraisal reports.
Why would someone need a real estate appraisal? (See list of FAQ's)
There are a lot of reasons to get an appraisal from WalshStreet Appraisals with the usual reason being real estate and mortgage transactions.
Other reasons for ordering an report include:
For a more detailed description of the appraisal process click here.
- If you are applying for a loan.
- To reduce your property taxes.
- To show a homeowner has 30% equity and remove insurance.
- To challenge high property taxes.
- If you need to settle an estate.
- To provide you an edge when purchasing real estate.
- To determine a reasonable property value when selling your home.
- 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.
- It's possible you could be involved in a lawsuit - an appraisal will help.
Appraisers do not do perform residential property inspections and are not home inspectors.
A third-party home inspector will judge the structure of the property, from the top to the foundation.
Commonly, a home inspection report will explain the amenities and the requirements of the house: 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
What is the difference between an appraisal and a comparative market analysis (CMA)? (See list of FAQ's)
Simply put, it's night and day.
The CMA utilizes market trends to generate most of their business.
The appraisal is reliant on specific valid comparable sales.
Location and architectural prices are also important in an appraisal.
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.
But the most significant factor is who's behind the report.
A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts.
A certified, California licensed professional who bases a career on valuing homes in and around Los Angeles County is behind 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 accept a flat sum for assignments, 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 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 assignment.
- Precisely what "value" attribute is being reported and what that value means.
- The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
- Relevant property attributes, including: location, physical description, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
- All 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.
- What was included in the process of completing the appraisal.
Once the appraisal is done, how can I have confidence that the final number is valid? (See list of FAQ's)
In the documentation of an appraisal, each appraiser must ensure the following:
There are intense education and on the job experience requirements that must be satisfied in order to get an appraisal license in California.
Plus, appraisers must stick to a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
- That the information analysis utilized in the appraisal was proper.
- That grave errors of omission or commission were not committed individually or collectively.
- That appraisal services were not carried out in a careless or negligent fashion.
- The final appraisal report was transparent, legitimate and defensible.
(See list of FAQ's)
Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. However, licensing and certification is most often associated with many hours of classroom study, tests and real world experience.
Once an appraiser is licensed, he or she is required to complete continuing education courses so the license remains current. To see the specific requirements for any state click here.
Who do appraisers work for? (See list of FAQ's)
Commonly, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction - to make sure the property is indeed adequate collateral for the loan.
Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.
Where does WalshStreet Appraisals get the information used to estimate values in Los Angeles County or other areas? (See list of FAQ's)
Gathering information is one of the primary things an appraiser does.
Data can be categorized as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.
General data is gathered from a many places.
To look up recent sales to be used as "comps", we often use the local Multiple Listing Service.
Tax records and other public documents verify actual sales prices in a market.
Appraisers routinely need 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 last but not least, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
Why do I need a professional appraisal? (See list of FAQ's)
If you're involved in any kind of financial decision and the value of your home is relevant, you'll want a full appraisal.
For those selling a home, you'll want to figure out the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that.
If you're buying, it makes sure you don't overpay.
For parties settling an estate or divorce, an appraisal from WalshStreet Appraisals is the best way to ensure assets are split up fairly.
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 stands for Private Mortgage Insurance.
It takes care of the lender in case a borrower doesn't pay on the loan and the value of the property 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 secure your mortgage with less than 20% down? Call WalshStreet Appraisals today at 323-936-9970 to see if you can cancel your Private Mortgage Insurance payment.
How do I get ready for the appraiser? (See list of FAQ's)
The first step in most appraisals is the home 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 we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.
To help expedite our work plus ensure a more accurate report, attempt if possible to have the following items:
- Any records on the purchase of the property for the last three years.
- List of personal property to be sold with the building.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
- Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
- Most recent real estate tax bill from Los Angeles and or legal description of the property.
What is "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 actually owns 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 bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
The exception to this rule is when a home owner hires an appraiser directly.
In these cases, the appraiser may define 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.
How can I get the most ROI out of home improvements? (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.
installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
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%.
Adding bedrooms and baths can also increase the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.