Appraisal Quality has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Back to top) An appraiser performs an estimation that produces an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or estimate. The Cost Approach is one of the methods that real estate appraisers use to find the value of a home; it involves concluding what the improvements would cost without physical degradation, adding the land value. The most common approach in finding the value of a home is the Sales Comparison Approach which concerns figuring a comparison to comparable homes nearby. Being the most popular approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residential property. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the income generated by the property.
What does an appraiser do?(Back to top) An appraiser offers an unprejudiced and well justified opinion of market value, to be used in making real estate transactions. Appraisers reveal the details of their expert investigation in appraisal reports.
What are the reasons I would request services from Appraisal Quality?(Back to top) There are many reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an report include:
My agent performed a CMA for me. Is that the same as an appraisal?(Back to top) To be blunt, it's night and day. What the CMA relies upon are vague trends. An appraisal relies on comparable sales that can be validated by records. The appraisal report will also contain area and building values. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
The person creating the report is frankly the most significant 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. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for work they perform, regardless of their value conclusion.
What's in an appraisal report? (Back to top)The main point 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, you'll usually see the following:
Once the appraisal has been completed, how can I have confidence that the value conclusion is trustworthy?(Back to top) In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
Who are an appraiser's customers?(Back to top) Most of the time, appraisers are called upon by lenders to render a value opinion on a home involved in a loan transaction. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Appraisal Quality get the information used to estimate values in Los Angeles County or other areas?(Back to top) One of the most important things an appraiser does is to collect property data. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is collected from a numerous places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood product.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
What can a full appraisal do for me?(Back to top) 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 will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by commissioning an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Back to top) PMI is short for for Private Mortgage Insurance. PMI guards the lender in case a borrower defaults on the loan and the market price of the house is less than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Should I do anything in advance of the appraisal appointment(Back to top) We begin with an inspection of the home. 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. On the home's interior, make sure it is clutter free and that we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of outside walls.
To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
Define "Market Value"(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. 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 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 scenarios, the appraiser may stipulate how the appraisal can be used; 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?(Back to top) It really depends on the market. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!
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 are right up there with kitchens, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.