Appraisal Care has answers to "Frequently Asked Questions"
Appraisal Care is always willing to reply to any concerns you might have about appraisals in Los Angeles and Orange County. Contact Appraisal Care today to talk about how we can help you with your valuation problems.
(Back to top)The method of creating an appraisal deals with an inspection which forms an opinion of value. The appraiser must use a few "approaches," typically three, to come to the estimation of market value. One of the processes is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with searching for similar properties in close proximity and figuring out the value based on comparing those homes to the home in question. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residence. 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 capital generated by the property.
(Back to top)An appraiser forumlates a fair and credible determination of market value, in the support of real property exchanges. Appraisers reveal the details of their findings in appraisal reports.
(Back to top)There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for obtaining an appraisal include:
If you are applying for a loan.
To reduce your tax burden.
To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
To challenge improperly assessed property taxes.
If you need to settle an estate.
To provide you an edge when purchasing a home.
To find a likely sales price when listing your home.
To ensure parties are provided just compensation in eminient domain cases.
Because a government agency such as the IRS requires it.
It's possible you could be involved in a lawsuit - an appraisal will help.
For a more detailed explanation of the appraisal process click here.
Appraisers do not do complete house inspections and are not home inspectors. An inspection is a third-party evaluation of the livable structure and appliances of a property, from the top to the foundation. The general home inspector's report will contain an evaluation of the condition of the house'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.
(Back to top)Simply, they have nothing in common. What the CMA depends on are vague trends. Appraisals use comparable sales which are valid resources. Area and building prices are also precedent in an appraisal. 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. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, state licensed professional who has formed their livelihood on valuing properties in and around Los Angeles County is behind the appraisal. 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 flat fee for work they perform, regardless of their outcome.
Every appraisal must indicate a supported estimate of value and should identify the following:
Who engaged the appraiser and other intended users.
The intended use of the appraisal.
The reason for the assignment.
The type of value reported and a definition of the value reported.
The effective date of the appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Pertinent property characteristics, including: location, physical characteristics, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible factors.
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.
What was involved in the activity of completing the job.
For a more comprehensive look at what goes into an appraisal report click here: Sample Appraisal Report
(Back to top)In communicating an appraisal report, each appraiser must make sure of the following:
The appraisal used an appropriate analysis of the data.
That major errors of omission or commission were not committed individually or collectively.
That appraisal services were done in a careful and judicious fashion.
That a trustworthy, defensible appraisal report was communicated.
There are rigorous education and on the job experience requirements that must be met in order to become a licensed appraiser in California. Plus, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
(Back to top)Mortgage lenders are an appraiser's most likely client, requiring their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.
(Back to top)Gathering information is one of the primary activities of an appraiser. Data can be divided into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a many places. To research recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. To verify actual sales prices, we use items in the assessor's office and other public documents. Appraisers often have to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.
And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other houses in the same market.
(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. 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.
(Back to top)PMI stands for Private Mortgage Insurance. This supplementary plan takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
The savings from dropping your PMI will make up for the cost of the appraisal in no time. Nobody is more qualified than Appraisal Care when it comes to analyzing real estate appreciation in Long Beach and Los Angeles County. Contact us today.
(Back to top)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. On the home's interior, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
To help speed things along as well as ensure a more accurate report, attempt if possible to have the following items:
Records on the latest purchase of the property in the last three years.
A list of any personal property that is part of the home and you intend to be sold with the home, such as an oven, or a washer and dryer, if applicable.
Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
Locate copies of the current listing agreement, broker's data sheet and, in the event of a pending sale.
A bill for your most recent real estate taxes which should also contain a legal description of the property.
(Back to top)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."
(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 entitled to a copy of the appraisal - 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 define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.
(Back to top)Like all things real estate, this is dependent on a home's location. For example, 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.
As a rule, the most value returned from renovating a home comes in the kitchen. 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%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.
