GreatLand Appraisal Group has answers to "Frequently Asked Questions"
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GreatLand Appraisal Group is ready to address any concerns you might have about appraisals in Los Angeles County.
Feel free to contact us today.
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Describe an appraisal
What does an appraiser do?
What would cause me to require a real estate appraisal?
What is the difference between an appraisal and a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Upon completion of the appraisal, what assurance is there that the value indicated is legitimate?
How are appraisers certified?
Who employs appraisers?
Where does GreatLand Appraisal Group get the information used to estimate values in Los Angeles County or other areas?
How can a licensed appraiser help me?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
Define "Market Value"
Who actually owns the appraisal report?
Are some home improvements more worthwhile than others?
Describe an appraisal (Return to top)
An appraisal report is an inspection leading to an opinion of value.
There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or estimate.
One of the processes in use is the Cost Approach, which finds what it would cost to replace the improvements to the home, minus age and physical deterioration, plus the land value.
Another of the methods is the Sales Comparison Approach - which involves discovering a comparable analysis to other similar nearby properties which have recently sold.
Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a home.
The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property.
What does an appraiser do? (Return to top)
An appraiser produces a fair and credible assessment of market value, in the support of real property exchanges.
Appraisers exhibit their expert conclusions in appraisal reports.
What would cause me to require a real estate appraisal? (Return to top)
There are many reasons to get an appraisal from GreatLand Appraisal Group with the usual reason being real estate and mortgage transactions.
A few other reasons for getting an appraisal include:
- If you are applying for a loan.
- If you would like to reduce your property tax burden.
- To show a homeowner has 30% equity and remove insurance.
- To contest high property taxes.
- To deal with an estate.
- To offer you a leg-up when purchasing real estate.
- To figure out an honest price when putting your home on the market.
- To ensure parties are provided just compensation in eminient domain cases.
- Government agencies such as the IRS need an appraisal on every home.
- If you are ever involved in a lawsuit.
If you need more information about the appraisal process, please click here.
Home inspectors do not come to an opinion of value and are not appraisers.
The purpose of a home inspection is to investigate the structure of the home from foundation to top.
Commonly, a home inspection report will explain the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)? (Return to top)
Frankly, they have nothing in common.
What the CMA depends on are ill-defined trends.
An appraisal utilizes comparable sales that can be verified by records.
In addition, the appraisal verifies other factors like condition, area and building prices.
A CMA delivers a "ball park figure."
An appraisal delivers a defensible and carefully documented opinion of value.
But the largest differentiator is the person behind the report.
Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's.
The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties.
Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for work they perform, regardless of their value conclusion.
Each report should reflect a believable value opinion and must clearly state the following:
- Who engaged the appraiser and whose purposes the appraisal is to serve.
- How the appraisal is supposed to be used.
- The reason for 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!)
- Pertinent property characteristics, including: location, physical description, legal attributes, economic factors, the property rights in question, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible considerations.
- Any 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 involved in the activity of completing the assignment.
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report
Upon completion of the appraisal, what assurance is there that the value indicated is legitimate? (Return to top)
In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
- The appraisal contained an appropriate analysis of the information.
- Whether individually or collectively, there were no substantial errors contained in the appraisal, nor any relevant details left out.
- That appraisal services were not conducted in a careless or negligent manner.
- That a credible, supportable appraisal report was imparted.
To become a state licensed appraiser, we must satisfy extensive education and experience requirements that enable us to produce an unbiased opinion.
Plus, appraisers must stick to a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
(Return to top)
Licensing and certification takes classroom study, tests and practical experience.
Once an appraiser is licensed, he or 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 employs appraisers? (Return to top)
Most of the time, appraisers are called upon by mortgage lenders to estimate the value of a home involved in a loan transaction - to make sure the real estate is truly adequate collateral for the loan.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does GreatLand Appraisal Group get the information used to estimate values in Los Angeles County or other areas? (Return to top)
Compiling data is one of the primary occupations of an appraiser.
Data can be described as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.
General data is collected from a many places.
Local Multiple Listing Services (MLS) provide data on recently sold homes that could be used as comparables.
Tax records and other public documents verify actual sales prices in a market.
Appraisers routinely have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.
And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.
How can a licensed appraiser help me? (Return to top)
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 a 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 wise financial decisions.
What exactly is PMI and how can I get rid of it? (Return to top)
PMI stands for Private Mortgage Insurance.
It covers the lender in the event a borrower doesn't pay on the loan and the value of the property is lower 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.
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Did you secure your mortgage with less than 20% down? Call GreatLand Appraisal Group today at (562) 618-3869 to see if you can save money by removing your Private Mortgage Insurance premium.
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Should I do anything in advance of the appraisal inspection (Return to top)
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 shrubs and relocate any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access items like furnaces and water heaters.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
- Information on any written private agreements, such as a shared driveway with a neighbor.
- Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
- Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
- A list of any 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).
- A list of "proposed" improvements when the property is being appraised "as complete".
Define "Market Value" (Return to top)
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? (Return 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 report - it's usually included with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.
This rule doesn't apply when a home owner engages an appraiser directly.
In these situations, the appraiser may stipulate the purpose of the appraisal; 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.
Are some home improvements more worthwhile than others? (Return to top)
Like all things real estate, this is dependent on a home's location.
For example,
if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.
As a rule, the most value returned 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 are right up there with kitchens, returning 85%.
On the contrary, something that may not increase your value would be painting just for the sake of redecorating.
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