FAQ

The procedure of writing an appraisal report consists of an estimation which leads to an opinion of value. The real estate appraiser will typically use a number of “approaches,” typically three, to come to the estimation of market value. One of the three is the Cost Approach – which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in figuring the value of a house is the Sales C omparison Approach which deals with making a comparison to similar properties nearby. Being the most common approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a house. One of the least common approaches in appraising homes is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the building.

An appraiser generates a professional, unbiased assessment of market value, in the support of real property transactions. Appraisers summarize their professional analysis in appraisal reports.

There are many reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:

• If you are applying for a loan.
• To reduce your tax burden.
• To show a homeowner has 30% equity and remove insurance.
• To fight improperly assessed property taxes.
• If you need to settle an estate.
• To give you an edge when purchasing real estate.
• To determine the most probable property value when selling real estate.
• To ensure parties are provided just compensation in eminient domain cases.
• Because an official agency such as the IRS requires it.
• If you ever find yourself in a civil case.

The appraiser is not a home inspector and he or she does not do a comprehensive home inspection. A third – party home inspector will evaluate the structure of the house, from the roof to the bottom. Generally, a home inspection report will discuss the amenities and the requirements of the property: 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, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

Simply, they have nothing in common. What the CMA depends on are superficial trends. An appraisal relies on comparable sales that can be proven by records. Location and building prices are also a priority in an appraisal. All a CMA does is generate a “ball park figure.” An appraisal delivers a defensible and carefully documented opinion of value.

But the biggest difference is who’s creating the report. A CMA is written 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 real estate in and around Sacramento County creates the appraisal. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.

The main purpose of an appraisal report is to provide a value opinion, and depending on the scope of the report, you’ll usually see the following:

• The client and whose purposes the appraisal is to serve.
• How the appraisal is supposed to be used.
• The appraisal’s purpose.
• Precisely what “value” attribute is being reported and what that value means.
• The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
• Characteristics of the property that have a bearing on the value,including:location,physicalcharacteristics, legal attributes, economic factors, the property rights valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations 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.
• The scope of work used to complete the job.

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:

• The appraisal used an apropos analysis of the data.
• That significant errors of omission or commission were not committed individually or collectively.
• That appraisal services were not executed in a careless or negligent manner.
• The final appraisal report was transparent, credible and conclusive.

To become a state licensed appraiser, there are intense education requirements as well as real world experience that must be attained. Plus, appraisers must obey a strict industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for developing an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

<=”” be=”” to=”” requirements=”” the=”” are=””> Regulations regarding licensing and certification are different from state to state. However, licensing and certification is commonly associated with many hours of classroom study, tests and practical experience. Once an appraiser is licensed, he/she must then engage in continuing education courses so that the license doesn’t expire.

Mortgage lenders are an appraiser’s most likely customer, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

One of the primary tasks an appraiser performs is to assimilate property data. Data can be classified 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 while on site.

General data is collected from a numerous 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 lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode’s InterFlood product.

And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.

An appraisal is a worthwhile anytime the value of your home is relevant 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. 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. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

General data is collected from a numerous 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 lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode’s InterFlood product.

And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.

We start with an inspection of the home. During this process, we 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 . Trim any landscaping and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.

To help expedite our work plus ensure a more accurate report, try if possible to have the following items:

• Information on the latest purchase of the property in the last three years.
• Information on any written private agreements, such as a shared driveway with a neighbor.
• Most recent real estate tax bill and or legal description of the property.
• Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
• A list of “suggested” improvements if the property is to be appraised “as complete”.

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.”

In most real estate transactions, the appraisal is ordered by the lender. 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 included with all the other closing documents – but is not allowed to use the report for any other purpose without permission from the lender.

The exception to this rule is when a home owner engages an appraiser directly. In these cases, the appraiser may define the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.

A home’s location – what city it is in and even what part of that city – is key to this popular question. For example, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!

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 boost 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.