Anthony Real Estate Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) The method of writing an appraisal deals with an evaluation which forms an opinion of value. This opinion or estimate is found through a formal process that typically uses three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the home, less the age and physical dilapidation, plus the land value. The Sales Comparison Approach deals with finding similar homes in the vicinity and discovering the value based on making a comparison of those homes to the property being appraised. Generally speaking, the Sales Comparison Approach is the most accurate 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 money produced by the property.
Describe what an appraiser does(Return to top) An appraiser provides a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers demonstrate their findings in appraisal reports.
What would cause me to request your services?(Return to top) There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for purchasing an appraisal report include:
How is an appraisal different than a home inspection? (Return to top)Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. A third-party home inspector will judge the structure of the property, from the top to the foundation. Commonly, a home inspection report will discuss 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 capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
My agent performed a CMA for me. Is that the same as an appraisal?(Return to top) Frankly, they share nothing in common. The CMA uses market trends to create most of their business. An appraisal utilizes comparable sales that can be proven by records. Location and construction costs are also a priority in an appraisal. A CMA delivers 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 creating the report. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. A certified, California licensed professional who bases their livelihood on valuing homes in and around Ventura County creates the appraisal. 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 accept a previously agreed upon sum for assignments, regardless of their outcome.
What's in an appraisal report? (Return to top)The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, one will customarily see the following:
Upon completion of the appraisal, what assurance is there that the final number is valid?(Return to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who employs appraisers?(Return to top) Mortgage lenders are an appraiser's typical client, needing their services to ensure property involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Anthony Real Estate Appraisal Service get the data used to estimate values in Ventura County or other areas?(Return to top) Collecting information is one of the primary roles 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 specifics are gathered by the appraiser while on site.
General data is received from a variety of sources. To look up recent sales to be used as "comps", we typically use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.
And most importantly, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.
What can a full appraisal do for 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 an appraisal. For those selling a home, you'll want to determine 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. Don't make decisions in the dark with a professional appraisal.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI is short for for Private Mortgage Insurance. PMI guards the lender if a borrower doesn't pay on the loan and the market price of the house 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.
Should I do anything in advance of the appraisal appointment(Return to top) The first step in most appraisals is the property inspection. What this entails is the appraiser, after setting up an appointment, personally going through the home - recording the layout of the rooms, taking photos and documenting the general condition of its amenities. On the home's interior, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value is commonly defined as:
Does the appraisal belong to the bank or the consumer?(Return to top) 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 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.
This rule doesn't apply when a home owner hires 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 stipulated otherwise, the home owner can do whatever they want with the appraisal.
I want to get more for my house. Where should I spend money renovating?(Return to top) The answer to this is different depending upon the location of the home. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes
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 were second, returning 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.