SCV Appraisal Service has answers to "Frequently Asked Questions"
What is an appraisal?
What is an appraisal?(Return to top) An appraisal is an investigation allowing the appraiser to come to an opinion of value. The appraiser will typically use a few "approaches," typically three, to draw up the estimation of market value. One of the methods is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Easily the most common approach in finding the value of a home is the Sales Comparison Approach which involves figuring a comparison to comparable properties close by. Generally speaking, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The third approach is the Income Approach, which is the best method in appraising income producing properties - it deals with estimating what an investor would pay based on the income generated by the property.
Describe what an appraiser does(Return to top) An appraiser forumlates an unbiased and well justified opinion of market value, in the support of real property transactions. Appraisers exhibit their expert analysis in appraisal reports.
What are the reasons someone would need services from SCV Appraisal Service?(Return to top) There are a lot of reasons to obtain an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal report include:
How is an appraisal different than a home inspection? (Return to top)Appraisers do not do provide residential property inspections and are not home inspectors. The purpose of a home inspection is to investigate the structure of the property from basement to top. The usual home inspector's report will include an evaluation of the integrity of the house's heating systems, 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.
Is an appraisal the same as a comparative market analysis(CMA)?(Return to top) Frankly, they have nothing in common. The CMA relies on vague market trends. Appraisals use similar sales which are valid resources. The appraisal report will also contain neighborhood and construction prices. 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 largest differentiator is who's creating 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 - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon fee for assignments, regardless of their value conclusion.
What can I expect to see in my appraisal report? (Return to top)The main purpose of an appraisal document is to let the reader know the value of the real estate in question, 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 value indicated is legitimate?(Return to top) In the documentation of an appraisal, each appraiser must make sure of the following:
Who hires an appraiser?(Return to top) Mortgage lenders are an appraiser's typical customer, requiring their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does an appraiser get the data used to estimate values in Los Angeles County or other areas?(Return to top) Gathering data is one of the main things an appraiser does. Data can be classified as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.
General data is gathered from a variety of places. To look up recent sales to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we look at tax records and other public documents that are usually online nowadays. Appraisers often need 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 last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.
What can a full appraisal do for me?(Return to top) If you're making any kind of financial decision and the value of your home is relevant, you'll want an appraisal. If you're selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. 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 is essential to making the right financial decisions.
What exactly is PMI and how can I get rid of it?(Return to top) PMI is an acronym for Private Mortgage Insurance. It protects the lender if a borrower defaults on the loan and the value of the home 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.
Do you need anything from me in advance?(Return to top) We begin with an inspection of the home. 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 status of its features. 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 shrubs and relocate any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can easily access appliances 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:
How does an appraiser define "Market Value"?(Return to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Who has rights to the appraisal report?(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 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 scenarios, 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.
Are some home improvements more worthwhile than others?(Return to top) This really depends on where the home is. 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. 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also increase 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.