Walker Appraisal Services has answers to "Frequently Asked Questions"
Describe an appraisal
Describe an appraisal(Return to top) An appraiser performs an estimation that leads to an opinion of value. The real estate appraiser will typically use a several "approaches," typically three, to conclude the estimation of market value. One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Another of the approaches is the Sales Comparison Approach - which deals with making a comparable analysis to other similar properties within a close proximity which have recently sold. 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 of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the income generated by the property.
What does an appraiser do?(Return to top) An appraiser forumlates a professional, unbiased opinion of market value, often in the context of a real estate sale. Appraisers exhibit their expert analysis in appraisal reports.
What are the reasons I would require a real estate appraisal?(Return to top) There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
How is an appraiser different than a home inspector? (Return to top)Home inspectors do not estimate an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the available structure and mechanical systems of a property, from the roof to the bottom. The archetypal property inspector's report will include an evaluation of the integrity of the property'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.
What is the difference between an appraisal and a comparative market analysis (CMA)?(Return to top) Frankly, it's apples and oranges. What the CMA relies upon are vague trends. An appraisal utilizes comparable sales that can be validated by records. In addition, the appraisal verifies other factors like condition, area and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.
Who's behind the report is actually the biggest difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. A certified, state licensed professional who bases a career on valuing homes in and around Santa Clara County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon fee for work they perform, regardless of their value conclusion.
What's in an appraisal report? (Return to top)Each appraisal should indicate a supported value opinion and must document the following:
Once the assignment is done, what guarantee is there that the value indicated is valid?(Return to top) In the documentation of an appraisal, each appraiser must ensure the following:
Who hires an appraiser?(Return to top) Mortgage lenders are an appraiser's typical customer, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.
Where does Walker Appraisal Services get the information used to estimate values in Santa Clara County or other areas?(Return to top) Collecting data is one of the primary things an appraiser does. Data can be categorized as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is received from a numerous sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Flood zone data is available from FEMA data outlets, 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 properties in the same market.
How can a licensed appraiser help me?(Return to top) If you're involved in some sort of financial decision and the value of your home matters, you'll want a full appraisal. For those selling a home, you'll want to determine 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. Simply put, a house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.
My mortgage statement has an item on it for PMI? Can I get rid of that?(Return to top) PMI stands for Private Mortgage Insurance. It protects the lender in case a borrower defaults on the loan and the market price of the house is less than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.
Should I do anything in advance of the appraisal inspection(Return to top) The first step in most appraisals is the property inspection. 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. Inside, 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 outside walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
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) For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 hires an appraiser directly. In these scenarios, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.
Which home renovations add the most to the price?(Return to top) Like all things real estate, this is dependent on a home's location. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!
As a rule, the best ROI 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 are right up there with kitchens, 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 atypical for your neighborhood in terms of size.