Axiom Real Estate Appraisal has answers to "Frequently Asked Questions"
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Axiom Real Estate Appraisal is always eager to address any concerns you might have about appraisals or real estate in San Diego County.
Don't hesitate to contact us today.
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Describe an appraisal
Describe what an appraiser does
Why would I require your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What can I expect to see in my appraisal report?
After completing the report, what assurance is there that the value conclusion is valid?
How are appraisers certified?
Who do appraisers work for?
Where does Axiom Real Estate Appraisal get the data used to estimate values in San Diego County or other areas?
What can a full appraisal do for me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
I want to get more for my house. Where should I spend money renovating?
Describe an appraisal (Return to top)
The method of performing an appraisal report deals with an estimation which forms an opinion of value.
This opinion or estimate is concluded by a formal method that generally utilizes three "common approaches to value".
One of the three is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, plus the land value.
Another of the methods is the Sales Comparison Approach - which involves making a comparison to other similar properties within a close vicinity which have recently sold.
Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property.
One of the least common approaches in appraising houses is the Income Approach, which is generally used to figure the value of a property based on what an investor would pay based on the capital produced by the building.
Describe what an appraiser does (Return to top)
An appraiser produces an unprejudiced and well justified determination of market value, often in the context of a real estate purchase.
Appraisers document their expert conclusions in appraisal reports.
Why would I require your services? (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 purchasing an report include:
- If you are applying for a loan.
- To lower your tax burden.
- To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
- To challenge high property taxes.
- If you need to settle an estate.
- To provide you a negotiating tool when purchasing a home.
- To find the most probable price when listing your home.
- To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
- Government agencies such as the IRS need an appraisal on every house.
- It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
For a more extensive description of the appraisal process click here.
Home inspectors do not produce an opinion of value and do not use the same forms as appraisers.
The purpose of a home inspection is to evaluate the structure of the home from bottom to attic.
The archetypal property inspector's report will contain an evaluation of the integrity of the home's heating system, 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, they share nothing in common.
What the CMA relies upon are ill-defined trends.
The appraisal relies on similar definite comparable sales.
In addition, the appraisal looks at other factors like condition, location and building costs.
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 doing the report.
Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's.
The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties.
Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for work they perform, regardless of their value conclusion.
The main objective of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, you'll usually see the following:
- Who engaged the appraiser and whose purposes the appraisal is to serve.
- How the appraisal is supposed to be used.
- The appraisal's purpose.
- The type of value reported and a definition of the value reported.
- The effective date of the appraiser's opinions and conclusions.
- Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations 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 process of completing the appraisal.
For a more comprehensive view of all that goes into an appraisal report click here: Sample Appraisal Report
After completing the report, what assurance is there that the value conclusion is valid? (Return to top)
In communicating an appraisal report, each appraiser must make sure of the following:
- That the information analysis contained in the appraisal was suitable.
- That critical errors of omission or commission were not committed individually or collectively.
- That appraisal services were not conducted in a careless or negligent manner.
- The final appraisal report was transparent, credible and conclusive.
To become a state licensed appraiser, there are strenuous education requirements as well as on the jobexperience that must be logged - all with the objective of being able to render unbiased value opinions.
In addition, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for working up an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
(Return to top)
Licensing and certification is achieved through classroom study, tests and experience working under a supervisor.
Once licensed, he/she is required to engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.
Who do appraisers work for? (Return to top)
Commonly, appraisers are called upon by mortgage lenders to render a value opinion on a house involved in a loan transaction.
Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does Axiom Real Estate Appraisal get the data used to estimate values in San Diego County or other areas? (Return to top)
Collecting information is one of the primary activities of an appraiser.
Data can be divided into Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser while on site.
General data is gathered from a many places.
To find out about recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service.
Tax records and other courthouse documents reveal actual sales prices in a market.
Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood servers.
And most importantly, the appraiser assimilates general data from his or her past experience in creating appraisals for other properties in the same market.
What can a full appraisal do for 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 doesn't leave your home on the market too long; an appraisal can help with that.
When buying, be sure you're not 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 home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.
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.
This added plan takes care of the lender in the event a borrower is unable to pay on the loan and the value of the property is less than the loan balance.
You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.
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Does your monthly mortgage payment include a fee for PMI?Call Axiom Real Estate Appraisal today at (760) 525-2742 or send us an e-mail. Documentation of your home's present value could save you thousands.
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How do I get ready for the appraiser? (Return to top)
We begin with an inspection of the property.
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.
Inside, pick up any clutter and make sure we can get to things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.
You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
- Any records on the purchase of the property for the last three years.
- Written property agreements, such as a maintenance agreement for a shared driveway.
- Title policy that lists encroachments or easements.
- A list of any major home improvements and upgrades, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
- Information on "Homeowners Associations" or condominium covenants and fees.
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:
"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 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 appraisal - it's usually bundled with all the other closing documents - but is not entitled 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 stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stated 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 added value of a particular amenity truly depends on the local market.
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.
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, returning 85%.
On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.
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