TIERRA WEST Appraisal & Land Use Dynamics, Inc. has answers to "Frequently Asked Questions"
Define the term "Appraisal"
Define the term "Appraisal"(Back to top) The process of performing an appraisal report consists of an evaluation which forms an opinion of value. This opinion or estimate is concluded through the use of a formal process that typically utilizes the three main "common approaches to value". One of the processes 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 Sales Comparison Approach involves searching for similar houses in the vicinity and discovering the value based on making a comparison of those prior sales to the home in question. Usually, the Sales Comparison Approach is the most definite indicator of market value of a residential property. The Income Approach is mainly used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.
Describe what an appraiser does(Back to top) An appraiser offers a fair and credible opinion of market value, in the support of real estate exchanges. Appraisers summarize their analysis in appraisal reports.
What would cause me to request services from TIERRA WEST Appraisal & Land Use Dynamics, Inc.?(Back to top) There are a lot of reasons to order an appraisal from TIERRA WEST Appraisal & Land Use Dynamics, Inc. with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
Is an appraisal the same as a home inspection? (Back to top)The appraiser is not a home inspector and does not do a complete home inspection. The purpose of a home inspection is to investigate the structure of the house from bottom to attic. For the most part, a home inspection report will evaluate the amenities and the necessities of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?(Back to top) To be honest, they share nothing in common. The CMA utilizes market trends to conduct most of their business. An appraisal relies on comparable sales that can be proven by records. Also, the appraisal checks other factors like condition, location and construction 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 largest differentiator is the person behind 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 created 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 whereas the appraiser is bound by a code of ethics to accept a flat sum for work they perform, regardless of their value conclusion.
What's in an appraisal report? (Back to top)Each appraisal should demonstrate a credible value opinion and should identify the following:
Upon completion of the appraisal, what guarantee is there that the value indicated is valid?(Back to top) In communicating an appraisal report, each appraiser must make sure of the following:
Who are an appraiser's customers?(Back to top) Commonly, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction. Attorneys and CPAs also hire appraisers for divorce and estate settlements.
Where does an appraiser get the data used to estimate values in Riverside County or other areas?(Back to top) One of the most important tasks an appraiser performs is to collect property data. Data can be classified as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.
General data is gathered from a number of places. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood system.
And most importantly, the appraiser gathers 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?(Back to top) If you're making 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 also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, be sure you're not overpaying by commissioning an independent appraisal. 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.
What exactly is PMI and how can I get rid of it?(Back to top) PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary policy guards the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.
Should I do anything in advance of the appraisal appointment(Back 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 status of its amenities. Inside, make sure it is clutter free and that we can get 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.
To help expedite our work plus ensure a more accurate report, try if possible to have the following items:
What does "Market Value" mean?(Back to top) In real estate appraising, Market Value (as opposed to Fair Market Value) is commonly defined as:
Once complete, who actually owns the appraisal report?(Back to top) In most real estate transactions, the appraisal is ordered by the lender. 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 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.
It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may stipulate 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 do whatever they want with the appraisal.
How can I get the most ROI out of home improvements?(Back to top) The added value of a particular amenity truly depends on the local market. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want
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 were second, yielding 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.