KB Appraisal Services is happy to handle any concerns you might have about appraisals or real estate in San Diego County. Contact KB Appraisal Services today to see how we can help you with your specific valuation problems.
Define the term “Appraisal”
The procedure of writing an appraisal report deals with an investigation which forms an opinion of value. The real estate appraiser will use a few “approaches,” typically three, to come to the estimation of market value. One of the processes 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. Another of the methods is the Sales Comparison Approach – which concerns making a comparable analysis to other similar properties within a close vicinity which have recently sold. The Sales Comparison Approach is normally the most accurate and clearest indicator of a liklely sales price for a residence. The Income Approach is primarily 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.
What does an appraiser do?
An appraiser produces a fair and credible determination of market value, to be used in making real estate transactions. Appraisers present their conclusions in appraisal reports.
What are the reasons I would need services from KB Appraisal Services?
There are many reasons to purchase an appraisal from KB Appraisal Services with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an report include:
- If you are applying for a loan.
- To reduce your tax burden.
- To build a case for a homeowner’s equity and remove PMI.
- To challenge improperly assessed property taxes.
- If you need to take care of an estate.
- To give you a leg-up when purchasing real estate.
- To find the most probable price when listing your home.
- To ensure parties are provided just compensation in eminient domain cases.
- Because an official agency such as the IRS requires it.
- If you ever find yourself in a civil case.
Click here for a more extensive explanation of the process about getting an appraisal.
How is an appraiser different than a home inspector?
Appraisers do not do provide house inspections and are not home inspectors. An inspection is a third-party evaluation of the livable structure and mechanical systems of a property, from the top to the foundation. Usually, a home inspection report will evaluate the amenities and the necessities of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.
Is an appraisal the same as a comparative market analysis(CMA)?
Frankly, it’s apples and oranges. The CMA utilizes market trends to create most of their business. Appraisals use similar sales which are valid resources. Also, the appraisal verifies other factors like condition, location and building prices. All a CMA does is generate a “ball park figure.” Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.
But the most significant factor is the person creating the report. 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. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an unbiased party, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the price of the home.
What does the appraisal report contain?
The main point of an appraisal document is to provide a value opinion, and depending on the scope of the report, you’ll usually see the following:
- The client and whose purposes the appraisal is to serve.
- The intended use of the report.
- The purpose of the appraisal.
- The type of value contained and a definition of that value.
- The effective date of the appraiser’s opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
- Pertinent property characteristics, including: location, physical description, legal attributes, economic attributes, the property rights valued, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible considerations.
- All 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.
- The scope of work considered when completing the appraisal.
For a more detailed view of what goes into an appraisal report click here: Sample Appraisal Report
After completing the report, what assurance is there that the value indicated is trustworthy?
In communicating an appraisal report, each appraiser must ensure the following:
- The appraisal used an apropos analysis of the data.
- Whether individually or collectively, there were no substantial errors contained in the appraisal, nor any relevant details left out.
- That appraisal services were not conducted in a careless or negligent manner.
- The final appraisal report was transparent, legitimate and defensible.
To become a state licensed appraiser, there are intense education requirements as well as practical experience that must be attained – all with the objective of being able to render unbiased value opinions. Plus, appraisers must obey a strict industry code of ethics and observe national standards of practice for real estate appraisal. The rules for working up an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification is most often associated with many hours of coursework, tests and real world experience. Once licensed, he or she is required to take continuing education courses so the license remains up to date. To see the specific requirements for any state click here.
Who hires KB Appraisal Services
Mortgage lenders are an appraiser’s typical client, requiring their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.
Where does an appraiser get the information used to estimate values in San Diego County or other areas?
One of the main tasks an appraiser must accomplish is to compile data. Data can be classified as either Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.
General data is gathered from a number of sources. To look up recent sales to be used as “comps”, we typically go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers routinely need to report when a property lies in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode’s InterFlood service.
And last but not least, the appraiser assembles general data from his or her collective knowledge gained from doing assignments for other properties in the same market.
Why should I hire a licensed appraiser?
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 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. For those settling an estate or divorce, an appraisal from KB Appraisal Services is the best documentation to ensure assets are split up evenly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making the right financial decisions.
My mortgage statement has an item on it for PMI? Can I get rid of that?
PMI is short for for Private Mortgage Insurance. This additional policy covers the lender if a borrower is unable to pay on the loan and the market price of the home is less than what is owed on the loan. 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.
|Did you secure your mortgage with less than 20% down? Call KB Appraisal Services today at (760) 634-7660. You may be able to save money by removing your Private Mortgage Insurance premium.
Should I do anything in advance of the appraisal inspection
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 amenities. Inside, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.
The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
- Any records on the purchase of the property for the last three years.
- A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
- Information on “Homeowners Associations” or condominium covenants and fees.
- Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
- A list of “proposed” improvements if the property is to be appraised “as complete”.
How does an appraiser define “Market Value”?
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?
For mortgage transactions, the lender orders the appraisal, either directly or through a third party. 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 included with all the other closing documents – but is not allowed to use the report for any other purpose without permission from the lender.
It’s different when it’s the homeowner hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state how the appraisal can be used; 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.
I want to get more for my house. Where should I spend money renovating?
This really depends on where the home is. For example, if you live in a cold region, insulated windows can be a real plus. But they aren’t as attractive in a warm-weather climate.
No matter where you go, however, renovating a kitchen is almost always a safe investment. 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%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn’t then become atypical for your neighborhood in terms of size.