Correct Appraisals has answers to "Frequently Asked Questions"

Correct Appraisals is willing to reply to any inquiries you might have about appraisals in San Diego County. Feel free to contact us today.

Define the term "Appraisal"
Describe what an appraiser does
What would cause me to need your services?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Once the report has been completed, what assurance is there that the final number is trustworthy?
What does it mean for an appraiser to be licensed?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in San Diego County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Does the appraiser need anything from the homeowner in advance?
Define "Market Value"
Who has rights to the appraisal report?
Which home renovations add the most to the price?

Define the term "Appraisal"   (Back to top)

The method of writing an appraisal report consists of an inspection which forms an opinion of value. The appraiser must use a number of "approaches," typically three, to come to the estimation of market value. One of the three is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which concerns making a comparison to similar properties nearby. The Sales Comparison Approach is normally the most accurate and best indicator of a liklely sales price for a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property.

Describe what an appraiser does   (Back to top)

An appraiser generates a professional, unbiased determination of market value, in the support of real estate transactions. Appraisers show their professional analysis in appraisal reports.

What would cause me to need your services?   (Back to top)

There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for ordering an report include:
  • To receive a loan.
  • To reduce your tax burden.
  • To demonstrate a homeowner's acquired equity and remove PMI.
  • To challenge inflated property taxes.
  • To deal with an estate.
  • To offer you an edge when purchasing real estate.
  • To find a likely property value when selling real estate.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS need an appraisal on every home.
  • If you ever find yourself in a lawsuit.
If you need more information about the appraisal process, please click here.

How is an appraiser different than a home inspector?   (Back to top)

Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers. The point of a home inspection is to investigate the structure of the property from basement to top. The usual house 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.

Is an appraisal the same as a comparative market analysis(CMA)?   (Back to top)

Simply, they share nothing in common. What the CMA relies upon are vague trends. An appraisal utilizes comparable sales that can be validated by records. Location and architectural costs are also precedent in an appraisal. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

The credentials of the person creating the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an unbiased party, with no conditional interest in the property's value, unlike the real estate agent, who gets a commission based upon the value of the home.

What are the contents of an appraisal report?   (Back to top)

The main objective 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 appraisal.
  • The appraisal's purpose.
  • The type of value reported and a definition of the value reported.
  • The effective date of the appraisal.
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights valued, and non-real estate items included in the appraisal, such as personal property, items that are more or less permanently installed and even intangible considerations.
  • Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • What was entailed in the activity of completing the job.
For a more comprehensive view of what goes into an appraisal report click here: Sample Appraisal Report

Once the report has been completed, what assurance is there that the final number is trustworthy?   (Back to top)

In communicating an appraisal report, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was proper.

  • That substantial errors of omission or commission were not committed individually or collectively.

  • That appraisal services were not carried out in a careless or negligent manner.

  • The final appraisal report was clear, legitimate and conclusive.
There are intense classroom and on the job experience requirements that must be satisfied in order to become a licensed appraiser in California. In addition, appraisers must follow a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for developing an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Back to top) Licensing and certification requires classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he or she is required to engage in continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Back to top)

Mortgage lenders are an appraiser's typical customer, requesting their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does an appraiser get the information used to estimate values in San Diego County or other areas?   (Back to top)

One of the most important activities of an appraiser is to collect data. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is gathered from a number of 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. Appraisers often 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 gathers general data from his or her past experience in creating appraisals for other properties in the same market.

Why should I hire a licensed appraiser?   (Back to top)

If you're involved in some sort of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. 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 people settling an estate or divorce, an appraisal from Correct Appraisals is the best documentation to ensure assets are divided properly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that?   (Back to top)

PMI stands for Private Mortgage Insurance. This supplemental policy takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is lower 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.

Has your real estate appreciated since you first purchased? Call Correct Appraisals today at 619-269-7673 to see if you can get rid of your Private Mortgage Insurance payment.

Does the appraiser need anything from the homeowner in advance?   (Back to top)

We begin with an inspection of the home. 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. On the home's interior, pick up any clutter and make sure we can find our way 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.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • Title policy that lists encroachments or easements.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
  • A list of any major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • A list of "proposed" improvements if the property is to be appraised "as complete".

Define "Market Value"   (Back 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?   (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 report - it's usually bundled with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.

This rule doesn't apply when a home owner engages an appraiser directly. In these situations, 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 do whatever they want with the appraisal.

Which home renovations add the most to the price?   (Back to top)

A home's location - what city it is in and even what part of that city - is key to this popular question. 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 increase the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.