Hammer Appraisal, Inc. has answers to "Frequently Asked Questions"

Hammer Appraisal, Inc. is always prepared to elaborate on any concerns you might have about appraisals in Redondo Beach and Los Angeles County. Contact Hammer Appraisal, Inc. today to talk about how we can help solve your valuation problems.

What is an appraisal?
What does an appraiser do?
Why would I need a real estate appraisal?
How is an appraiser different than a home inspector?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
After completing the appraisal, what assurance is there that the value indicated is trustworthy?
How difficult is it to become certified?
Who employs appraisers?
Where does Hammer Appraisal, Inc. get the data used to estimate values in Los Angeles County or other areas?
How can a licensed appraiser help me?
What exactly is PMI and how can I get rid of it?
Does the appraiser need anything from the homeowner in advance?
How does an appraiser define "Market Value"?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Back to top)

An appraiser provides an estimation that generates an opinion of value. This opinion or estimate is concluded by a formal process that commonly uses three "common approaches to value". One of the processes in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, minus depreciation and physical deterioration, adding the land value. The Sales Comparison Approach deals with finding comparable properties in the vicinity and figuring out the value based on making a comparison of those houses to the house being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. One of the least common approaches in appraising houses is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the building.

What does an appraiser do?   (Back to top)

An appraiser generates a professional, unbiased assessment of market value, often in the context of a real estate exchange. Appraisers summarize their analysis in appraisal reports.


Why would I need a real estate appraisal?   (Back to top)

There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for getting an report include:
  • To get a loan.
  • If you would like to lower your property tax obligations.
  • To demonstrate a homeowner's acquired equity and remove insurance.
  • To contest improperly assessed property taxes.
  • If you need to settle an estate.
  • To give you an edge when purchasing real estate.
  • To determine a reasonable sales price when listing your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because a government agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will help.
If you need a more detailed explanation of the appraisal process, please click here.


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

Home inspectors do not provide an opinion of value and do not do appraisal reports. A third-party home inspector will judge the structure of the home, from the roof to the bottom. Commonly, a home inspection report will evaluate the amenities and the necessities of the home: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Back to top)

Honestly, they share nothing in common. The CMA uses market trends to conduct most of their business. The appraisal is based on similar valid comparable sales. The appraisal report will also contain neighborhood and building costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

But the largest differentiator is the person doing the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate 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 - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their value conclusion.

What does the appraisal report contain?   (Back to top)

The main objective of an appraisal document 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.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • The type of value reported 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!)
  • Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible items.
  • 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 assignment.
For a more detailed view of all that goes into an appraisal report click here: Sample Appraisal Report


After completing the appraisal, what assurance is there that the value indicated is trustworthy?   (Back to top)

In communicating an appraisal report, each appraiser must make sure of the following:
  • That the information analysis utilized in the appraisal was suitable.

  • Whether individually or collectively, there were no significant errors contained in the report, nor any relevant details left out.

  • That appraisal services were done in a careful and cognizant fashion.

  • The final appraisal report was clear, credible and not easily discredited.
There are intense classroom and real world experience requirements that must be fulfilled in order to become a licensed appraiser in California. In addition, appraisers must abide by a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Regulations regarding licensing and certification vary from state to state. However, licensing and certification is most often associated with many hours of classroom study, tests and practical experience. Once an appraiser is licensed, he/she is required to complete continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who employs appraisers?   (Back to top)

Mortgage lenders are an appraiser's typical customer, using their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does Hammer Appraisal, Inc. get the data used to estimate values in Los Angeles County or other areas?   (Back to top)

One of the main tasks an appraiser must accomplish is to collect data. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.

General data is received from a variety of places. To find out about recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers routinely have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

And most importantly, the appraiser gathers 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?   (Back to top)

An appraisal is a worthwhile whenever the value of your home is relevant to a financial decision. 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. When buying, you can avoid overpaying by commissioning an independent appraisal. For people settling an estate or divorce, an appraisal from Hammer Appraisal, Inc. is the best documentation to ensure assets are divided evenly. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.


What exactly is PMI and how can I get rid of it?   (Back to top)

PMI is short for for Private Mortgage Insurance. This supplemental plan covers the lender if a borrower is unable to pay on the loan and the market price of the house is less than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

Did you secure your mortgage with less than 20% down? Contact Hammer Appraisal, Inc. today at 310.379.5300 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 start 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. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would get in our way while we measure the structure. On the inside, make sure the appraiser can easily access appliances like furnaces and water heaters.

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 is part of the home and you intend to be sold with the home, such as a oven, or a washer and dryer, if applicable.
  • Most recent real estate tax bill and or legal description of the property.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .

How does an appraiser 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."



Once complete, who actually owns the appraisal report?   (Back 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 entitled to a copy of the report - 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 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 use the appraisal for any purpose.


Are some home improvements more worthwhile than others?   (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

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 are right up there with kitchens, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.