Hammer Appraisal, Inc. has answers to "Frequently Asked Questions"
What is an appraisal?
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:
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:
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:
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.
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:
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:
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.