FAQs

California Home Appraisals answers to the most common “Frequently Asked Questions”

What is a home appraisal?

An appraiser provides a property evaluation that provides an opinion of value. There are three “common approaches to value” which assists the appraiser arrive at this opinion/valuation. The Cost Approach is one of the processes that appraisers use to find value; it involves finding what the improvements of the property would cost minus physical degradation, plus the land value. The Sales Comparison Approach is the most common approach and involves finding similar houses in close proximity of the subject and evaluating the subject’s value based a comparative analysis of these prior sales. The Sales Comparison Approach is commonly the most definitive and clearest indicator of value for a home. The Income Approach is primarily used for calculating the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would generate.
 

What are some examples of why a home appraisal is completed?

There are a lot of reasons to get an appraisal from California Home Appraisals with the most common situation being a real estate or mortgage transaction. Other reasons for getting a real estate appraisal include:

• Selling your 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 is great tool for this.
• To offer you an edge when purchasing a home and make sure you don’t overpay. Helps you make an informed decision.
• To provide evidence of a homeowner’s acquired equity and remove the PMI.
• In the process of administering and managing an estate.
• Typically completed during the process of a divorce to determine the Fair Market Value for each property owned. An appraisal is the best verification to ensure assets are split up fairly.
• The bankruptcy appraisal is completed for purposes as laid out by the court. It sets the market value of your property in a bankruptcy proceeding.
• To challenge inflated property taxes.
• To ensure parties are provided just compensation in eminient domain cases.

 

How is an appraisal different than a home inspection?

Residential appraisers do not do perform residential property inspections as they are not home inspectors. A home inspection is a third-party evaluation of the accessible structure and mechanical systems of a property, including most elements of the entire structure. The typical home inspector’s report will contain an evaluation of the condition of the property’s heating systems, central air conditioning system, interior plumbing and electrical systems, the roof, attic, and visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.

Although an appraisal report will mention certain defects and problems the property might have, it will not give you a detailed overall picture of whether or not the property is in good condition. To find that out you will need to hire your own home inspector, who will tell you about the condition of the foundation, the plumbing and electrical systems, the roof and the chimney as well as the other things a standard home inspection checks out about a property.
 

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

A CMA is based on the market information that is obtained by the agent who generates it. This may or may not be based on characteristics and market data that is related to and specific to the subject property and its specific market area. An appraisal utilizes comparable sales that can be validated by records, neighborhood market information, architectural/design criteria, lot size, external factors, location and view adjustment adjustments and many other criteria that go into the development and accuracy of a residential real estate appraisal report. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

Who’s creating the report is absolutely the biggest difference between a CMA and a residential appraisal report. Real estate agents produce the CMA and they may not have specific competence when it comes to home valuation and the appraisal process for your specific property. The appraisal is produce by a licensed, certified professional who is a market expert within their coverage area. Also, the agent typically has something at stake since they get a commission based on the property’s selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon fee for assignments, regardless of their value conclusion.
 

What does the appraisal report contain?

The main point of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:

• Who engaged the appraiser and other intended users.
• How the appraisal is to be used.
• The purpose of the appraisal.
• Precisely what value attribute is being reported and what that value means.
• The effective date of the value opinion. (Sometimes this is in the past i.e., retrospective appraisal or it may be in the future i.e., new construction)
• Relevant property characteristics which include: location, physical attributes, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, permanent equipment installations and even intangible factors.
• All 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 included in the activity of completing the assignment.

 

Where does the appraiser obtain the data used within the appraisal report within Placer County, Sacramento County, Yuba County and Sutter County?

Compiling data is one of the primary roles of an appraiser. 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 documented by the appraiser during the appraisal inspection completed at the subject property.

General data is collected from a numerous places. To look up recent sales to be used as comparables, we often use the local Multiple Listing Service for each local market area. To confirm actual sales prices, sales dates, examine prior sales for subject property and comparables and obtain plat maps we use data derived from the assessor’s office and other public documents. Flood zone data is retrieved from FEMA data outlets.

And most importantly, the appraiser assembles all necessary data from his or her past experience in creating appraisals for other properties within the same market area.
 

I currently have PMI, can I get rid of it?

PMI stands for Private Mortgage Insurance. This insurance policy protects the lender in case a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan. Once you are able to prove that the amount you owe on your home is less than 80% of the home’s market value, you can provide this information to your lender and request that the PMI be removed. In many cases this additional PMI payment may be removed. Please check with your lender to determine specific terms of your loan in regards to PMI removal. You may be able to save thousands of dollars a year by having California Home Appraisals complete and appraisal on your property.
 

Is there anything I have to do before the appraisal inspection?

One of the first things completed during the appraisal process is the property inspection. During the appraisal inspection the appraiser will go around the outside of your home and take measurements to determine the size of the gross living area, garage space and measure any other buildings on the property, determine the layout of the rooms inside, observe the home’s general condition throughout the exterior and interior, and take photos of your house to be included within the report. The best thing you can do to help is make sure the appraiser has easy access around the exterior of the house. On the interior of the home please be sure appraiser has easy access to all rooms and attic access is available (clear area under attic scuttle for ladder use) in case head and shoulders inspection of attic area is completed.

If there is a known encroachment or easement associated with the subject property please provide a Title Policy if available. Also, if there have been any recent inspections completed for pest/termites, home inspection or septic and well inspections please provide a copy of the report if available.

You can make the inspection go faster and improve the accuracy of the appraisal report by having the following things on hand:
 

How is “Market Value” defined?

In real estate appraising, Market Value is commonly defined as:

The most probable price 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 owns the appraisal report?

For mortgage transactions, the lender typically orders the appraisal either directly or through a third party (typically a AMC, appraisal management company). Even though the buyer typically 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 entitled to a copy of the appraisal – 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 example does not apply when the homeowner engages the appraiser directly. In this case the appraiser may define the purpose of the appraisal i.e., PMI removal, estate planning, fair market value or tax issues. If not stated otherwise, the homeowner can do whatever they want with the appraisal.
 

Are some home improvements worth more than others?

Even if you’re not planning to sell your home anytime soon, it’s an inevitable question when you consider remodeling: How much will this improvement add to the value of my home?Surprisingly, much of the time the answer is not as much value as it costs to actually make the improvement. But some home renovations bring you more bang for your buck than others.

What is the top-ranking home improvement? Probably not what you might think – A new front door. On average it adds 97% of the amount you spent to the value to your home.

Replacing old elements, such as doors, windows and siding, in general yielded a better financial return than bigger remodeling projects, such as additions. However agents and remodelers say updated kitchens and baths still can bring a significant payoff, especially when its time to sale your home. The report found that kitchen projects yielded a higher return than bath projects, with a minor kitchen remodel adding 82% of the project’s cost back to the home’s value. Kitchens are important because typically buyers often overestimate how much it would cost to update the kitchen.

Whether certain improvements will pay off varies not only regionally, but by each individual neighborhood based on who will be living in the house.

Renovations within the existing structure of your home – those that don’t require you to build an addition or expand the roof and foundation – often return more value than building extra rooms onto your home and typically, they’re much cheaper.