Appraisal Circle has answers to "Frequently Asked Questions"

Appraisal Circle is willing to talk to you about any concerns you might have about appraisals or real estate in Los Angeles County. Feel free to contact us today.

What is an appraisal?
What does an appraiser do?
Why would a person require 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 report, how can I have confidence that the value conclusion is valid?
What are the requirements to be a certified appraiser?
Who employs appraisers?
Where does Appraisal Circle get the data used to estimate values in Los Angeles County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?



What is an appraisal?   (Top)

The procedure of writing an appraisal report deals with an investigation which leads to an opinion of value. The appraiser will use a several "approaches," typically three, to draw up the estimation of market value. One of the processes is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which deals with figuring 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 Income Approach is mainly used for figuring out 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?   (Top)

An appraiser generates a professional, unbiased opinion of market value, in the support of real property exchanges. Appraisers exhibit their expert conclusions in appraisal reports.


Why would a person require a real estate appraisal?   (Top)

There are a lot of reasons to order an appraisal from Appraisal Circle with the most common reason being real estate and mortgage transactions. Other reasons for obtaining an appraisal include:
  • To obtain a loan.
  • If you would like to reduce your property tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To challenge high property taxes.
  • If you need to take care of an estate.
  • To offer you an edge when purchasing a home.
  • To find the most probable property value when putting your home on the market.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Government agencies such as the IRS require an appraisal on every home.
  • It's possible you could be involved in a lawsuit - an appraisal will definitely help.
If you need more information about the appraisal process, please click here.


How is an appraiser different than a home inspector?   (Top)

Appraisers do not do perform house inspections and are not home inspectors. The point of a home inspection is to investigate the structure of the property from foundation to rooftop. Usually, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, visible 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)?   (Top)

To be blunt, it's like comparing broadband and dial-up. The CMA utilizes market trends to generate most of their business. The appraisal is reliant on specific valid comparable sales. Location and building costs are also precedent in an appraisal. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

The credentials of the person behind the report is actually the most significant 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 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 whereas the appraiser is bound by a code of ethics to accept a flat fee for work they perform, regardless of their value conclusion.

What does the appraisal report contain?   (Top)

The main purpose 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, 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.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.
  • Pertinent property characteristics, including: location, physical attributes, legal attributes, economic factors, the property rights in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible items.
  • 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.
  • The scope of work used to complete the assignment.
For a more in depth view of all that goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have confidence that the value conclusion is valid?   (Top)

In the documentation of an appraisal, each appraiser must ensure the following:
  • The appraisal used an apropos analysis of the data.

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

  • That appraisal services were not executed in a careless or negligent fashion.

  • That a solid, supportable appraisal report was communicated.
There are intense education and experience requirements that must be adhered to in order to become a licensed appraiser in California. Likewise, appraisers must stick to a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for carrying out an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Top) Licensing and certification requires coursework, tests and practical experience. Once licensed, he or she must then take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who employs appraisers?   (Top)

Most of the time, appraisers are hired by lenders to render a value opinion on property involved in a loan transaction. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does Appraisal Circle get the data used to estimate values in Los Angeles County or other areas?   (Top)

Collecting 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 home itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.

General data is collected from a number of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that could be used as comparables. To verify actual sales prices, we use items in the assessor's office and other public documents. Appraisers routinely need to report when a property lies in a flood zone, so 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 collective knowledge gained from doing assignments for other houses in the same market.

What can a full appraisal do for me?   (Top)

An appraisal is a valuable tool whenever your home's value 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 also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. When buying, you can avoid overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Appraisal Circle is the best way to ensure assets are split up fairly. A house is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.

What exactly is PMI and how can I get rid of it?   (Top)

PMI stands for Private Mortgage Insurance. This additional plan protects the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the loan balance. 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.

Is PMI something increasing your monthly mortgage payment?Call Appraisal Circle today at 818-370-0898 or send us an e-mail. A new appraisal could save you thousands.

How do I get ready for the appraiser?   (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. Inside, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, 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 describes encroachments or easements.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.

How does an appraiser define "Market Value"?   (Top)

In real estate appraising, 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."

Does the appraisal belong to the bank or the consumer?   (Top)

In most real estate transactions, the appraisal is ordered by the lender. 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 cases, the appraiser may define the purpose of the appraisal; 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?   (Top)

It really depends on the market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 weren't far behind, returning 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.