McGraw Associates Appraisal Services has answers to "Frequently Asked Questions"


	McGraw Associates Appraisal Services is always happy to answer any questions you might have about appraisals in Orange County. Feel free to contact us today.

Define the term "Appraisal"
What does an appraiser do?
What would cause me to require services from McGraw Associates Appraisal Services?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Upon completion of the report, how can I have confidence that the value conclusion is valid?
What goes into an appraiser's certification?
Who do appraisers work for?
Where does an appraiser get the data used to estimate values in Orange 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?
Do you need anything from the homeowner in advance?
What is "Market Value?"
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?

Define the term "Appraisal" (Go to list of questions)

An appraisal is a thought process leading to an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or valuation. The Cost Approach is one of the processes that appraisers use to find the value of a house; it involves figuring what the improvements would cost minus physical depreciation, plus the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which involves concluding a comparison to comparable properties close by. Being the most common approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residence. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the capital produced by the property.

What does an appraiser do? (Go to list of questions)

An appraiser offers a fair and credible assessment of market value, to be used in making real estate transactions. Appraisers summarize their professional conclusions in appraisal reports.

What would cause me to require services from McGraw Associates Appraisal Services? (Go to list of questions)

There are a lot of reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for getting an report include:

To get a loan.
If you would like to lower your property tax burden.
To build a case for a homeowner's equity and remove PMI.
To challenge improperly assessed property taxes.
If you need to take care of an estate.
To offer you an edge when purchasing a home.
To figure out an honest 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 property.
If you ever find yourself in a civil case.

If you need more information regarding the appraisal process, please click here.

How is an appraiser different than a home inspector? (Go to list of questions)

Home inspectors do not provide an opinion of value and are not appraisers. The point of a home inspection is to investigate the structure of the house from basement to rooftop. For the most part, a home inspection report will evaluate the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

My agent performed a CMA for me. Is that the same as an appraisal? (Go to list of questions)

Simply, they share nothing in common. The CMA relies on indistinct market trends. An appraisal relies on comparable sales that can be validated by records. The appraisal report will also contain neighborhood and construction costs. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

The person behind the report is frankly the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. 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 sum for assignments, regardless of their outcome.

What's in an appraisal report? (Go to list of questions)

Every appraisal must indicate a credible estimate of value and will identify the following:

Who engaged the appraiser and other intended users.
The intended use of the report.
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 description, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible factors.
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.
The scope of work used when completing the assignment.

For a more in depth view of all that goes into an appraisal report click here: Sample Appraisal Report

Upon completion of the report, how can I have confidence that the value conclusion is valid? (Go to list of questions)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:

That the information analysis implemented in the appraisal was proper.

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

That appraisal services were done in a careful and conscientious manner.

That a trustworthy, supportable appraisal report was communicated.

To become a state licensed appraiser, we must satisfy extensive education and experience requirements that prepare us to produce an unbiased opinion. In addition, appraisers must obey a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for working up an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Go to list of questions) Regulations regarding licensing and certification vary from state to state. In general, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, he/she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for? (Go to list of questions)

Mortgage lenders are an appraiser's most likely client, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.

Where does an appraiser get the data used to estimate values in Orange County or other areas? (Go to list of questions)

Compiling information is one of the primary functions of an appraiser. 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 collected from a number of sources. To find out about recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely have 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 collective knowledge gained from doing assignments for other properties in the same market.

Why should I hire a licensed appraiser? (Go to list of questions)

An appraisal is a valuable tool whenever your home's value is pertinent to some financial decision. For those selling a home, you'll want to figure out a 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, be sure you're not overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.

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

PMI stands for Private Mortgage Insurance. This additional policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	Is PMI a part of your monthly mortgage payment?Call McGraw Associates Appraisal Services today at (949) 831-8596 or send us an e-mail. Documentation of your home's present value could save you thousands.

Do you need anything from the homeowner in advance? (Go to list of questions)

The first step in most appraisals is the property inspection. What this entails is the appraiser, after setting up an appointment, personally going through the home - recording the layout of the rooms, taking photos and documenting the general condition of its amenities. 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.

To help expedite our work as well as ensure a more accurate report, attempt if possible to have the following items:

A survey or plot map of the property and building (if available).
Written property agreements, such as a maintenance easement for a shared driveway.
Title policy that lists encroachments or easements.
A list of any major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
Locate copies of the current listing agreement, broker's data sheet and, in the event of a pending sale.

What is "Market Value?" (Go to list of questions)

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."

Does the appraisal belong to the bank or the consumer? (Go to list of questions)

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 entitled to a copy of the appraisal - it's usually bundled with all the other closing documents - but is not entitled to use the report for any other purpose without permission from the lender.

This rule doesn't apply when a home owner hires an appraiser directly. In these scenarios, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.

Which home renovations add the most to the price? (Go to list of questions)

The answer to this is different depending upon the location of the home. 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

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 were second, yielding 85%. Adding bedrooms and baths can also boost the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.