Jerry Smith & Associates has answers to "Frequently Asked Questions"

Jerry Smith & Associates is always ready to answer any questions you might have about appraisals or real estate in Fresno County. Contact us today to talk about how we can help solve your specific valuation problems.

What is an appraisal?
What does an appraiser do?
Why would a person need your services?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
Once the report has been delivered, how can I have a guarantee that the final number is valid?
What are the requirements to be a certified appraiser?
Who are an appraiser's customers?
Where does an appraiser get the data used to estimate values in Fresno 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?
Does the appraiser need anything from me in advance?
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?

What is an appraisal?   (List of questions)

The procedure of creating an appraisal report deals with an inspection which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser come to this opinion or valuation. The Cost Approach is one of the methods that real estate appraisers use to find the value of a property; it involves concluding what the improvements would cost without physical deterioration, plus the land value. The Sales Comparison Approach deals with searching for comparable homes in close proximity and discovering the value based on comparing those houses to the property being investigated. The Sales Comparison Approach is commonly the most accurate and best indicator of value for a residence. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to determine the market value of a property based on what an investor would pay based on the income produced by the building.

What does an appraiser do?   (List of questions)

An appraiser produces an impartial and well substantiated assessment of market value, in the support of real estate transactions. Appraisers show their professional findings in appraisal reports.

Why would a person need your services?   (List of questions)

There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:
  • To receive a loan.
  • To lower your property taxes.
  • To demonstrate a homeowner's acquired equity and remove insurance.
  • To challenge high property taxes.
  • To handle an estate.
  • To offer you a leg-up when purchasing a home.
  • To find a likely property value when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Because an official agency such as the IRS requires it.
  • If you are ever involved in a lawsuit.
If you need a more detailed explanation of the appraisal process, please click here.

What is the difference between an appraisal and a home inspection?   (List of questions)

Appraisers do not do provide house inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the house, from the top to the bottom. The archetypal house inspector's report will contain an evaluation of the condition of the home's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.

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

Frankly, they have nothing in common. What the CMA depends on are superficial trends. An appraisal relies on comparable sales that can be verified by public record. Location and architectural prices are also important in an appraisal. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

The credentials of the person behind the report is frankly 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. A certified, state licensed professional who bases a career on valuing properties in and around Fresno County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to collect only a flat sum for assignments, regardless of their outcome.

What are the contents of an appraisal report?   (List of questions)

Every report should demonstrate a supported value opinion and should identify the following:
  • The client and other intended users.
  • The intended use of the appraisal.
  • The reason for the assignment.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraiser's opinions and conclusions.
  • Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible factors.
  • All 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 in depth look at what goes into an appraisal report click here: Sample Appraisal Report

Once the report has been delivered, how can I have a guarantee that the final number is valid?   (List of questions)

In the documentation of an appraisal, each appraiser must make sure of the following:
  • The appraisal used an appropriate analysis of the information.

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

  • That appraisal services were delivered in a careful and conscientious fashion.

  • The final appraisal report was clear, credible and conclusive.
To become a state licensed appraiser, there are strenuous education requirements as well as practical experience that must be logged - all with the end goal of gaining the skills required to provide unbiased value opinions. Likewise, appraisers must abide by a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (List of questions) Licensing and certification requires classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he or she must then engage in continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (List of questions)

Commonly, appraisers are employed by mortgage lenders to estimate the value of a home involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.

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

Gathering data is one of the primary occupations 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 specific data are gathered by the appraiser during an inspection.

General data is received from a many places. To look up recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.

And last but not least, the appraiser assembles general data from his or her past experience in creating appraisals for other houses in the same market.

Why should I hire a licensed appraiser?   (List of questions)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your house, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. If you're buying, it makes sure you don't overpay. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home 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?   (List of questions)

PMI is the common abbreviation for for Private Mortgage Insurance. It takes care of the lender in case a borrower doesn't pay on the loan and the market price of the property is lower 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.

The money you keep from cancelling your PMI will make up for the price of the appraisal in a matter of months. Jerry Smith & Associates stays current with value trends in Clovis and Fresno County. Contact us today.

Does the appraiser need anything from me in advance?   (List of questions)

We begin with an inspection of the home. 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 status of its amenities. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any landscaping and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can get to items like furnaces and water heaters.

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).
  • List of personal property to be sold with the home.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .

What does "Market Value" mean?   (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?   (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 certainly entitled to a copy of the appraisal - it's usually included 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 situations, 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.

I want to get more for my house. Where should I spend money renovating?   (List of questions)

The answer to this is different depending upon the location of the home. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

As a rule, the most value returned from renovating a home comes in the kitchen. 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.