Frequently Asked Questions...
If the appraisal is for loan purposes, usually, the lender will choose the property appraiser. You are entitled to see the results of the appraisal if it is paid for by you. Keep in mind that lenders and mortgage brokers’ agents are not allowed to “up charge” for third party services such as appraisals. Most lenders require a professional appraisal to determine the current market value of a property before they approve a loan.
In most real estate transactions involving financing, the appraisal is ordered by the lender. While the borrower pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within it. If the borrower is entitled to a copy of the report, it’s usually included with all of the other closing documents. The borrower is not entitled to use the report for any other purposes pursuant to USPAP.
The exception to this rule is when a borrower engages an appraiser directly. In these cases, the appraiser may stipulate how the appraisal can be used and is indicated in the appraisal and as agreed upon between the appraiser and the client. Typically, the purpose of the appraisal is stated in the appraisal and is part of the appraisal assignment.
This may be the most common objection we hear after explaining the process to a borrower. In a further effort to explain this, please note:
- The appraisal is not for you, the borrower. The bank ordered the appraisal for them. They want to make a lending decision about the property and they need an appraisal for that purpose.
- The cost of the appraisal is just another cost of financing a property with someone else’s money. So even though you paid for an appraisal on your property or subject property, that appraisal belongs to the bank.
Unfortunately if the order was placed by a lender/loan broker we are unable to give the borrower a copy of the appraisal even if the borrower paid for the report. Due to Federal Regulations, the appraiser has a fiduciary responsibility to the lender that ordered the appraisal and CANNOT reveal any details regarding the appraisal to anyone, including the borrower. For residential units between 1 and 4, you are entitled to see the results of the appraisal if it is paid for by you. This must be requested of the lender and furnished by the lender.
No. An appraiser cannot simply readdress an appraisal for another client. This is expressly a violation of the Uniform Standards of Professional Appraisal Practices (USPAP) and may result in disciplinary action including loss of license. We are unable to simply retype the report with a different lender’s name because it is necessary to complete the appraisal as a new assignment pursuant to California laws requiring USPAP compliance.
Real estate is unique by nature. Every property is different. There are appraisals for a variety of purposes and different appraisal report types. For these reasons, we need to determine the appropriate options and quote the price based upon all factors requiring consideration.
Please refer to TYPICAL PRICING for usual and customary appraisal costs for various appraisal types in an effort to provide a range of typical prices
Per the Appraisal Foundation’s Uniform Standards of Professional Appraisal Practices (USPAP), Standards Rule 2-2, each written real property appraisal report must be prepared under one of the following options and prominently state which option is used: Appraisal Report or Restricted Appraisal Report.
When the intended users include parties other than a specific client, an Appraisal Report must be provided. When the intended users do not include parties other than the client, a Restricted Appraisal Report may be provided. The essential differences between these two options are the content and level of information. Therefore, a Restricted Appraisal Report, including many industry standard form reports, is less expensive.
Yes. Although the Uniform Standards of Professional Appraisal Practices (USPAP) does not permit a Restricted Appraisal Report when there are additional intended users beyond the client, USPAP does allow multiple parties to engage an appraiser in an assignment. If all parties engage the appraiser as co-clients, there would be no intended users besides the client(s), and a Restricted Appraisal Report would be permitted under USPAP.
No, an appraisal is not a building inspection. Inspections involve a licensed and qualified inspector, engineer, or contractor who evaluates the structure and mechanical systems (heating, electrical, plumbing, air-conditioning, etc.) of the property from foundation to rooftop.
The appraiser is typically more interested in market data, income and expenses, and any other aspects that have an effect upon the value of the property.
Although the appraiser, David Bond, is properly licensed as a building contractor and can perform inspection services, an appraisal is done with only a casual inspection and only through the lens of a typical appraiser. Should a more detailed inspection be desired, additional fees and reporting requirements would be applicable.
We must comply with the Uniform Standards of Professional Appraisal Practice (USPAP) for all appraisals.
For federal related transactions, we comply with both the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and USPAP. In certain situations it is also required that we conform with Yellow Book standards. Also, we may do appraisals with hypothetical conditions and/or extraordinary assumptions which is defined below.
An extraordinary assumption is an assumption, which if found to be false, could alter the resulting opinion or conclusion. A hypothetical condition is an assumption made contrary to fact, but which is assumed for the purpose of discussion, analysis, or formulation of opinions of value.
A value determination can be based upon different definitions of value depending upon the needs of the client and/or type of property. The most common, is Market Value and typically 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:
- Buyer and seller are typically motivated;
- Both parties are well informed or well advised, and acting in what they consider their own best interests;
- A reasonable time is allowed for exposure in the open market;
- Payment is made in terms of cash in U.S. 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.
Dollar for dollar:
- Elbow grease: clean and declutter (no money spent, only your time).
- Interior/exterior paint.
Depending on your submarket (neighborhood) and what could be considered an over-improvement: bathroom remodels and kitchen remodels are the next best places to update. Make sure to research your market. Retain the services of a professional appraiser or a professional real estate broker knowledgeable with the area and make sure that you don’t go overboard with the improvements.
In communicating an appraisal report, each appraiser must ensure the following:
- That the information analysis utilized in the appraisal was appropriate.
- That significant errors of omission or commission were not committed individually or collectively.
- That appraisal services were not rendered in a careless or negligent manner.
- That a credible, supportable appraisal report was communicated.
California requires that real estate appraisers be state licensed or certified. The state licensed or certified appraiser is trained to render an unbiased opinion based upon extensive education and experience requirements. To become licensed or certified, appraisers must fulfill rigorous education and experience requirements. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
Most importantly, appraisal is an art and not an exact science. Experience matters. As a highly qualified and experienced appraiser, the client is assured of top quality, unbiased and thorough appraisals that well support the final opinion of value.
Typically, an appraiser needs to document the condition of the property, both inside and out, from the layout and features to the degree of modernization including any updates as well as the overall quality of the construction. This information will help to assist the appraiser throughout the valuation and comparison process.
The appraiser estimates the square footage (GLA – gross living area), by measuring the exterior of the home. Non-living areas, such as garages or covered porches, are not included in the GLA, but are accounted for and considered in value separately. Finished basements are also calculated separately from the above-ground GLA. The local market will dictate the contributory value of the finished basement, which can be influenced by governmental regulations, the degree of modernization, the quality of the finish, and other factors.
The appraiser will generally consider only permanent fixtures and real property. Because many above-ground swimming pools and small sheds are not permanent structures, they typically usually aren’t included in the valuation. Depending on the specific installation process and local custom, however, an above ground pool or small shed might be considered part of the real property.
Absolutely not. The appraiser is required to maintain confidentiality with the client, which would typically be you, the client, if you undertook the appraisal, or the bank (in a mortgage related appraisal), not the local tax authorities. Furthermore, in California, Proposition 13 limits any assessment increases that may result in higher property taxes.
Many people have a biased opinion of value and desire an appraisal to come in high or low, depending upon the appraisal user’s motivation that favors a particular outcome. If the appraisal is lower than expected and used for loan purposes, typically a buyer can terminate the contract, make up the difference with cash, or renegotiate the purchase price. If an appraisal is higher than expected, read the report carefully and see the rational for the opinion of value. Note that pertinent aspects of property valuations are measured by typical market reactions and nothing else. Whether the appraisal is higher or lower than expected, if you think an error has been made you can check through all the data the appraiser used to come up with their evaluation. If you see a major mistake, a reevaluation may be in order and requested upon discovery. An advantage of hiring David Bond, a professional, experienced, highly educated, and licensed accredited Certified General appraiser, is the adherence to professional standards in full compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). The final opinion of value will be well supported, unbiased, and based upon a full professional analysis. If there still is a disagreement over the appraised value, the client has the absolute right to hire another qualified appraiser and have it reappraised.
Commercial appraisals can be extremely complicated and may take hundreds of hours to complete depending upon the complexity. Typically, commercial appraisals take two to four weeks to complete. We do provide expedited turnaround times at an additional cost.
No. Appraisers bear liability both ways. They have a vested interest in looking at both high and low sales and weighing all factors to value to render an honest and unbiased opinion of value that is well supported. Not doing so is unethical, illegal, and may subject the appraisal to be disqualified in litigation or under review. In a rising market, appraisers will tend to place emphasis on the higher priced most recent sales. In a falling market, they will tend to place emphasis on the lower priced most recent sales.
PMI is the common abbreviation for Private Mortgage Insurance. It protects the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan. You should have your PMI dropped once you’ve achieved 20% equity in your home through appreciation and principal payments. The money you save, from getting rid of your PMI, pays for the appraisal in a matter of months.
ADA compliance refers to the American’s with Disability Act. This Act requires that commercial properties that conduct business with the public must provide reasonable access for people with disabilities. This means a dedicated parking space, path to entry, and sidewalks and doorways that allow wheelchair access. Property owners that do not comply with this regulation may be subject to formal legal complaints. An ADA consultant is recommended to insure that your property is compliant.
Commercial banks typically will want a determination of your commercial property’s insurable value as well as its fair market value. The insurable value pertains to the replacement cost of the improvements. The insurable value does not include the underlying land value. This value is based on a construction cost estimate of your property and may be required in order to ensure there is proper insurance coverage for your property.
Leadership in Energy and Environmental Design (LEED) consists of a suite of rating systems for the design, construction and operation of high performance energy efficient (green) buildings.
If you don’t find an answer to your questions here, feel free to contact us. We are here to help and pride ourselves on excellence in customer service and professionalism.
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