SOUTHERN CALIFORNIA REAL ESTATE APPRAISAL SERVICE.
What is a Real Estate Appraisal?
A Real Estate Appraisal is an opinion of
value, and anyone can have an opinion. The accuracy of an appraisal depends on
the skill and impartiality of the appraiser, the diligence of the inspection and
research, and the quantity and quality of market data available. An
appraisal is usually required by most lenders when you buy or refinance a house.
Are Real Estate Appraisers Required to be Licensed?
In 1989, in the aftermath of the $500
billion savings and loan debacle, Congress passed a bill mandating all states to
set up licensing programs for appraisers. Their intent was to help prevent
fraudulent and inflated loans which led to the biggest taxpayer bailout in
history. California began licensing appraisers on November 1, 1992 and all
states had licensing programs in place by the mid 1990s.
Licensed appraisers must adhere to the Uniform Standards of Professional
Appraisal Practice (USPAP), a set of strict ethical and professional guidelines
developed by a nonprofit organization called the Appraisal Foundation. To become
licensed, an appraiser must take a series of prescribed classes, demonstrate
experience and competence, pass an examination and take continuing education
courses.
Only a handful of states require that all appraisals be performed by licensed
appraisers. Most states only require licensed appraisers for federally-related
transactions, which include real estate loans from federally-insured lenders.
When an appraiser becomes licensed they increase their liability exposure for
all of their appraisal work and become subject to fines, penalties and even
prison terms for violations. By becoming licensed, an appraiser has demonstrated
a commitment to professional and ethical standards, continuing education, and
has agreed to abide by state laws and regulations.
Should I Only Hire a Licensed
Appraiser?
A licensed appraiser will generally
produce a more accurate, thorough and better-documented appraisal than an
unlicensed person. However, they expect you to pay for their time, expertise and
liability exposure.
Most real estate agents and brokers are not licensed appraisers, but they can
often provide accurate estimates of value for little or no cost. If you’re
thinking of selling your house, most real estate agents will conduct a free
comparative market analysis or CMA. Of course, they’re hoping you’ll list your
house with them if you decide to sell. Be sure you ask them to estimate the most
probable selling price and marketing time as well as their suggested listing
price. Be wary of inflated appraisals designed to get you to list your property
with a particular agent. This is an unethical real estate practice.
Some real estate agents and brokers provide valuations for estate purposes at
little or no cost. Again, they’re hoping you’ll work with them if and when you
decide to sell.
When Do I Need an Appraiser?
REAL ESTATE LOANS – Lenders need to know
what a property is worth so they can make a loan secured by the real estate.
They want some reasonable assurance they will get their money back if you stop
making payments and they have to sell your house through foreclosure. Lenders
also base their decisions on your ability to pay (your income and expenses) and
your willingness to pay (your credit history).
SELLING PROPERTY – If you want to sell your property in the least amount of
time, it’s important to list it at or near market value. Real estate agents will
usually perform a free comparative market analysis to help establish a listing
price. However, sometimes an independent appraiser is needed for unusual or
complex properties.
BUYING PROPERTY – Potential buyers, especially those who are unfamiliar with the
local real estate market, may want to know what a property is worth before they
make an offer. Buyers often include an appraisal contingency in their purchase
offer.
DISSOLUTIONS AND BUYOUTS – People often own property together as married
couples, partners or groups. When partnerships or marriages dissolve, it’s often
necessary to estimate the market value of the various interests to allow the
co-owners to buy from or sell to each other.
PARTIAL INTERESTS – The market value of a minority interest is often less than
its actual percentage of the total property value (the minority partner has less
property rights). Appraisers can estimate appropriate discounts for these
interests.
RENT SURVEYS – Whether you’re a landlord or a tenant, it’s important to know
what sort of rent and lease terms are appropriate for your market. Appraisers
can conduct rent surveys to determine the market rent for a particular property.
LEASEHOLD INTERESTS – When a tenant has a long-term lease at less than market
rent, they own a type of property right called a leasehold interest which has
market value. Appraisers can estimate the tenant’s leasehold interest and the
landlord’s corresponding leased fee interest. The sum of the two interests is
equal to market value.
ESTATES AND TRUSTS – Real estate appraisers can have a profound effect on estate
taxes by providing an accurate estimate of market value. Appraisers can also
provide valuation expertise to attorneys and financial planners for estate
planning, setting up trusts and distributing assets.
CHARITABLE DONATIONS – Charitable donations can provide large tax deductions for
some people. Appraisers can estimate the value of charitable donations,
including complex arrangements such as life estates and conservation easements.
LITIGATION SUPPORT – Appraisers assist attorneys with a variety of services
including trial preparation, research, analysis, deposition reviews and expert
testimony.
CASUALTY LOSS – Appraisers assist property owners and insurance companies in
determining casualty losses from fires, floods, storms and other disasters.
EASEMENTS – An easement is a type of partial interest which has value.
Estimating the value of an easement requires an understanding of the property
rights conveyed by the easement and how they affect the use of the property.
BOUNDARY LINE ADJUSTMENTS – When property owners need to adjust a boundary or
negotiate an easement, appraisers can assist in this process and estimate the
effect on the market value of the properties involved.
PMI REMOVAL – Homeowners who pay costly private mortgage insurance (PMI) are
normally entitled to have it removed when their equity exceeds 20 percent of
market value. Appraisers can provide the necessary support for PMI removal.
PROPERTY TAX APPEALS – A private appraiser can assist you with property tax
appeals. Also, the appraisers in the County Assessor’s Office may be able to
help you reduce your property taxes at no charge.
CONDEMNATION – Government agencies are required to pay fair market value when
they condemn or acquire private property for road widening, utility
rights-of-way, open space and other public purposes. Appraisers can assist both
private property owners and government agencies in this process. Even voluntary
sales to government agencies normally must be supported by appraisals which
follow state condemnation guidelines.
HIGHEST AND BEST USE ANALYSIS – A thorough highest and best use analysis can
help the property owner decide whether to buy, sell, lease, hold for future
development, divide, consolidate, build, remodel or demolish. For
income-producing projects, a highest and best use analysis can help determine
the best design, including the optimum size and number of units.
REAL ESTATE CONSULTING – Some appraisers give expert real estate advice that may
not necessarily include an estimate of value.
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A.M Appraisal is proud to provide excellent service to the Southern California Real Estate professional. We are a leading provider of residential appraisal services for Orange County, Los Angeles County, Riverside County, San Bernardino County and San Diego County.