Stark & Associates has answers to "Frequently Asked Questions"

Stark & Associates is eager to answer any concerns you might have about appraisals in Escondido and San Diego County. Contact Stark & Associates today to learn how we can help you with your specific valuation problems.

Describe an appraisal
Describe what an appraiser does
What are the reasons a person would request 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 can I expect to see in my appraisal report?
Once the appraisal has been delivered, what guarantee is there that the value indicated is veritable?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in San Diego 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?
How do I get ready for the appraiser?
Define "Market Value"
Who has rights to the appraisal report?
I want to get more for my house. Where should I spend money renovating?



Describe an appraisal   (Back to top)

An appraisal is an investigation allowing the appraiser to come to an opinion of value. There are three "common approaches to value" which helps the real estate appraiser conclude this opinion or valuation. One of the processes is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in figuring the value of a home is the Sales Comparison Approach which concerns figuring a comparison to comparable homes nearby. The Sales Comparison Approach is commonly the most accurate and best indicator of a liklely sales price for a residence. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.

Describe what an appraiser does   (Back to top)

An appraiser generates a professional, unbiased assessment of market value, in the support of real property transactions. Appraisers reveal the details of their analysis in appraisal reports.


What are the reasons a person would request your services?   (Back to top)

There are a lot of reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for purchasing an report include:
  • If you are applying for a loan.
  • To reduce your tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
  • To fight high property taxes.
  • To settle an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To find a likely sales price when listing your home.
  • To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Because an official agency such as the IRS requires it.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will help.
Click here for a more extensive explanation of the process of getting an appraisal.


What is the difference between an appraisal and a home inspection?   (Back to top)

Home inspectors do not figure out an opinion of value and do not use the same forms as appraisers. An inspection is a third-party investigation of the accessible structure and systems of a home, from the top to the bottom. Commonly, a home inspection report will discuss the amenities and the requirements of the home: 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 visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Back to top)

Frankly, it's like comparing opera to country. What the CMA depends on are superficial trends. Appraisals use comparable sales which are valid resources. The appraisal report will also include neighborhood and construction values. 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.

Who's creating the report is hands down 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. A certified, California licensed professional who made a career on valuing real estate in and around San Diego County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their value conclusion.

What can I expect to see in my appraisal report?   (Back to top)

The main point of an appraisal report is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
  • The client and other intended users.
  • The intended use of the report.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the value opinion.
  • Pertinent property attributes, including: location, physical description, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed 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 included in the activity of completing the appraisal.
For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal has been delivered, what guarantee is there that the value indicated is veritable?   (Back to top)

In the documentation of an appraisal, each appraiser must ensure the following:
  • The appraisal contained analysis of the information.

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

  • That appraisal services were not carried out in a careless or negligent manner.

  • That a credible, substantiated appraisal report was imparted.
There are intense education and experience requirements that must be adhered to in order to achieve the status of "licensed appraiser" in California. Plus, appraisers must obey a strict industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Back to top) Licensing and certification is achieved through classroom study, tests and experience working under a supervisory appraiser. Once an appraiser is licensed, he or she is required to complete continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Back to top)

Mortgage lenders are an appraiser's typical client, using their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does an appraiser get the information used to estimate values in San Diego County or other areas?   (Back to top)

One of the primary things an appraiser does is to compile data. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser while on site.

General data is gathered from a number of sources. Local Multiple Listing Services (MLS) provide data on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers often have 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 product.

And most importantly, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.

Why should I hire a licensed appraiser?   (Back to top)

If you're involved in some sort of financial decision and the value of your home is relevant, you'll want an appraisal. When selling your home, an appraisal will help you determine 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?   (Back to top)

PMI is an acronym for Private Mortgage Insurance. This added plan covers the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

Does your monthly loan payment include a fee for PMI?Call Stark & Associates today at 760.746.3500 or send us an e-mail. A new appraisal could save you thousands.

How do I get ready for the appraiser?   (Back to top)

We start 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 condition of its amenities. On the home's interior, make sure it is clutter free and that 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 outside walls.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Any information on the purchase of the property for the last three years.
  • A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • A list of "suggested" improvements if the property is to be appraised "as complete".

Define "Market Value"   (Back to top)

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."

Who has rights to the appraisal report?   (Back to top)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 report - it's usually bundled 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 engaging the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may define how the appraisal can be used; 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.

I want to get more for my house. Where should I spend money renovating?   (Back to top)

Like all things real estate, this is dependent on a home's location. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.

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 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 overbuilt for your neighborhood in terms of size.