Frequently Asked Questions & Definitions

What is an appraisal

A real estate appraisal is a process that leads to an opinion of value. The opinion of value is usually derived using the “three common approaches to value”, the cost approach, sales comparison approach or the income approach. The appraiser provides a professional, unbiased opinion of value for the subject property.

USPAP & The Appraisal Institute - http://www.appraisalinstitute.org/newsadvocacy/downloads/UnderstandingTheAppraisal.pdf

Why do I need an appraisal

A professional appraisal is useful for most real estate transactions. There are many reasons you may need an appraisal but some of the most common include:

  • To secure a mortgage loan
  • To help prospective sellers determine acceptable selling prices or prospective buyers decide on offering prices
  • To estimate the market value of partnership interests
  • To estimate assessed value
  • To determine gift or inheritance taxes
  • To transfer ownership of real property
  • To settle an estate

Appraisal Institute - http://www.appraisalinstitute.org/newsadvocacy/downloads/UnderstandingTheAppraisal.pdf

Why don’t I get a copy of my appraisal when I am the one who paid for it

The appraiser's client is the lender, not the borrower, even though the borrower may pay the appraisal fee. A client is defined as the party who directly engages the appraiser to perform the assignment. Appraisers receive and accept many appraisal assignments from clients specifically instructing them to collect the appraisal fee at the door (or "C.O.D.") from the borrower. This does not render the borrower as the client or entitle them to a copy of the appraisal from the appraiser.

The appraiser is required to protect the confidential nature of the appraiser-client relationship, and thus is prohibited by law to provide a copy, or disclose the contents of his or her appraisal report to anyone other than the client. Although the appraiser cannot provide the borrower with a copy of the appraisal without the client's permission, the borrower has every right to receive a copy of the appraisal from the lender, provided he or she has paid for the appraisal and the loan involves 1-4 unit residential property. According to California Business and Professions Code Section 11423, a borrower has up to 90 days after the lender has provided notice of their lending decision to submit a written request for a copy of the appraisal.

CA Office of Real Estate Appraisers.

What is an AMC

AMC stands for Appraisal Management Company. An AMC performs appraisal management services including but not limited to: administering an appraisal panel, recruiting, qualifying, and verifying licensing or certification, negotiating fees and service level expectations, receive an appraisal order from one person and deliver the appraisal order to the appraiser, track and determine the status of the order, conduct quality control of completed assignment and provide completed appraisal to the person who ordered the appraisal. AMCs serve as an impartial order coordinator between the client and the appraiser to maintain appraiser independence.

Appraisal Institute - http://www.appraisalinstitute.org/newsadvocacy/downloads/modelprovisionsamc.pdf

What is AIR (Appraiser Independence Requirements)

The Appraiser Independence Requirements (AIR) were developed by Fannie Mae, the Federal Housing Finance Agency (FHFA), Freddie Mac, and key industry participants to replace the Home Valuation Code of Conduct (HVCC). They went into effect October 15, 2010. The updated requirements maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, home buyers, and the housing market. The goal of the AIR is to maintain independence of the appraiser by eliminating undue influence placed on the appraiser by clients. Appraisers at a minimum must be licensed or certified within the state in which the property to be appraised is located. No party on behalf of the client or lender shall influence the development, reporting, result or review of the appraisal. The lender is also required to provide a copy of the appraisal report to the borrower no less than 3 days prior to the closing of the loan. To read AIR in its entirety please see: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/appcode/pdf/air.pdf.

When do I need a drive-by appraisal vs. a full interior appraisal

A drive-by appraisal is typically used when the interior of the property is inaccessible, the subject is conforming and in average condition or the property has been appraised recently by the appraiser and no significant improvements have been made. This type of report is mostly used for non-lending transactions including estate, divorce or tax purposes. It is a good idea to get a full interior appraisal when the subject property has significant improvements; square footage noted on public record differs from the actual square footage, or when a property is complex. If you are unsure what type of appraisal you need speak with someone in our office to determine the complexity of your assignment.

What should I do to prepare for an appraisal appointment

In preparation for your appraisal appointment be sure that all areas of the home are accessible. The appraiser takes measurements and photographs which requires the ability to access to all rooms within the home. If you have a multifamily property please be sure all units are accessible. For FHA appraisals the appraiser will need access to the attic and/or crawl space and will also need to verify utilities/appliances are on and in working order. If you have security bars on bedroom windows please be sure that they have safety releases, if not have them removed prior to the inspection. If you have a dog or other animal please be sure to keep them out of the way, in a kennel or dog run while the appraiser is there.

Does an appraisal for the bank affect my taxes

No, appraisal reports for lending purposes are not provided to local tax athorities and do not impact your current tax base.

What is a comparable sale

The appraiser researches the market data for the subject property’s neighborhood and finds properties that are most similar to the subject property, this is a comparable sale. The appraiser estimates the degree of similarity by comparing various aspects of the property including but not limited to: location, physical characteristics, economic characteristics, use/zoning, market conditions, and conditions of sale.

Appraisal Institute - http://www.appraisalinstitute.org/newsadvocacy/downloads/UnderstandingTheAppraisal.pdf.

How do you calculate square footage

For single family homes attached (PUD: Planned Unit Developments) and detached, the appraiser measures the exterior of the home to calculate the Gross Living Area (GLA). All light wells and non-living areas are excluded from living area calculations.

Condominium properties are typically measured from the interior “paint-to-paint” and include all living space, minus light wells and common stair wells. Patio, deck or balconies are not included in condominium living area calculations.