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American Dream Appraisals has answers to "Frequently Asked Questions"

American Dream Appraisals is always willing to elaborate on any questions you might have about appraisals or real estate in Folsom and Sacramento County. Feel free to contact us today.

Describe an appraisal
Describe what an appraiser does
Why would I need services from American Dream Appraisals?
How is an appraisal different than 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?
After completing the appraisal, how can I have confidence that the value indicated is veritable?
How are appraisers certified?
Who engages the services of appraisers?
Where does American Dream Appraisals get the data used to estimate values in Sacramento County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
How can I get the most ROI out of home improvements?



Describe an appraisal   (Back to top)

The process of creating an appraisal report consists of an estimation which forms an opinion of value. The appraiser will typically use a several "approaches," typically three, to conclude the estimation of market value. One of the processes in use is the Cost Approach, which finds what it would cost to restore the improvements to the property, less the age and physical dilapidation, adding the land value. Another of the methods is the Sales Comparison Approach - which concerns discovering a comparable analysis to other similar properties within a close vicinity which have recently sold. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it deals with estimating what an investor would pay based on the income generated by the property.

Describe what an appraiser does   (Back to top)

An appraiser offers a professional, unbiased opinion of market value, to be used in making real estate transactions. Appraisers show their conclusions in appraisal reports.


Why would I need services from American Dream Appraisals?   (Back to top)

There are a lot of reasons to purchase an appraisal from American Dream Appraisals with the most common reason being real estate and mortgage transactions. A few other reasons for getting an report include:
  • To receive a loan.
  • If you would like to reduce your property tax obligations.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To challenge inflated property taxes.
  • To deal with an estate.
  • To provide you an edge when purchasing real estate.
  • To determine a reasonable property value when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS require an appraisal on every property.
  • It's possible you could be involved in a lawsuit - an appraisal will help.
If you need more information about the appraisal process, please click here.


How is an appraisal different than a home inspection?   (Back to top)

Appraisers do not do provide residential property inspections and are not home inspectors. A third-party home inspector will inspect the structure of the house, from the top to the foundation. The archetypal home inspector's report will contain an evaluation of the condition of the house'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)?   (Back to top)

Honestly, they share nothing in common. The CMA relies on vague local market trends. An appraisal utilizes comparable sales that can be proven by records. In addition, the appraisal verifies other factors like condition, area and replacement prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is who's creating the report. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Likewise, the agent has a vested interest in the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to accept a flat fee for work they perform, regardless of their value conclusion.

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

Each appraisal should reflect a believable estimate of value and will document the following:
  • The client and other intended users.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • The type of value reported and a definition of that value.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible items.
  • Any 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.
  • The scope of work considered while working up the assignment.
For a more in depth look at the work that goes into an appraisal report click here: Sample Appraisal Report


After completing the appraisal, how can I have confidence that the value indicated is veritable?   (Back to top)

In communicating an appraisal report, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was suitable.

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

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

  • That a believable, supportable appraisal report was conferred.
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 render unbiased value opinions. Plus, appraisers must follow a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for developing an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Regulations regarding licensing and certification vary from state to state. In general, licensing and certification typically translates to many hours of coursework, tests and experience working under a supervisory appraiser. Once an appraiser is licensed, he or she must then take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

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

Most of the time, appraisers are hired by mortgage lenders to render a value opinion on real estate involved in a loan transaction - to make sure the subject is truly adequate collateral for the loan. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does American Dream Appraisals get the data used to estimate values in Sacramento County or other areas?   (Back to top)

Compiling information is one of the primary roles of an appraiser. Data can be split into Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.

General data is gathered from a variety of sources. To look up recently sold homes to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To verify actual sales prices, we use tax records and other public documents that are usually online nowadays. Appraisers often have to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

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


Why do I need a professional appraisal?   (Back to top)

If you're making some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. If you're selling your house, an appraisal helps you set the most appropriate price. 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 house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.


What exactly is PMI and how can I get rid of it?   (Back to top)

PMI is short for for Private Mortgage Insurance. It guards the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the loan balance. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.

Has your home value appreciated since you first purchased? Contact American Dream Appraisals today at (916) 984-4913. You may be able to save money by removing your Private Mortgage Insurance premium.

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

The first step in most appraisals is the home inspection. During this process, the appraiser will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. On the outside, trim any landscaping so we can be free to get an accurate measurement of exterior walls.

To help speed things along plus ensure a more accurate report, try if possible to have the following items:
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
  • A list of any major home improvements and enhancements, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • A list of "suggested" improvements if the property is to be appraised "as complete".

What does "Market Value" mean?   (Back to top)

In real estate appraising, 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?   (Back to top)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. While the buyer pays for the report as part of the closing costs, the lender retains the right to use the report or any information contained within. The buyer is 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 hiring the appraiser for things outside securing a mortgage. In these situations, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can do whatever they want with the appraisal.


How can I get the most ROI out of home improvements?   (Back to top)

The answer to this is different depending upon the location of the home. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

No matter where you go, however, renovating a kitchen is almost always a safe move. 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%. On the contrary, something that may not add value would be painting just for the sake of redecorating.