Kelly and Associates has answers to "Frequently Asked Questions"


	Kelly and Associates is always ready to elaborate on any questions you might have about appraisals or real estate in Monterey County. Contact us today to learn how we can help you with your valuation problems.

Define the term "Appraisal"
What does an appraiser do?
Why would someone require services from Kelly and Associates?
How is an appraisal different than a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What are the contents of an appraisal report?
Once the appraisal has been completed, how can I have certainty that the final number is trustworthy?
How hard is it to become certified?
Who are an appraiser's customers?
Where does an appraiser get the information used to estimate values in Monterey County or other areas?
How can a licensed appraiser help me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Should I do anything in advance of the appraisal inspection
What is "Market Value?"
Once complete, who actually owns the appraisal report?
How can I get the most ROI out of home improvements?

Define the term "Appraisal" (Back to top)

An appraiser performs an evaluation that leads to an opinion of value. This opinion or estimate is concluded through the use of a formal process that generally utilizes the three main "common approaches to value". One of them is the Cost Approach - which is how much it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. The most common approach in figuring the likely sales price of a home is the Sales Comparison Approach which involves figuring a comparison to comparable properties nearby. Being the most commonly used approach, the Sales Comparison Approach is generally the most accurate and best indicator of market value for a house. The Income Approach is primarily used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.

What does an appraiser do? (Back to top)

An appraiser produces an objective and well substantiated determination of market value, in the support of real estate transactions. Appraisers reveal the details of their analysis in appraisal reports.

Why would someone require services from Kelly and Associates? (Back to top)

There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for getting an appraisal include:

To obtain a loan.
To reduce your tax burden.
To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
To fight inflated property taxes.
If you need to take care of an estate.
To give you a negotiating tool when purchasing a home.
To determine a reasonable price when putting your home on the market.
To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
Because a government agency such as the IRS requires it.
If you ever find yourself in a civil case.

Click here for a more extensive explanation of the process dealing with getting an appraisal.

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

Home inspectors do not produce an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to investigate the structure of the home from basement to rooftop. The archetypal property inspector's report will include an evaluation of the integrity of the property'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.

My agent performed a CMA for me. Is that the same as an appraisal? (Back to top)

To be blunt, it's night and day. The CMA relies on indefinite market trends. An appraisal relies on comparable sales that can be validated by public record. In addition, the appraisal checks other factors like condition, neighborhood and construction prices. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

Who's creating the report is actually the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, generate CMA's. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Further, the appraiser is an independent voice, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the value of the home.

What are the contents of an appraisal report? (Back to top)

Each report should reflect a supported value opinion and should document 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 appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
Pertinent property characteristics, including: location, physical attributes, legal attributes, economic factors, the property rights in question, and non-real estate items included in the valuation, such as personal property, items that are more or less permanently installed 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.
What was involved in the process of completing the job.

For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal has been completed, how can I have certainty that the final number is trustworthy? (Back to top)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:

The appraisal used an apropos analysis of the data.

Whether individually or collectively, there were no major errors contained in the report, nor any material details left out.

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

The final appraisal report was transparent, sound and defensible.

To become a state licensed appraiser, there are education requirements as well as on the jobexperience that must be attained - all with the objective of gaining the skills required to provide unbiased value opinions. Plus, appraisers must obey a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for developing an appraisal and documenting 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 classroom study, tests and experience working under a supervisor. Once licensed, he/she is required to engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who are an appraiser's customers? (Back to top)

Commonly, appraisers are hired by mortgage lenders to estimate the value of property involved in a loan transaction - to make sure the house is truly adequate collateral for the 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 Monterey County or other areas? (Back to top)

Gathering information is one of the primary activities of an appraiser. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser during an inspection.

General data is gathered from a many places. To look up recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

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

How can a licensed appraiser help me? (Back to top)

If you're involved in any kind of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to determine a price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For parties settling an estate or divorce, an appraisal from Kelly and Associates is the best documentation to ensure assets are divided fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make smart financial decisions.

My mortgage statement has an item on it for PMI? Can I get rid of that? (Back to top)

PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary policy takes care of the lender in case a borrower defaults on the loan and the value of the house is lower than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	Does your monthly mortgage payment include a fee for PMI?Call Kelly and Associates today at 831-621-7335 or send us an e-mail. A current appraisal could save you thousands.

Should I do anything in advance of the appraisal inspection (Back to top)

The first step in most appraisals is the property inspection. 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 status of its amenities. Inside, 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 exterior walls.

You can make our visit go faster and improve the quality of the appraisal report by having the following things on hand:

Information on the latest purchase of the property in the last three years.
Information on any written private easements, such as a shared driveway with a neighbor.
Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .

What is "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."

Once complete, who actually owns the appraisal report? (Back to top)

In most real estate transactions, the appraisal is ordered by the lender. 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 included 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 stipulate how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not noted otherwise, the home owner can use the appraisal for any purpose.

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

Like all things real estate, this is dependent on a home's location. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.