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Paragon Appraisal Group has answers to "Frequently Asked Questions"

Paragon Appraisal Group is always prepared to handle any questions you might have about appraisals in San Francisco Bay Area and Contra Costa County. Contact Paragon Appraisal Group today to talk about how we can help solve your valuation problems.

What is an appraisal?
Describe what an appraiser does
What would cause me to request a real estate appraisal?
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's in an appraisal report?
After completing the appraisal, how can I have confidence that the value conclusion is legitimate?
What goes into an appraiser's certification?
Who employs appraisers?
Where does Paragon Appraisal Group get the information used to estimate values in Contra Costa County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Return to top)

An appraisal report is an inspection allowing the appraiser to come to an opinion of value. This opinion or estimate is arrived at by using a formal process that generally utilizes three "common approaches to value". One of them is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns discovering a comparison to other similar properties within a close vicinity which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residence. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to determine the market value of a property based on what an investor would pay based on the capital produced by the property.

Describe what an appraiser does   (Return to top)

An appraiser provides a fair and credible determination of market value, often in the context of a real estate exchange. Appraisers demonstrate their expert investigation in appraisal reports.


What would cause me to request a real estate appraisal?   (Return to top)

There are a lot of reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal report include:
  • To obtain a loan.
  • To lower your tax burden.
  • To build a case for a homeowner's equity and remove PMI.
  • To challenge high property taxes.
  • To settle an estate.
  • To give you a leg-up when purchasing a home.
  • To find the most probable sales price when selling real estate.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS require an appraisal on every property.
  • If you ever find yourself in a civil case.
Click here for a more detailed explanation of the process involved in getting an appraisal.


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

Home inspectors do not provide an opinion of value and do not use the same forms as appraisers. An inspection is a third-party evaluation of the accessible structure and appliances of a house, from the roof to the bottom. The archetypal house inspector's report will include an evaluation of the condition of the property's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and visible 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)?   (Return to top)

Frankly, it's like comparing broadband and dial-up. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are valid resources. The appraisal report will also include location and building values. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

The credentials of the person behind the report is actually the biggest difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, create CMA's. The appraisal is created by a licensed, certified professional who makes a living out of valuing properties. Moreover, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the real estate agent, whose income is tied to the value of the home.

What's in an appraisal report?   (Return to top)

Every appraisal must reflect a supported estimate of value and must 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 contained and a definition of that value.
  • The effective date of the appraisal.
  • Pertinent property characteristics, 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, 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 involved in the activity of completing the appraisal.
For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report


After completing the appraisal, how can I have confidence that the value conclusion is legitimate?   (Return to top)

In communicating an appraisal report, each appraiser must see to it that each of the items below are covered:
  • The appraisal contained an appropriate analysis of the information.

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

  • That appraisal services were delivered in a careful and cognizant manner.

  • The final appraisal report was easy to explain, credible and conclusive.
To become a state licensed appraiser, there are extensive education requirements as well as practical experience that must be logged. Plus, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Return to top) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. However, licensing and certification is commonly associated with many hours of classroom study, tests and experience working under a supervisory appraiser. Once licensed, he/she is required to take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who employs appraisers?   (Return to top)

Mortgage lenders are an appraiser's most likely client, needing their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does Paragon Appraisal Group get the information used to estimate values in Contra Costa County or other areas?   (Return to top)

One of the most important things an appraiser does is to compile data. Data can be categorized as either Specific or General. Specific data is gathered from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.

General data is gathered from a variety of places. To research recently sold homes to be used as "comps", an appraiser will often use the local Multiple Listing Service. To double-check actual sales prices, we look at items in the assessor's office and other public documents. Appraisers routinely 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 service.

And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.


What can a full appraisal do for me?   (Return 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. For those selling a home, you'll want to figure out the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. 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. Simply put, a home is often the single, largest financial asset anybody owns. Don't make decisions in the dark with a professional appraisal.


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

PMI is the common abbreviation for for Private Mortgage Insurance. It guards the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than what is owed on the loan. 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.

Did you have less than 20% to put down on your mortgage? Contact Paragon Appraisal Group today at (415) 626-3191. You may be able to get rid of your Private Mortgage Insurance premium.

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

The first step in most appraisals is the home 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 condition of its features. 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 outside walls.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • A survey or plot map of the property and building (if readily available).
  • Title policy that describes encroachments or easements.
  • Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
  • A list of "suggested" improvements when the property is being appraised "as complete".

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

For mortgage transactions, the lender orders 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 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.

The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may state how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can use the appraisal for any purpose.


Are some home improvements more worthwhile than others?   (Return to top)

The added value of a particular amenity truly depends on the local market. 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.

No matter where you go, however, renovating a kitchen is almost always a safe investment. 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 were second, returning 85%. Adding bedrooms and baths can also help the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.