R2 Appraisal, Inc. has answers to "Frequently Asked Questions"

R2 Appraisal, Inc. is always eager to talk to you about any questions you might have about appraisals or real estate in King County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
Why would someone require your services?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What does the appraisal report contain?
Once the report has been delivered, how can I have certainty that the value indicated is accurate?
How hard is it to become certified?
Who engages the services of appraisers?
Where does R2 Appraisal, Inc. get the information used to estimate values in King County or other areas?
Why do I need a professional appraisal?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?

Describe an appraisal   (Go to list of  questions)

An appraiser performs an evaluation that generates an opinion of value. The appraiser must use a several "approaches," typically three, to draw up the estimation of market value. The Cost Approach is one of the processes that real estate appraisers use to find the value of a property; it involves discerning what the improvements would cost minus physical depreciation, plus the land value. The most common approach in finding the value of a house is the Sales Comparison Approach which concerns concluding a comparison to comparable houses nearby. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a residential property. The Income Approach is mainly 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?   (Go to list of  questions)

An appraiser produces a fair and credible opinion of market value, in the support of real property transactions. Appraisers summarize their professional conclusions in appraisal reports.

Why would someone require your services?   (Go to list of  questions)

There are many reasons to get an appraisal from R2 Appraisal, Inc. with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax obligations.
  • To show a homeowner has 30% equity and remove Primary Mortgage Insurance.
  • To fight high property taxes.
  • To settle an estate.
  • To give you a leg-up when purchasing real estate.
  • To determine an honest property value 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.
  • Government agencies such as the IRS need an appraisal on every property.
  • If you are ever involved in a civil case.
Click here for a more detailed explanation of the process involved in getting an appraisal.

How is an appraisal different than a home inspection?   (Go to list of  questions)

The appraiser is not a home inspector and does not do a full home inspection. The purpose of a home inspection is to evaluate the structure of the property from bottom to top. Usually, a home inspection report will evaluate the amenities and the requirements of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible 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)?   (Go to list of  questions)

Frankly, it's apples and oranges. The CMA utilizes market trends to generate most of their business. An appraisal is based on comparable sales that can be verified by public record. Also, the appraisal verifies other factors like condition, area and replacement costs. 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.

But the biggest difference is the person creating the report. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, state licensed professional who made a career on valuing properties in and around King County is behind the appraisal. Moreover, the appraiser is an independent voice, with no conditional interest in the value conclusion, unlike the agent, who gets a commission based upon the price of the home.

What does the appraisal report contain?   (Go to list of  questions)

Each appraisal should demonstrate a credible value opinion and will document the following:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • The intended use of the appraisal.
  • The appraisal's purpose.
  • The type of value contained and a definition of that value.
  • The effective date of the value opinion.(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 description, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible factors.
  • Any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, and the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work considered when completing the appraisal.
For a more comprehensive view of what goes into an appraisal report click here: Sample Appraisal Report

Once the report has been delivered, how can I have certainty that the value indicated is accurate?   (Go to list of  questions)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal contained analysis of the data.

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

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

  • The final appraisal report was clear, sound and not easily discredited.
To become a state licensed appraiser, there are strenuous education requirements as well as real world experience that must be logged. In addition, appraisers must abide by a strict industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for developing an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Go to list of  questions) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once an appraiser is 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 engages the services of appraisers?   (Go to list of  questions)

Commonly, appraisers are hired by lenders to render a value opinion on real estate involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does R2 Appraisal, Inc. get the information used to estimate values in King County or other areas?   (Go to list of  questions)

One of the main tasks an appraiser performs is to compile property data. Data can be classified as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specific data are noted by the appraiser while on site.

General data is collected from a numerous sources. Local Multiple Listing Services (MLS) have data on recently sold homes that could be used as comparables. To verify actual sales prices, we research items in the assessor's office and other public documents that are usually online nowadays. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.

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?   (Go to list of  questions)

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 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. Without knowing its real value, wise financial decisions are impossible.

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

PMI is short for for Private Mortgage Insurance. This supplementary policy covers the lender in the event a borrower is unable to pay on the loan and the market price of the property 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 real estate appreciated since you first purchased? Contact R2 Appraisal, Inc. today at (206) 522-1475. You may be able to cancel your Private Mortgage Insurance payment.

How do I get ready for the appraiser?   (Go to list of  questions)

We begin 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house . Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.

To help speed things along plus ensure a more accurate report, attempt if possible to have the following items:
  • A plot plan or survey of the house and land (if readily available).
  • List of personal property to be sold with the building.
  • Most recent real estate tax bill from King and or legal description of the property.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
  • A list of "proposed" improvements if the property is to be appraised "as complete".

How does an appraiser define "Market Value"?   (Go to list of  questions)

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?   (Go to list of  questions)

In most real estate transactions, the appraisal is ordered by the lender. 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 appraisal - it's usually included with all the other closing documents - but is not entitled 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 cases, the appraiser may define 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.

Are some home improvements more worthwhile than others?   (Go to list of  questions)

The added value of a particular amenity truly depends on the local market. For example, putting in 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 were second, yielding 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.