REID E. CHOATE & ASSOCIATES, LLC has answers to "Frequently Asked Questions"

REID E. CHOATE & ASSOCIATES, LLC is always eager to address any questions you might have about appraisals or real estate in Pahoa and Hawaii County. Contact us today to see how we can help you with your specific valuation problems.

Describe an appraisal
Describe what an appraiser does
What would cause me to request services from REID E. CHOATE & ASSOCIATES, LLC?
How is an appraisal different than a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Once the report has been completed, how can I have assurance that the value indicated is accurate?
What does it mean for an appraiser to be licensed?
Who do appraisers work for?
Where does an appraiser get the data used to estimate values in Hawaii 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?
Does the appraiser need anything from the homeowner in advance?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?



Describe an appraisal   (Back to top)

The appraisal process is an evaluation that leads to an opinion of value. There are three "common approaches to value" which helps the appraiser arrive at this opinion or valuation. The Cost Approach is one of the processes that appraisers use to find the value of a property; it involves concluding what the improvements would cost without physical depreciation, adding the land value. Another of the approaches is the Sales Comparison Approach - which concerns making a comparable analysis to other similar properties within a close proximity which have recently sold. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. The third approach is the Income Approach, which is the best method in appraising income producing properties - it deals with estimating what an investor would pay based on the capital produced by the property.

Describe what an appraiser does   (Back to top)

An appraiser generates an impartial and well justified opinion of market value, to be used in making real estate transactions. Appraisers show their professional analysis in appraisal reports.


What would cause me to request services from REID E. CHOATE & ASSOCIATES, LLC?   (Back to top)

There are many reasons to obtain an appraisal from REID E. CHOATE & ASSOCIATES, LLC with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an report include:
  • To receive a loan.
  • To lower your tax burden.
  • To show a homeowner has 30% equity and remove Primary Mortgage Insurance.
  • To challenge improperly assessed property taxes.
  • To handle an estate.
  • To offer you a leg-up when purchasing real estate.
  • To determine a reasonable price when selling real estate.
  • 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 require an appraisal on every property.
  • If you ever find yourself in a lawsuit.
Click here for a more extensive explanation of the process about getting an appraisal.


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

The appraiser is not a home inspector and he or she does not do a full home inspection. An inspection is a third-party investigation of the accessible structure and electrical and mechanical systems of a house, from the roof to the bottom. Generally, a home inspection report will explain the amenities and the necessities of the property: air conditioning (weather permitting), electrical systems, 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 other visible structures.

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

Simply put, it's apples and oranges. What the CMA relies upon are vague trends. Appraisals use similar sales which are valid resources. In addition, the appraisal looks at other factors like condition, area and replacement prices. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

The credentials of the person behind the report is hands down the biggest difference between a CMA and an appraisal. A CMA is created by a real estate agent who may or may not have a true grasp of the market or valuation concepts. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an unbiased voice, with no conditional interest in the property's value, unlike the agent, who gets a commission based upon the price of the home.

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

Each report should indicate a supported value opinion and must clearly state the following:
  • The client and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The purpose of the assignment.
  • The type of value reported and a definition of that value.
  • The effective date of the value opinion.
  • Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic factors, the property rights valued, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations 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.
  • What was involved in the activity of completing the job.
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report


Once the report has been completed, how can I have assurance that the value indicated is accurate?   (Back to top)

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

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

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

  • The final appraisal report was easy to explain, credible and not easily discredited.
There are intense classroom and real world experience requirements that must be met in order to get an appraisal license in Hawaii. Likewise, appraisers must abide by a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Licensing and certification is achieved through classroom study, tests and practical experience. Once an appraiser is licensed, he or she is required to engage in continuing education courses so the license remains current. To see the specific requirements for any state click here.

Who do appraisers work for?   (Back to top)

Mortgage lenders are an appraiser's typical client, requiring their services to ensure real estate involved in a mortgage transaction is enough to cover a loan balance in the case of default. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Hawaii County or other areas?   (Back to top)

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

General data is collected from a number of places. To look up recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To double-check actual sales prices, we research tax records and other public documents. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.

And most importantly, the appraiser assimilates 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)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. 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. 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?   (Back to top)

PMI is the common abbreviation for for Private Mortgage Insurance. This supplementary policy covers the lender in case a borrower doesn't pay on the loan and the value 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.

Did you secure your mortgage with less than 20% down? Call REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238. You may be able to cancel your Private Mortgage Insurance premium.

Does the appraiser need anything from the homeowner in advance?   (Back to top)

We start 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 status of its features. Inside, make sure it is clutter free and that we can get to things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.

You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
  • Records on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the building.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • A list of any major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".

How does an appraiser define "Market Value"?   (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 orders 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 certainly 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can use the appraisal for any purpose.


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

The answer to this is different depending upon the location of the home. 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.

As a rule, the best ROI from renovating a home comes in the kitchen. 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%. On the contrary, an improvement that may not add value would be painting just for the sake of redecorating.

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