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

REID E. CHOATE & ASSOCIATES, LLC is always ready to handle any concerns you might have about appraisals or real estate in Hawaii County. Don't hesitate to contact us today.

Define the term "Appraisal"
What does an appraiser do?
What are the reasons someone would require a real estate appraisal?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
After completing the appraisal, how can I have assurance that the value indicated is trustworthy?
What are the requirements to be a certified appraiser?
Who are an appraiser's customers?
Where does an appraiser get the information used to estimate values in Hawaii County or other areas?
Why should I hire a licensed appraiser?
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 does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?

Define the term "Appraisal"   (See list of FAQ's)

An appraiser provides an estimation that produces an opinion of value. The real estate appraiser will use a several "approaches," typically three, to come to 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 home, less the age and physical deterioration, adding the land value. The Sales Comparison Approach involves finding similar homes in close proximity and discovering the value based on comparing those homes to the house being appraised. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a house. The Income Approach is primarily used for determining the market value of income-producing properties based on what an investor would pay based on the amount of capital a property would bring in.

What does an appraiser do?   (See list of FAQ's)

An appraiser provides an impartial and well supported assessment of market value, to be used in making real estate transactions. Appraisers reveal the details of their professional findings in appraisal reports.

What are the reasons someone would require a real estate appraisal?   (See list of FAQ's)

There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for getting an appraisal include:
  • If you are applying for a loan.
  • If you would like to lower your property tax burden.
  • To show a homeowner has 30% equity and remove PMI.
  • To fight high property taxes.
  • If you need to take care of an estate.
  • To offer you an edge when purchasing real estate.
  • To determine a reasonable sales 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.
  • It's possible you could be involved in a lawsuit - an appraisal will definitely help.
If you need a more detailed explanation of the appraisal process, please click here.

How is an appraisal different than a home inspection?   (See list of FAQ's)

Appraisers do not do perform residential property inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the house, from the roof to the foundation. For the most part, a home inspection report will evaluate the amenities and the necessities of the house: 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.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (See list of FAQ's)

To be honest, they share nothing in common. The CMA depends on vague local market trends. Appraisals use comparable sales which are valid resources. The appraisal report will also include location and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

But the largest differentiator is the person doing the report. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. The appraisal is created by a licensed, certified professional who makes a living 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 collect only a previously agreed upon fee for work they perform, regardless of their value conclusion.

What are the contents of an appraisal report?   (See list of FAQ's)

Each appraisal must reflect a supported estimate of value 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 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.
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic attributes, the real property interest valued, and non-real estate items included in the valuation, 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 the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work considered while working up the job.
For a more detailed look at all that goes into an appraisal report click here: Sample Appraisal Report

After completing the appraisal, how can I have assurance that the value indicated is trustworthy?   (See list of FAQ's)

In communicating an appraisal report, each appraiser must make sure of the following:
  • That the information analysis utilized in the appraisal was proper.

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

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

  • That a credible, supportable appraisal report was communicated.
There are intense classroom and practical experience requirements that must be adhered to in order to achieve the designation of "licensed appraiser" in Hawaii. In addition, appraisers must follow a stringent industry code of ethics and observe national standards of practice for real estate appraisal. The rules for working up an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (See list of FAQ's) Regulations regarding licensing and certification vary from state to state. However, licensing and certification typically translates to many hours of classroom study, tests and real world experience. Once an appraiser is licensed, he or she must then complete continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (See list of FAQ's)

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

Where does an appraiser get the information used to estimate values in Hawaii County or other areas?   (See list of FAQ's)

One of the primary things an appraiser does is to collect property data. Data can be described as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.

General data is gathered from a many places. To look up recently sold homes to be used as "comps", we typically use the local Multiple Listing Service. To verify actual sales prices, we use tax records and other public documents. Appraisers often 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 service.

And last but not least, the appraiser gathers general data from his or her past experience in doing assignments for other houses in the same market.

Why should I hire a licensed appraiser?   (See list of FAQ's)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. 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. Don't make decisions in the dark with a professional appraisal.

My mortgage statement has an item on it for PMI? Can I get rid of that?   (See list of FAQ's)

PMI is short for for Private Mortgage Insurance. This added plan covers the lender if a borrower defaults on the loan and the value of the house is less than the balance of 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.

The savings from dropping your PMI will make up for the cost of the appraisal in no time. Nobody is more qualified than REID E. CHOATE & ASSOCIATES, LLC when it comes to analyzing real estate appreciation in Pahoa and Hawaii County. Contact us today.

Should I do anything in advance of the appraisal inspection   (See list of FAQ's)

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 status of its amenities. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and move any items that would make it difficult to measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.

You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
  • A survey or plot map of the property and building (if readily available).
  • 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.
  • Home 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".

What does "Market Value" mean?   (See list of FAQ's)

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."

Does the appraisal belong to the bank or the consumer?   (See list of FAQ's)

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 situations, the appraiser may stipulate 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.

Which home renovations add the most to the price?   (See list of FAQ's)

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 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, an improvement that may not increase your value would be painting just for the sake of redecorating.

Got a Question?

Do you have a question relating to real estate appraisals? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.

Your Information
Your Question