LA Appraisals, LLC has answers to "Frequently Asked Questions"

LA Appraisals, LLC is always more than happy to address any inquiries you might have about appraisals or real estate in Traverse City and Grand Traverse County. Don't hesitate to contact us today.

What is an appraisal?
What does an appraiser do?
Why would I request your services?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What can I expect to see in my appraisal report?
After completing the appraisal, how can I have confidence that the final number is legitimate?
What goes into an appraiser's certification?
Who employs appraisers?
Where does LA Appraisals, LLC get the information used to estimate values in Grand Traverse County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal appointment
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?



What is an appraisal?   (Return to top)

The appraisal process is an estimation that produces an opinion of value. The real estate appraiser must use a few "approaches," typically three, to arrive at the estimation of market value. One of the methods is the Cost Approach - which is how much capital would be required to replace the improvements, less physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with finding similar houses in the vicinity and figuring out the value based on making a comparison of those prior sales to the property in question. Being the most commonly used approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a residential property. One of the least common approaches in appraising residential properties is the Income Approach, which is generally used to figure the market value of a property based on what an investor would pay based on the income produced by the building.

What does an appraiser do?   (Return to top)

An appraiser produces a fair and credible determination of market value, to be used in making real estate transactions. Appraisers illustate their expert analysis in appraisal reports.


Why would I request your services?   (Return to top)

There are a lot of reasons to obtain an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for purchasing an appraisal report include:
  • If you are applying for a loan.
  • To reduce your tax burden.
  • To build a case for a homeowner's equity and remove PMI.
  • To contest inflated property taxes.
  • To handle an estate.
  • To offer you a leg-up when purchasing a home.
  • To find the most probable sales price when selling real estate.
  • To protect 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 house.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
Click here for a more detailed explanation of the process of getting an appraisal.


Is an appraisal the same as a home inspection?   (Return to top)

The appraiser is not a home inspector and does not do a comprehensive home inspection. The purpose of a home inspection is to evaluate the structure of the property from bottom to top. The archetypal house inspector's report will contain an evaluation of the condition of the home'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 apples and oranges. The CMA relies on indistinct local market trends. An appraisal relies on comparable sales that can be verified by public record. Location and architectural values are also precedent in an appraisal. 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.

Who's behind the report is actually the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, Michigan licensed professional who has formed a career on valuing homes in and around Grand Traverse County is behind the appraisal. 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 flat fee for work they perform, regardless of their outcome.

What can I expect to see in my appraisal report?   (Return to top)

Each appraisal must indicate a credible value opinion and must document the following:
  • The client and other intended users.
  • The intended use of the appraisal.
  • 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!)
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights 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 items.
  • 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 included in the activity of completing the appraisal.
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report

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

In the documentation of an appraisal, each appraiser must ensure the following:
  • That the information analysis implemented in the appraisal was proper.

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

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

  • The final appraisal report was easy to explain, credible 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 end goal of being able 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 working up an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Return to top) Licensing and certification is achieved through classroom study, tests and experience working under a supervisor. Once licensed, he or she is required to complete 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 typical client, requiring their services to ensure property involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does LA Appraisals, LLC get the information used to estimate values in Grand Traverse County or other areas?   (Return to top)

Collecting information is one of the main things an appraiser performs. Data can be categorized as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.

General data is collected from a number of places. To find out about 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. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.

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

Why should I hire a licensed appraiser?   (Return to top)

If you're involved in some sort of financial decision and the value of your home matters, you'll want to hire a licensed appraiser. 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. For people settling an estate or divorce, an appraisal from LA Appraisals, LLC is the best documentation to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

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

PMI is short for for Private Mortgage Insurance. This additional policy protects the lender in case a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan. Once you reach the point where your home's equity plus the amount you've paid is at least 20% of your loan balance, you can have your PMI dropped.

Did you secure your mortgage with less than 20% down? Contact LA Appraisals, LLC today at (231) 995-8865. You may be able to get rid of your Private Mortgage Insurance premium.

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

The first step in most appraisals is the home inspection. During this process, we will come to your home and measure it, determine the layout of the rooms inside, confirm all aspects of the home's general condition, and take several photos of your house for inclusion in the report. Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. In the yard, trim any bushes so we can be free to get an accurate measurement of outside walls.

To help speed things along as well as ensure a more accurate report, try if possible to have the following items:
  • Any records on the purchase of the property for the last three years.
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • 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"?   (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."

Does the appraisal belong to the bank or the consumer?   (Return to top)

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 certainly entitled to a copy of the appraisal - 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 do whatever they want with the appraisal.

I want to get more for my house. Where should I spend money renovating?   (Return to top)

It really depends on the 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. 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, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.