Bailey Valuation and Consulting has answers to "Frequently Asked Questions"

Bailey Valuation and Consulting is willing to handle any questions you might have about appraisals in Maricopa County. Contact us today to talk about how we can help you with your specific valuation problems.

What is an appraisal?
What does an appraiser do?
What are the reasons I would request your services?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What does the appraisal report contain?
Once the assignment is done, what guarantee is there that the value conclusion is legitimate?
What goes into an appraiser's certification?
Who employs appraisers?
Where does Bailey Valuation and Consulting get the information used to estimate values in Maricopa County or other areas?
What can a full appraisal do for me?
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 appointment
Define "Market Value"
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Top)

The process of producing an appraisal report consists of an estimation which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or estimate. One of them is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, plus the land value. Easily the most common approach in finding the value of a house is the Sales Comparison Approach which deals with figuring a comparison to similar houses close by. Usually, the Sales Comparison Approach is the most accurate indicator of market value of a home. One of the least common approaches in appraising houses is the Income Approach, which is generally used to determine the value of a property based on what an investor would pay based on the income produced by the building.

What does an appraiser do?   (Top)

An appraiser generates an objective and well justified assessment of market value, to be used in making real estate transactions. Appraisers present their findings in appraisal reports.


What are the reasons I would request your services?   (Top)

There are many reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for getting an appraisal report include:
  • If you are applying for a loan.
  • To reduce your tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To challenge inflated property taxes.
  • To settle an estate.
  • To give you a leg-up when purchasing a home.
  • To determine a reasonable price when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS require an appraisal on every home.
  • If you are ever involved in a civil case.
If you need a more detailed explanation of the appraisal process, please click here.


How is an appraiser different than a home inspector?   (Top)

The appraiser is not a home inspector nor does he/she do a comprehensive home inspection. The purpose of a home inspection is to investigate the structure of the property from foundation to rooftop. The standard house inspector's report will contain an evaluation of the integrity of the house's heating systems, 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.

Is an appraisal the same as a comparative market analysis(CMA)?   (Top)

Frankly, it's like comparing opera to country. The CMA utilizes market trends to conduct most of their business. Appraisals use comparable sales which are verifiable resources. Location and construction values are also precedent in an appraisal. The CMA will provide a non-specific figure. Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

But the biggest difference is who's behind the report. Real estate agents write 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 has made a career out of valuing properties. Moreover, the appraiser is an independent party, with no conditional interest in the value of a home, unlike the agent, who gets a commission based upon the price of the home.

What does the appraisal report contain?   (Top)

Every appraisal should indicate a supported estimate of value and will clearly state the following:
  • The client and other intended users.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • The type of value contained and a definition of the value reported.
  • The effective date of the value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Pertinent property attributes, including: location, physical characteristics, legal attributes, economic factors, the property rights 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.
  • 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 used to complete the job.
For a more detailed look at all that goes into an appraisal report click here: Sample Appraisal Report


Once the assignment is done, what guarantee is there that the value conclusion is legitimate?   (Top)

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

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

  • That appraisal services were provided in a careful and conscientious manner.

  • That a trustworthy, substantiated appraisal report was communicated.
There are rigorous classroom and experience requirements that must be fulfilled in order to achieve the title of "licensed appraiser" in Arizona. In addition, appraisers must follow a strict industry code of ethics and observe national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Top) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification is most often associated with many hours of coursework, tests and experience working under a supervisor. Once an appraiser is 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?   (Top)

Most of the time, appraisers are called upon by lenders to render a value opinion on property involved in a loan transaction - to make sure the property is truly adequate collateral for the loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.

Where does Bailey Valuation and Consulting get the information used to estimate values in Maricopa County or other areas?   (Top)

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

General data is received from a variety of places. To find out about recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. To verify actual sales prices, we research tax records and other public documents. Appraisers often need to report when a property is in a flood zone, so that information is retrieved from a FEMA data outlet such as a la mode's InterFlood service.

And most importantly, the appraiser assimilates general data from his or her collective knowledge gained from doing assignments for other properties in the same market.


What can a full appraisal do for me?   (Top)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, you can avoid overpaying by getting an independent appraisal. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.


My mortgage statement has an item on it for PMI? Can I get rid of that?   (Top)

PMI is an acronym for Private Mortgage Insurance. It guards the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what is owed 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.

The savings from dropping your PMI pays for the appraisal in no time. Nobody is more qualified than Bailey Valuation and Consulting when it comes to analyzing real estate appreciation in Tempe and Maricopa County. Contact us today.

Should I do anything in advance of the appraisal appointment   (Top)

We start with an inspection of the home. During this process, the appraiser 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. 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 shrubs and relocate any items that would make it difficult to measure the structure. Indoors, make sure we can easily access appliances like furnaces and water heaters.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Information on any written private easements, such as a shared driveway with a neighbor.
  • A list of any personal property that is part of the home and you intend to be sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
  • A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.

Define "Market Value"   (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?   (Top)

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 certainly entitled to a copy of the report - it's usually bundled 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 engaging the appraiser for things outside securing a mortgage. In these situations, the appraiser may state the purpose of the appraisal; 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?   (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 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.