Arizona requires appraisers to be state licensed or certified in order to provide appraisals to federally regulated lenders. In Arizona, appraisers must first have a college degree; this is usually in a related area such as real estate law, finance, mathematics, economics or computer science. They then must complete qualifying real property appraisal courses from a state-approved school and complete an appraisal apprenticeship under a qualified registered supervisor who meets Arizona statute requirements. Appraisers must meet the Uniform Standards of Professional Appraisal Practice (USPAP) and are required to pass a national examination. Education and experience must be completed and the application must be approved by the Arizona Board of Appraisal before the examination may be taken. In addition, the State of Arizona requires all appraisers to be fingerprinted and go through a criminal background check administered by the Arizona Department of Safety. To maintain certification, an Arizona appraiser must complete 28 hours of state-approved courses every two years. A certified appraiser is the highest level of authorization. Certified appraisers are allowed to appraise any residential property, in any price range, of any size and complexity.
Most appraisals begin with a home inspection and, understandably, that makes some people nervous. So first, stop and breathe! Appraisers are not looking to see whether your home passes the white glove test. Rather, they are looking at the overall structure and its features.
During a typical home inspection, the appraiser will measure the square footage of your home, determine the layout of the rooms, confirm all aspects of the home’s general condition, note any special amenities, and take numerous photos of both the inside and outside. The best thing you can do to is to make sure that the appraiser has easy access to your home’s interior and exterior and can move about easily. Move any items that would make it difficult to measure your home.
Before issuing a report, an appraiser may also ask for any surveys that have been conducted of the house and property, deeds or title reports showing the legal description, recent tax bills, a list of furniture or other personal property to be sold with the home, a copy of the original plans or a list of recent renovations or improvements. When these special requests are made, producing the documents quickly will speed up the appraisal process.
In Maricopa County, the best investments are in renovating or upgrading kitchens and bathrooms. Dollar for dollar, improvements made to these rooms yield the highest return on investment and attract the most attention from buyers. Other amenities – such as new paint and flooring, installation of solar panels, or adding a pool, fire pit, jacuzzi or gazebo – may also increase value and help a home sell quicker, but owners usually make only a small percentage of their money back from these improvements.
Beyond providing a professional estimate of value, an appraisal should identify:
- Scope of Work – Each report should state the client’s identifying information and property address, followed by the purpose and type of appraisal. Included in scope of work is the process the appraiser uses to complete a detailed and accurate appraisal. The appraiser states the client’s intended use and whether the report will be shared with other parties.
- Type of Approach – A certified residential real estate appraisal should include the type of approach the appraiser uses to determine value of the property (for example: market value, historical value, salvage value, replacement cost, etc.), along with the type of valuation used. For each type of valuation, the appraiser should discuss why the approach is applicable to this particular real estate situation.
- Property Description – All residential appraisals should contain a detailed physical, legal and economic description of the property being appraised. This includes property boundaries, lot size, square footage, layout of rooms, exterior and interior building features and other unique items used to distinguish the appraised property over others. The appraiser should also disclose all known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances and other items of a similar nature. Photographs and/or blueprints are often included in this documentation.
- Valuation Conclusions – The report should document support for the valuation produced, including geographic market area and selling prices of comparables or “comps” of residential properties similar to the one being appraised. While no two properties are identical, the comps should be of similar lot size, neighborhood type and square footage.
- Relevant Dates – The report should contain inspection dates, the date the property was constructed, dates of additions or other major changes to the property, the effective date of the valuation and other notable dates.
- Signed Certification – Each report should state the qualifications of the appraiser and the appraiser’s signature certifying that his or her work is true and correct, contains all relevant information and represents an unbiased opinion.
- Fair market value (FMV) is tied to the economic concept of supply and demand. It is the price that a particular home or parcel of property should sell for in an open and competitive marketplace. To simplify further, it is the most competitive price a buyer is willing to pay and the lowest price a seller is willing to accept. FMV fluctuates based on how many properties are for sale in a particularly desirable area.
- Appraised value is the valuation of a property as determined by a licensed or certified real estate appraiser based on that person’s knowledge, experience and research of worth, including fair market value and other factors. An appraiser does not establish market value, but rather reports market value. Because an appraiser provides an independent, unbiased opinion of value, lenders rely on appraisers to validate the amount of a loan sought by a borrower, justifying whether there is enough collateral available for the lender’s comfort. An appraiser’s report is private.
- Assessed value is determined by the local property valuation administrator. In the greater Phoenix Metropolitan Area, this is the Maricopa County Assessor’s Office. The assessor gathers the general characteristics of each property in the county (property location, lot size, square footage, etc.) and looks at what price that parcel of property sold for recently. Note that the assessed value of home is available to the general public, so anyone can access this valuation.
As stated above, appraisal reports are not public documents. They are owned by the people who order them and anyone they instruct to have copies. In the majority of real estate transactions, the appraisal is ordered by the lender. While the home buyer pays for the report as part of the loan process, the lender retains the right to use the report and any information it contains. The home buyer is entitled to a copy of the report – it is included with other closing documents – but is not entitled to use the report for any other purpose without permission from the lender. In other transactions, the appraisal report is ordered by an individual or business. In these cases, the client may use the appraisal for a variety of purposes – from settling a divorce to estate planning to investment purposes. The appraiser cannot disclose the report to any outside parties without permission from the client who ordered it.
An appraiser draws upon multiple sources of data to help in establishing value. Data is gathered from the home or property itself, including location, condition, amenities, lot size, home size and proximity to desirable schools and other public facilities. Data is gathered from local multiple listing services (MLS) that provide information on recently sold homes that might be used as comparable properties. Tax records and other public documents are used to verify actual sales prices in a market. Government documents may be accessed to gather information about flood zones, for example. Engineering reports may be used to identify geological features on the property. Most importantly, the appraiser draws upon a wealth of data from his or her own personal experience and knowledge gleaned from writing appraisals for other properties in the same market.
PMI insures a lender against potential loss on homes purchased with a down payment of less than 20 percent. Once equity in a home reaches 20 percent, you can usually eliminate the need for PMI. To remove PMI on your loan, contact your mortgage company and ask what would be needed to satisfy its requirements. Every mortgage company is different so it is best to get information in writing. At this point, you can have your home appraised to determine if you have enough equity to quit paying for PMI and start saving money!
A CMA relies on overall market trends and delivers a “ball park figure” of worth. By comparison, an appraisal relies on specific, verifiable comparable sales and looks at a variety of factors such as condition, location, layout and construction costs. An appraisal delivers a defensible and carefully documented opinion of value. In addition, a CMA is often generated by a realtor who may or may not have a realistic grasp of the market or valuation concepts. The appraisal is created by a licensed professional appraiser who has made a career out of valuing properties. Furthermore, the appraiser is an independent voice, with no vested interest in the value of a property. A realtor’s income is tied to the perceived value of the home he or she is evaluating and helping to sell.
While both the appraiser and home inspector visually inspect a home to look for apparent or observable deficiencies and signs of neglect that could affect value, an appraiser does not test mechanical systems and major appliances. The appraiser’s job is to formulate an opinion of the property’s value. In the case of purchasing of a home and obtaining a loan, an appraisal protects the lender from paying more than the home is worth. A home inspector’s job is to protect the prospective buyer from purchasing a home with structural defects and other major problems, so that there are no hidden costly surprises. A home inspector’s report will usually include an evaluation of the home’s heating, cooling, electrical and plumbing systems; roof, attic, walls, ceilings, floors, windows, doors, foundation, basement, fireplace and other structures; and oven, stove, refrigerator, microwave, washing machine, dryer and other appliances. A home inspector determines if the home needs repairs and if there are any health or safety concerns.
Our certified appraisers bring over a decade of knowledge, experience, reliability and trust to every transaction. In doing so, we help clients make sound decisions with regard to real property. We stand 100 percent behind the appraisals we write, and – when required – will go to court to defend our estimations. We also work diligently to meet clients’ needs and deadlines. Thank you for considering our firm!