Frandsen Appraising has answers to "Frequently Asked Questions"

Frandsen Appraising is always willing to address any questions you might have about appraisals in Sandy and Salt Lake County. Feel free to contact us today.

What is an appraisal?
What does an appraiser do?
What would cause me to require your services?
Is an appraisal the same as a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Once the report is done, how can I have a guarantee that the final number is valid?
What goes into an appraiser's certification?
Who are an appraiser's customers?
Where does an appraiser get the information used to estimate values in Salt Lake County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
Does the appraiser need anything from the homeowner in advance?
How does an appraiser define "Market Value"?
Who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Back to top)

An appraiser performs an estimation that leads to an opinion of value. This opinion or estimate is concluded using a formal process that typically utilizes three "common approaches to value". The Cost Approach is one of the methods that real estate appraisers use to find value; it involves concluding what the improvements would cost less physical deterioration, plus the land value. Easily the most common approach in figuring the value of a home is the Sales Comparison Approach which involves concluding a comparison to similar houses nearby. Being the most popular approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a residential property. The third approach is the Income Approach, which is the most important method in appraising income producing properties - it involves estimating what an investor would pay based on the money produced by the property.

What does an appraiser do?   (Back to top)

An appraiser forumlates an impartial and well justified opinion of market value, to be used in making real estate transactions. Appraisers illustate their investigation in appraisal reports.


What would cause me to require your services?   (Back to top)

There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for purchasing an report include:
  • To obtain a loan.
  • If you would like to lower your property tax obligations.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove PMI.
  • To contest inflated property taxes.
  • If you need to settle an estate.
  • To provide you a leg-up when purchasing real estate.
  • To figure out the most probable 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 an official agency such as the IRS requires it.
  • If you ever find yourself in a civil case.
Click here for a more detailed explanation of the process involved in getting an appraisal.


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

The appraiser is not a home inspector and does not do a complete home inspection. The point of a home inspection is to evaluate the structure of the property from foundation to attic. Commonly, a home inspection report will explain the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

Is an appraisal the same as a comparative market analysis(CMA)?   (Back to top)

To be blunt, it's like comparing opera to country. The CMA uses market trends to conduct most of their business. An appraisal relies on comparable sales that can be validated by records. In addition, the appraisal checks other factors like condition, location and construction costs. The CMA will provide a non-specific figure. An appraisal delivers a defensible and carefully documented opinion of value.

The person creating the report is hands down the biggest difference between a CMA and an appraisal. Real estate agents produce CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, Utah licensed professional who has formed a career on valuing real estate in and around Salt Lake County is behind the appraisal. Moreover, the appraiser is an unbiased party, with no vested interest in the value of a home, unlike the agent, who gets a commission based upon the value of the home.

What are the contents of an appraisal report?   (Back to top)

The main purpose of an appraisal report is to provide a value opinion, and depending on the scope of the report, you'll usually see the following:
  • The client and whose purposes the appraisal is to serve.
  • The intended use of the appraisal.
  • 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 description, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the appraisal, such as personal property, trade fixtures 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 when completing the appraisal.
For a more detailed look at what goes into an appraisal report click here: Sample Appraisal Report

Once the report is done, how can I have a guarantee that the final number is valid?   (Back to 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 report, nor any material details left out.

  • That appraisal services were delivered in a careful and judicious fashion.

  • The final appraisal report was easy to explain, credible and conclusive.
There are intense education and experience requirements that must be fulfilled in order to achieve the title of "licensed appraiser" in Utah. In addition, appraisers must stick to a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The tenets for working up an appraisal and reporting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Back to top) Licensing and certification is achieved through classroom study, tests and experience working under a supervisor. Once an appraiser is licensed, he/she must then complete continuing education courses so the license remains up to date. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (Back to top)

Mortgage lenders are an appraiser's typical customer, using their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

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

Gathering information is one of the primary roles of an appraiser. Data can be divided into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is received from a many places. To research recently sold homes to be used as "comps", an appraiser will typically use the local Multiple Listing Service. To verify actual sales prices, we research tax records and other public documents. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood system.

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

What can a full appraisal do for me?   (Back to top)

An appraisal is a valuable tool anytime the value of your home is pertinent to some financial decision. When selling your home, an appraisal helps you set a price that maximizes profit and reduces time on the market. 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. Simply put, a home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.

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

PMI stands for Private Mortgage Insurance. This additional plan guards the lender in case a borrower defaults on the loan and the value of the house is lower than what is owed on 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 amount you keep from dropping your PMI will make up for the cost of the appraisal in a matter of months. Frandsen Appraising is in the business of tracking real estate value trends in Sandy and Salt Lake County. Contact us today.

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

We begin 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 amenities. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to appliances like furnaces and water heaters.

You can make things 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 available).
  • Information on any written private easements, such as a shared driveway with a neighbor.
  • Most recent real estate tax bill from Salt Lake and or legal description of the property.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and your well.
  • 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."

Who actually owns the appraisal report?   (Back to top)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 report - 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.

It's different when it's the homeowner engaging the appraiser for things outside securing a mortgage. 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 stated otherwise, the home owner can do whatever they want with the appraisal.

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

Like all things real estate, this is dependent on a home's location. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

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 were second, returning 85%. On the contrary, work that may not increase your value would be painting just for the sake of redecorating.