AppraiseRite, LLC has answers to "Frequently Asked Questions"

AppraiseRite, LLC is always eager to talk to you about any questions you might have about appraisals or real estate in Aurora and Arapahoe County. Don't hesitate to contact us today.

What is an appraisal?
What does an appraiser do?
What are the reasons I would request services from AppraiseRite, LLC?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Once the appraisal has been delivered, how can I have certainty that the final number is legitimate?
What does it mean for an appraiser to be licensed?
Who employs appraisers?
Where does an appraiser get the data used to estimate values in Arapahoe County or other areas?
How can a licensed appraiser help me?
What exactly is PMI and how can I get rid of it?
Do you need anything from me in advance?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?

What is an appraisal?   (See list of FAQ's)

An appraiser performs an estimation that generates an opinion of value. This opinion or estimate is arrived at using a formal process that generally uses the three main "common approaches to value". The Cost Approach is one of the processes that real estate appraisers use to find value; it involves discerning what the improvements would cost less physical depreciation, plus the land value. Another of the methods is the Sales Comparison Approach - which involves making a comparable analysis to other similar properties within a close proximity which have recently sold. Being the most popular approach, the Sales Comparison Approach is generally the most precise and best indicator of market value for a house. The third approach is the Income Approach, which is the best method in appraising income producing properties - it involves estimating what an investor would pay based on the capital produced by the property.

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

An appraiser provides an impartial and well substantiated opinion of market value, to be used in making real estate transactions. Appraisers summarize their professional conclusions in appraisal reports.

What are the reasons I would request services from AppraiseRite, LLC?   (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. Other reasons for purchasing an report include:
  • If you are applying for a loan.
  • If you would like to lower your property tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
  • To contest high property taxes.
  • To deal with an estate.
  • To provide you a leg-up when purchasing real estate.
  • To determine the most probable sales price when selling real estate.
  • 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.
  • If you ever find yourself in a lawsuit.
For a more detailed description of the appraisal process click here.

What is the difference between an appraisal and a home inspection?   (See list of FAQ's)

Home inspectors do not figure out an opinion of value and are not appraisers. The purpose of a home inspection is to investigate the structure of the property from foundation to attic. The general home inspector's report will contain an evaluation of the condition of the house's heating systems, central air conditioning system (temperature permitting), interior plumbing and electrical systems, the roof, attic, and accessible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.

My agent performed a CMA for me. Is that the same as an appraisal?   (See list of FAQ's)

Honestly, they have nothing in common. The CMA uses market trends to create most of their business. Appraisals use comparable sales which are valid resources. The appraisal report will also include area and building prices. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the most significant factor is the person behind the report. A CMA is written by a real estate agent who may or may not have a true grasp of the market or valuation concepts. A certified, state licensed professional who bases their livelihood on valuing real estate in and around Arapahoe 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 accept a flat fee for work they perform, regardless of their outcome.

What's in an appraisal report?   (See list of FAQ's)

Each report should demonstrate a credible estimate of value and will document the following:
  • The client and whose purposes the appraisal is to serve.
  • The intended use of the report.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.
  • Relevant property attributes, including: location, physical characteristics, legal attributes, economic factors, the real property interest 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 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.
  • What was entailed in the activity of completing the job.
For a more detailed view of the work that goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal has been delivered, how can I have certainty that the final number is legitimate?   (See list of FAQ's)

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

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

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

  • That a credible, defensible appraisal report was imparted.
To become a state licensed appraiser, there are strenuous education requirements as well as on the jobexperience that must be logged. Plus, appraisers must abide by a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for developing an appraisal and reporting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (See list of FAQ's) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. In general, licensing and certification typically translates to many hours of coursework, tests and real world experience. Once licensed, he or she is required to complete continuing education courses so the license remains current. To see the specific requirements for any state click here.

Who employs appraisers?   (See list of FAQ's)

Mortgage lenders are an appraiser's most likely customer, requesting their services to ensure real estate 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 data used to estimate values in Arapahoe County or other areas?   (See list of FAQ's)

One of the most important tasks an appraiser must accomplish is to compile data. Data can be divided into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser during an inspection.

General data is gathered from a many places. Local Multiple Listing Services (MLS) have information on recently sold homes that might be used as comparables. To double-check actual sales prices, we research tax records and other public documents. Appraisers routinely have 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 assembles general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.

How can a licensed appraiser help me?   (See list of FAQ's)

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. If you're 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. Don't make decisions in the dark with a professional appraisal.

What exactly is PMI and how can I get rid of it?   (See list of FAQ's)

PMI is the common abbreviation for for Private Mortgage Insurance. It guards the lender in the event a borrower doesn't pay on the loan and the value of the property 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.

Does your monthly mortgage payment include a fee for PMI?Call AppraiseRite, LLC today at 303-680-8261 or send us an e-mail. Documentation of your home's present value could save you thousands.

Do you need anything from me in advance?   (See list of FAQ's)

The first step in most appraisals is the property 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house . Trim any bushes and relocate 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 things go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • A plot plan or survey of the house and land (if readily available).
  • Written property agreements, such as a maintenance easement for a shared driveway.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • A list of "proposed" improvements when the property is being appraised "as complete".

How does an appraiser define "Market Value"?   (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 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not noted 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, putting in an inline humidifier could be nice in arid regions, but completely useless near the coast!

As a rule, the best ROI from renovating a home comes in the kitchen. 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 boost the value of your home (when done well) as long as your home doesn't then become an oddball for your neighborhood in terms of size.