Colorado Appraisal Advantage, Inc has answers to "Frequently Asked Questions"

Colorado Appraisal Advantage, Inc is willing to address any concerns you might have about appraisals in Monument and El Paso County. Contact us today to see how we can help you with your valuation problems.

What is an appraisal?
Describe what an appraiser does
Why would someone request a real estate appraisal?
How is an appraiser different than a home inspector?
Is an appraisal the same as a comparative market analysis(CMA)?
What are the contents of an appraisal report?
Once the appraisal has been delivered, what assurance is there that the final number is valid?
What does it mean for an appraiser to be licensed?
Who hires Colorado Appraisal Advantage, Inc
Where does an appraiser get the information used to estimate values in El Paso County or other areas?
Why should I hire a licensed appraiser?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
Define "Market Value"
Who has rights to the appraisal report?
Which home renovations add the most to the price?



What is an appraisal?   (Back to top)

The method of performing an appraisal deals with an estimation which forms an opinion of value. This opinion or estimate is concluded through the use of a formal process that commonly uses the three main "common approaches to value". The Cost Approach is one of the methods that appraisers use to find value; it involves concluding what the improvements would cost without physical degradation, plus the land value. The most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which deals with concluding a comparison to similar properties close by. Being the most popular approach, the Sales Comparison Approach is considered the most accurate and best indicator of market value for a residence. The Income Approach is mainly used for determining the market value of income-producing properties based on what an investor would pay based on the amount of income a property would bring in.

Describe what an appraiser does   (Back to top)

An appraiser provides a fair and credible assessment of market value, often in the context of a real estate sale. Appraisers illustate their expert analysis in appraisal reports.


Why would someone request a real estate appraisal?   (Back to top)

There are a lot of reasons to purchase an appraisal from Colorado Appraisal Advantage, Inc with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal include:
  • If you are applying for a loan.
  • If you would like to reduce your property tax burden.
  • To demonstrate a homeowner's acquired equity and remove Primary Mortgage Insurance.
  • To fight high property taxes.
  • If you need to settle an estate.
  • To give you an edge when purchasing a home.
  • To find a reasonable price when selling your home.
  • To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Government agencies such as the IRS need an appraisal on every house.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will help.
Click here for a more extensive explanation of the process of getting an appraisal.


How is an appraiser different than a home inspector?   (Back to top)

Home inspectors do not come to an opinion of value and are not appraisers. The purpose of a home inspection is to investigate the structure of the home from basement to top. For the most part, a home inspection report will discuss the amenities and the requirements of the house: air conditioning (weather permitting), electrical services, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, exposed insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

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

To be honest, they share nothing in common. The CMA relies on vague market trends. An appraisal utilizes comparable sales that can be validated by public record. In addition, the appraisal looks at other factors like condition, location and construction costs. A CMA delivers a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

But the most significant factor is the person creating the report. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, create CMA's. A certified, state licensed professional who has formed their livelihood on valuing real estate in and around El Paso County creates the appraisal. Moreover, the appraiser is an unbiased party, with no conditional interest in the value conclusion, unlike the real estate 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 point of an appraisal report is to let the reader know the value of the real estate in question, and depending on the scope of the report, one will customarily see the following:
  • The client and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The reason for the appraisal.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Relevant property characteristics, including: location, physical description, legal attributes, economic factors, the property rights in question, 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 other items of a similar nature.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work used when completing the job.
For a more comprehensive look at all that goes into an appraisal report click here: Sample Appraisal Report


Once the appraisal has been delivered, what assurance is there that the final number is valid?   (Back to top)

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

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

  • That appraisal services were not carried out in a careless or negligent manner.

  • The final appraisal report was understandable, credible and not easily discredited.
To become a state licensed appraiser, there are education requirements as well as real world experience that must be attained - all with the end goal of gaining the skills required to provide unbiased value opinions. Plus, appraisers must stick to a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for carrying out an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Back to top) Licensing and certification takes classroom study, tests and practical experience. Once licensed, he/she must then engage in continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who hires Colorado Appraisal Advantage, Inc   (Back 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. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

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

Collecting information is one of the primary activities of an appraiser. Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is gathered from a number of places. To find out about recent sales to be used as "comps", an appraiser will often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.

And most importantly, the appraiser gathers general data from his or her collective knowledge gained from creating appraisals for other houses in the same market.


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

An appraisal is a worthwhile whenever the value of your home is relevant to some financial decision. For those selling a home, you'll want to figure out the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For people settling an estate or divorce, an appraisal from Colorado Appraisal Advantage, Inc is the best documentation to ensure assets are split up evenly. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making informed financial decisions.


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

PMI is short for for Private Mortgage Insurance. This supplementary plan guards the lender in case a borrower defaults on the loan and the market price of the home is less than the balance of the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

The savings from getting rid of the PMI required when you got your mortgage pays for the appraisal in a matter of months. Colorado Appraisal Advantage, Inc is in the business of tracking value trends in Monument and El Paso County. Contact us today.

How do I get ready for the appraiser?   (Back to top)

The first step in most appraisals is the property inspection. 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. On the home's interior, make sure it is clutter free and that we can get to 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, attempt if possible to have the following items:
  • Records on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the building.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
  • Information on "Homeowners Associations" or condominium covenants and fees.

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 has rights to the appraisal report?   (Back to top)

For mortgage transactions, the lender requests the appraisal, either directly or through a third party. 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 appraisal - 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 hiring the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state how the appraisal can be used; 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.


Which home renovations add the most to the price?   (Back to top)

A home's location - what city it is in and even what part of that city - is key to this popular question. For example, if you're in a neigborhood of small to medium priced homes, a media room may not be something people in that price range want

As a rule, the best ROI from renovating a home comes in the kitchen. One recent study revealed that putting $20,000 into a kitchen remodel would add about $17,500 to the value of the home - or about an 88% return on investment. Bathrooms were second, 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 overbuilt for your neighborhood in terms of size.