Colorado Realty Reports has answers to "Frequently Asked Questions"


	Colorado Realty Reports is always prepared to address any questions you might have about appraisals in Pueblo County. Don't hesitate to contact us today.

Define the term "Appraisal"
Describe what an appraiser does
What are the reasons I would need a real estate appraisal?
What is the difference between an appraisal and a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
After completing the report, how can I have certainty that the value indicated is accurate?
How difficult is it to become certified?
Who do appraisers work for?
Where does Colorado Realty Reports get the data used to estimate values in Pueblo County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Are some home improvements more worthwhile than others?

Define the term "Appraisal" (Return to top)

An appraisal report is an investigation leading to an opinion of value. This opinion or estimate is figured through the use of a formal process that commonly uses the three main "common approaches to value". One of the processes is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. Another of the processes is the Sales Comparison Approach - which deals with discovering a comparison to other similar nearby properties which have recently sold. The Sales Comparison Approach is commonly the most accurate and clearest indicator of a liklely sales price 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 (Return to top)

An appraiser produces a fair and credible determination of market value, to be used in making real estate transactions. Appraisers exhibit their expert analysis in appraisal reports.

What are the reasons I would need a real estate appraisal? (Return to top)

There are many reasons to obtain an appraisal from Colorado Realty Reports 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.
To lower your property taxes.
To build a case for a homeowner's equity and remove PMI.
To fight high property taxes.
If you need to take care of an estate.
To offer you an edge when purchasing a home.
To determine a likely sales price when listing your home.
To ensure parties are provided just compensation in eminient domain cases.
Government agencies such as the IRS require an appraisal on every home.
It's possible you could be involved in a lawsuit - an appraisal will help.

If you need a more detailed explanation of the appraisal process, please click here.

What is the difference between an appraisal and a home inspection? (Return to top)

Home inspectors do not provide an opinion of value and do not use the same forms as appraisers. The purpose of a home inspection is to evaluate the structure of the property from foundation to top. Usually, a home inspection report will evaluate the amenities and the requirements of the home: air conditioning (weather permitting), electrical services, 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 visible structures.

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

Simply put, it's apples and oranges. The CMA depends on indistinct market trends. Appraisals use similar sales which are valid resources. The appraisal report will also include area and construction values. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is the person behind the report. 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, Colorado licensed professional who has formed their livelihood on valuing properties in and around Pueblo County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to collect only a previously agreed upon sum for assignments, regardless of their value conclusion.

What's in an appraisal report? (Return to top)

Every appraisal should reflect a credible estimate of value and will identify the following:

The client and other intended users.
The intended use of the appraisal.
The reason for the appraisal.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the appraisal.
Characteristics of the property that have a bearing on the value, including: location, physical attributes, legal attributes, economic attributes, the real property interest valued, 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 other items of a similar nature.
Division of interest, such as fractional interest, physical segment and partial holding.
The scope of work considered when completing the assignment.

For a more comprehensive view of what goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have certainty that the value indicated is accurate? (Return to top)

In the documentation of an appraisal, each appraiser must ensure the following:

The appraisal contained an appropriate analysis of the data.

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

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

That a trustworthy, defensible appraisal report was imparted.

To become a state licensed appraiser, we must meet considerable education and experience requirements that give us the background to formulate an unbiased opinion. In addition, appraisers must stick to a stringent industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for developing an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Return to top) Licensing and certification requires coursework, tests and practical experience. Once licensed, he or she must then engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for? (Return to top)

Commonly, appraisers are employed by lenders to estimate the value of a house involved in a loan transaction. Attorneys and CPAs also hire appraisers for asset division and estate settlements.

Where does Colorado Realty Reports get the data used to estimate values in Pueblo County or other areas? (Return to top)

Gathering data is one of the primary tasks an appraiser performs. Data can be described as either Specific or General. Specific data is from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is gathered from a number of places. To research recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.

And last but not least, the appraiser assimilates general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.

Why do I need a professional appraisal? (Return to top)

An appraisal is a valuable tool anytime the value of your home is pertinent to a financial decision. If you're selling your house, an appraisal assists you in setting 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. 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? (Return to top)

PMI is an acronym for Private Mortgage Insurance. It takes care of the lender if a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes 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.


	Did you have less than 20% to put down on your mortgage? Call Colorado Realty Reports today at 719 251-5332 to see if you can get rid of your Private Mortgage Insurance premium.

Should I do anything in advance of the appraisal inspection (Return to top)

The first step in most appraisals is the home inspection. During this process, we 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 access 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.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:

Any records on the purchase of the property for the last three years.
Information on any written private agreements, such as a shared driveway with a neighbor.
Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, your septic system and wells.
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"? (Return to 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? (Return to 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 entitled to a copy of the report - it's usually included with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.

The exception to this rule is when a home owner engages an appraiser directly. 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.

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

This really depends on where the home is. 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

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 are right up there with kitchens, returning 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.