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W. Earl Wilson has answers to "Frequently Asked Questions"

W. Earl Wilson is always more than happy to answer any concerns you might have about appraisals or real estate in Arapahoe County. Contact W. Earl Wilson today to learn how we can help solve your valuation problems.

Define the term "Appraisal"
Describe what an appraiser does
What would cause me to require services from W. Earl Wilson?
How is an appraisal different than a home inspection?
Is an appraisal the same as a comparative market analysis(CMA)?
What's in an appraisal report?
Once the report has been completed, how can I have confidence that the value indicated is accurate?
What does it mean for an appraiser to be licensed?
Who engages the services of appraisers?
Where does an appraiser get the data used to estimate values in Arapahoe 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?
What does "Market Value" mean?
Who has rights to the appraisal report?
Which home renovations add the most to the price?

Define the term "Appraisal"   (Back to top)

The method of producing an appraisal report consists of an evaluation which forms an opinion of value. This opinion or estimate is figured through a formal method that generally utilizes three "common approaches to value". One of the methods in use is the Cost Approach, which evaluates what it would cost to replace the improvements to the house, minus depreciation and physical deterioration, adding the land value. The Sales Comparison Approach involves searching for comparable houses nearby and figuring out the value based on making a comparison of those properties to the property being appraised. Being the most commonly used approach, the Sales Comparison Approach tends to be the most accurate and best indicator of market value for a residence. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.

Describe what an appraiser does   (Back to top)

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

What would cause me to require services from W. Earl Wilson?   (Back to top)

There are many reasons to order an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal report include:
  • To get a loan.
  • If you would like to reduce your property tax obligations.
  • To build a case for a homeowner's equity and remove PMI.
  • To fight improperly assessed property taxes.
  • To settle an estate.
  • To give you an edge when purchasing a home.
  • To find a likely 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 lawsuit.
For a more extensive explanation of the appraisal process click here.

How is an appraisal different than a home inspection?   (Back to top)

Home inspectors do not produce an opinion of value and are not appraisers. The purpose of a home inspection is to evaluate the structure of the house from foundation to top. Commonly, a home inspection report will evaluate the amenities and the requirements of the house: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, visible 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)

Simply put, it's like comparing Shakespeare to reality TV. What the CMA depends on are ill-defined trends. The appraisal depends on specific valid comparable sales. Also, the appraisal looks at other factors like condition, neighborhood and building prices. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

But the biggest difference is who's doing the report. Real estate agents produce CMA's, and they don't always know the whole market or bear specific competence when it comes to home valuation. The appraisal is produce by a licensed, certified professional who makes a living out of valuing properties. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a flat fee for assignments, regardless of their outcome.

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

Each report should reflect a supported value opinion and should document the following:
  • The client and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraiser's opinions and conclusions.
  • Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic factors, the real property interest valued, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible factors.
  • Any 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 used to complete the job.
For a more comprehensive view of the work that goes into an appraisal report click here: Sample Appraisal Report

Once the report has been completed, how can I have confidence that the value indicated is accurate?   (Back to top)

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

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

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

  • The final appraisal report was clear, credible and conclusive.
To become a state licensed appraiser, there are education requirements as well as experience that must be attained. In addition, appraisers must stick to a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The tenets for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

   (Back to top) Regulations regarding licensing and certification vary from state to state. In general, licensing and certification is commonly associated with many hours of coursework, tests and practical experience. Once an appraiser is licensed, he/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 engages the services of appraisers?   (Back to top)

Commonly, appraisers are called upon by lenders to render a value opinion on a house involved in a loan transaction - to make sure the subject is indeed adequate collateral for the loan. Attorneys and CPAs also hire appraisers for divorce and estate settlements.

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

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

General data is collected from a variety of sources. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents reveal actual sales prices in a market. Appraisers routinely need to report when a property is in a flood zone, and that information is retrieved from a FEMA data outlet such as a la mode's InterFlood product.

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

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

If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. 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 house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

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

PMI stands for Private Mortgage Insurance. It protects the lender in the event a borrower defaults on the loan and the market price of the house is less than the loan balance. 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.

Has your home value appreciated since you first purchased? Contact W. Earl Wilson today at 3032909521 to see if you can save money by removing your Private Mortgage Insurance payment.

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

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. Inside, make sure it is clutter free and that we can access things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of exterior walls.

You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • List of personal property to be sold with the home.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
  • Find copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.

What does "Market Value" mean?   (Back 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."

Who has rights to the appraisal report?   (Back 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 situations, the appraiser may stipulate 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.

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

It really depends on the market. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

As a rule, the most value returned 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 weren't far behind, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become an oddball for your neighborhood in terms of size.