frequently asked questions

What is an appraisal?

An appraisal report is an estimation that concludes with an opinion of value. The appraiser will use a few “approaches,” typically three, to draw up the estimation of market value. One of the methods is the Cost Approach – which is how much capital would be required to replace the improvements, less physical deterioration and other factors, then adding the land value. Another of the approaches is the Sales Comparison Approach – which concerns finding a comparison to other similar properties within a close proximity which have recently sold. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a house. The Income Approach is primarily used for figuring out the market value of income-producing properties based on what an investor would pay based on the amount of capital a property produce.

Describe what an appraiser does

An appraiser produces an unbiased and well supported determination of market value, in the support of real estate transactions. Appraisers illustrate their expert conclusions in appraisal reports.

What are the reasons someone would require your services?

There are a lot of reasons to purchase an appraisal with the most common reason being real estate and mortgage transactions. A few other reasons for ordering an appraisal include:

• If you are applying for a loan.
• If you would like to lower your property tax obligations.
• To show a homeowner has 30% equity and remove Primary Mortgage Insurance.
• To fight improperly assessed property taxes.
• If you need to settle an estate.
• To offer you a leg-up when purchasing a home.
• To find an honest sales price when listing your home.
• To ensure parties are provided just compensation in eminent domain cases.
• Government agencies such as the IRS need an appraisal on every property.
• It’s possible you could be involved in a lawsuit – an appraisal will definitely help.

Is an appraisal the same as a home inspection?

The appraiser is not a home inspector nor does he/she do a complete home inspection. The point of a home inspection is to investigate the structure of the home from bottom to attic. Usually, a home inspection report will evaluate 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.

My agent performed a CMA for me. Is that the same as an appraisal?

Frankly, it’s like comparing broadband and dial-up. The CMA depends on indefinite local market trends. An appraisal utilizes comparable sales that can be validated by records. The appraisal report will also contain area and construction values. All a CMA does is generate a “ballpark figure.” An appraisal delivers a defensible and carefully documented opinion of value.

The person behind the report is frankly the most significant difference between a CMA and an appraisal. 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, Texas licensed professional who bases a career on valuing homes in and around Gregg County creates 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 collect only a previously agreed upon sum for assignments, regardless of their outcome.

What can I expect to see in my appraisal report?

Each appraisal should indicate a believable value opinion and will document the following:

• The client and other intended users.
• How the appraisal is supposed to be used.
• The appraisal’s purpose.
• The type of value contained and a definition of that value.
• The effective date of the appraisal.
• Pertinent property attributes, including: location, physical attributes, legal attributes, economic attributes, the real property interest in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible considerations.
• 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.
• What was involved in the process of completing the assignment.

After completing the appraisal, what assurance is there that the value indicated is veritable?

In communicating an appraisal report, each appraiser must ensure the following:

• That the information analysis utilized in the appraisal was suitable.
• That critical errors of omission or commission were not committed individually or collectively.
• That appraisal services were provided in a careful and cognizant manner.
• That a credible, supportable appraisal report was communicated.

To become a state licensed appraiser, there are extensive education requirements as well as real world experience that must be logged. Likewise, appraisers must abide by a stringent 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).

Licensing and certification requires coursework, tests and practical experience. Once licensed, he/she must then complete continuing education courses so the license stays up to date. To see the specific requirements for any state click here.

Who employs appraisers?

Mortgage lenders are an appraiser’s most likely customer, requiring their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for asset division and estate settlements.

Where does an appraiser get the data used to estimate values in Gregg County or other areas?

Gathering information is one of the primary roles of an appraiser. Data can be classified as either Specific or General. Specific data is collected from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.

General data is received from a number of places. To look up recent sales to be used as “comps”, we often use the local Multiple Listing Service. Tax records and other courthouse documents verify actual sales prices in a market. Appraisers routinely have to report when a property lies 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 gathers general data from his or her past experience in doing assignments for other houses in the same market.

Why do I need a professional appraisal?

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. When 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. Simply put, a house is often the single, largest financial asset anybody owns. Knowing its true value is essential to making informed

My mortgage statement has an item on it for PMI? Can I get rid of that?

PMI is an acronym for Private Mortgage Insurance. This additional plan protects the lender in case a borrower doesn’t pay on the loan and the value of the house is less 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.

How do I get ready for the appraiser?

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, pick up any clutter and make sure we can find our way to things like furnaces and water heaters. On the outside, 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:

• Records on the latest purchase of the property in the last three years.
• Written property agreements, such as a maintenance agreement for a shared driveway.
• Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
• A list of any major home improvements and upgrades, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
• Locate copies of the current listing agreement, broker’s data sheet and, in the event of a pending sale.

Define “Market Value”

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?

For mortgage transactions, the lender orders 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 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.

It’s different when it’s the homeowner engaging the appraiser for things outside securing a mortgage. In these scenarios, the appraiser may state 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.

I want to get more for my house. Where should I spend money renovating?

The added value of a particular amenity truly depends on the local market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won’t pay off in a neighborhood of moderately priced homes

As a rule, the most value returned 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 are right up there with kitchens, yielding 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn’t then become overbuilt for your neighborhood in terms of size.