Dennis Paylor has answers to "Frequently Asked Questions"


	Dennis Paylor is always willing to address any questions you might have about appraisals in Highlands Ranch and Douglas County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
Why would a person 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 are the contents of an appraisal report?
After completing the report, what guarantee is there that the final number is legitimate?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does an appraiser get the data used to estimate values in Douglas County or other areas?
Why should I hire a licensed appraiser?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
Define "Market Value"
Who actually owns the appraisal report?
I want to get more for my house. Where should I spend money renovating?

What is an appraisal? (Return to top)

The process of writing an appraisal report deals with an inspection which forms an opinion of value. There are three "common approaches to value" which helps the real estate appraiser arrive at this opinion or valuation. One of the methods in use is the Cost Approach, which is what it would cost to restore the improvements to the home, less the depreciation and physical dilapidation, plus the land value. Another of the methods is the Sales Comparison Approach - which concerns discovering a comparison to other similar nearby properties which have recently sold. Being the most commonly used approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a residence. The Income Approach is mainly used for finding 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 generates a professional, unbiased opinion of market value, often in the context of a real estate purchase. Appraisers illustate their professional findings in appraisal reports.

Why would a person need a real estate appraisal? (Return to top)

There are many reasons to purchase an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for getting an report include:

To get a loan.
If you would like to reduce your property tax burden.
To show a homeowner has 30% equity and remove insurance.
To challenge inflated property taxes.
To settle an estate.
To offer you a negotiating tool when purchasing real estate.
To find an honest property value when listing your home.
To ensure parties are provided just compensation in eminient domain cases.
Because a government agency such as the IRS requires it.
If you are ever involved in a civil case.

Click here for a more extensive explanation of the process about getting an appraisal.

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

The appraiser is not a home inspector and does not do a full home inspection. The purpose of a home inspection is to evaluate the structure of the home from foundation to top. The usual property inspector's report will include 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 visible insulation, walls, ceilings, floors, windows and doors, the foundation, basement, and visible structure.

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

Frankly, it's like comparing Shakespeare to reality TV. What the CMA depends on are ill-defined trends. Appraisals use similar sales which are verifiable resources. In addition, the appraisal verifies other factors like condition, area and construction costs. A CMA delivers a "ball park figure." Being a documented and carefully investigated opinion of value, appraisals are defensible and stand up in legal situations.

The person behind the report is frankly the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a complete understanding of valuation methods or the entire market, write CMA's. A certified, Colorado licensed professional who has formed their livelihood on valuing homes in and around Douglas County is behind the appraisal. Further, the appraiser is an unbiased voice, with no vested interest in the property's value, unlike the agent, whose income is tied to the price of the home.

What are the contents of an appraisal report? (Return 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.
The intended use of the appraisal.
The appraisal's purpose.
Precisely what "value" attribute is being reported and what that value means.
The effective date of the value opinion.(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 real property interest valued, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible factors.
Any 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.
What was included in the process of completing the appraisal.

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

After completing the report, what guarantee is there that the final number is legitimate? (Return to top)

In communicating an appraisal report, each appraiser must make sure of the following:

That the information analysis contained in the appraisal was suitable.

Whether individually or collectively, there were no major errors contained in the appraisal, nor any material details left out.

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

The final appraisal report was transparent, credible and not easily discredited.

To become a state licensed appraiser, we must fulfill intense education and experience requirements that prepare us to formulate an unbiased opinion. Plus, appraisers must stick to a meticulous 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 insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Return to top) Licensing and certification requires coursework, tests and real world experience. Once an appraiser is licensed, he or she is required to take 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? (Return to top)

Mortgage lenders are an appraiser's typical client, needing their services to ensure a home involved in a mortgage transaction is adequate collateral for a loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

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

Gathering information is one of the primary occupations of an appraiser. Data can be described as either Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser during an inspection.

General data is received from a variety of sources. To find out about recent sales 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. 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 last but not least, the appraiser assembles 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? (Return to top)

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. For those selling a home, you'll want to determine a 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. For those settling an estate or divorce, an appraisal from Dennis Paylor is the best documentation to ensure assets are split up properly. A house is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

What exactly is PMI and how can I get rid of it? (Return to top)

PMI is an acronym for Private Mortgage Insurance. It guards the lender in case a borrower is unable to pay on the loan and the market price 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.


	Is PMI something increasing your monthly mortgage payment?Call Dennis Paylor today at 3037911109 or send us an e-mail. A current appraisal could save you thousands.

Should I do anything in advance of the appraisal inspection (Return 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. Is there anything you can do to help? Yes there is! First, be sure we have easy access to the exterior of the house (gates aren't locked, etc). Trim any bushes and relocate any items that would make it difficult to measure the structure. On the inside, make sure we can get to appliances like furnaces and water heaters.

To help speed things along plus ensure a more accurate report, try if possible to have the following items:

Information on the latest purchase of the property in 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.
Brag sheet that lists major home improvements and enhancements, the amount of their purchase and date of their installation (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available).
A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".

Define "Market Value" (Return 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 actually owns the appraisal report? (Return 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 allowed 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 cases, the appraiser may state the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated otherwise, the home owner can do whatever they want with the appraisal.

I want to get more for my house. Where should I spend money renovating? (Return 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. 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, returning 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.