The Appraisal Firm has answers to "Frequently Asked Questions"


	The Appraisal Firm is always prepared to handle any questions you might have about appraisals in Frisco and Collin County. Don't hesitate to contact us today.

Define the term "Appraisal"
What does an appraiser do?
What would cause me to request services from The Appraisal Firm?
Is an appraisal the same as a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What's in an appraisal report?
After completing the report, how can I have confidence that the final number is legitimate?
How are appraisers certified?
Who hires an appraiser?
Where does The Appraisal Firm get the information used to estimate values in Collin 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?
Does the appraiser need anything from me in advance?
What does "Market Value" mean?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?

Define the term "Appraisal" (Back to top)

The process of performing an appraisal report deals with an estimation which forms an opinion of value. The appraiser must use a few "approaches," typically three, to come to the estimation of market value. One of the processes is the Cost Approach - which is how much capital would be required to replace the improvements, minus physical deterioration and other factors, plus the land value. The Sales Comparison Approach deals with finding similar houses in close proximity and figuring out the value based on comparing those prior sales to the property being investigated. The Sales Comparison Approach is commonly the most accurate and clearest indicator of value for a residence. One of the least common approaches in appraising residential properties is the Income Approach, which is commonly used to figure the market value of a property based on what an investor would pay based on the capital produced by the building.

What does an appraiser do? (Back to top)

An appraiser provides a professional, unbiased assessment of market value, in the support of real property exchanges. Appraisers summarize their professional conclusions in appraisal reports.

What would cause me to request services from The Appraisal Firm? (Back to top)

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

To obtain a loan.
If you would like to lower your property tax obligations.
To demonstrate a homeowner's acquired equity and remove insurance.
To fight improperly assessed property taxes.
If you need to settle an estate.
To offer you an edge when purchasing a home.
To determine an honest 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.

For a more extensive description of the appraisal process click here.

Is an appraisal the same as a home inspection? (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 evaluate the structure of the house from bottom to rooftop. For the most part, a home inspection report will discuss the amenities and the requirements of the property: air conditioning (weather permitting), electrical systems, 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 other visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)? (Back to top)

Frankly, they have nothing in common. The CMA utilizes market trends to conduct most of their business. Appraisals use similar sales which are verifiable resources. The appraisal report will also contain area and construction values. All a CMA does is generate a "ball park figure." An appraisal delivers a defensible and carefully documented opinion of value.

The credentials of the person creating the report is hands down the most significant difference between a CMA and an appraisal. Real estate agents write CMA's, and they don't always know the whole market or have specific competence when it comes to home valuation. A certified, Texas licensed professional who has formed their livelihood on valuing properties in and around Collin County is behind the appraisal. 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 value conclusion.

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

Every appraisal should demonstrate a supported estimate of value and should document the following:

Who engaged the appraiser and whose purposes the appraisal is to serve.
How the appraisal is supposed to be used.
The appraisal's purpose.
The type of value contained and a definition of the value reported.
The effective date of the value opinion.
Characteristics of the property that have a bearing on the value, including: location, physical description, legal attributes, economic factors, the property rights valued, and non-real estate items included in the valuation, such as personal property, trade fixtures and even intangible considerations.
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.
What was involved in the activity of completing the appraisal.

For a more detailed look at all that goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have confidence that the final number is legitimate? (Back to top)

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

The appraisal used a suitable analysis of the information.

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

That appraisal services were delivered in a careful and conscientious fashion.

The final appraisal report was understandable, credible and defensible.

To become a state licensed appraiser, there are strenuous education requirements as well as on the jobexperience that must be attained - all with the end goal of being able to provide unbiased value opinions. Likewise, appraisers must stick to a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The rules for carrying out an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).

(Back to top) Licensing and certification requires classroom study, 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 hires an appraiser? (Back to top)

Mortgage lenders are an appraiser's most likely client, using their services to ensure a home 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 The Appraisal Firm get the information used to estimate values in Collin County or other areas? (Back to top)

One of the most important things an appraiser does is to gather data. Data can be categorized as either Specific or General. Specific data is taken from the property itself; Location, condition, amenities, size and other specifics are documented by the appraiser during an inspection.

General data is gathered from a number of places. To find out about recent sales to be used as "comps", we often use the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers often need 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 product.

And last but not least, the appraiser gathers 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)

An appraisal is a valuable tool anytime your home's value is pertinent to a financial decision. For those selling a home, you'll want to determine a 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. When buying, be sure you're not overpaying by commissioning an independent appraisal. For parties settling an estate or divorce, an appraisal from The Appraisal Firm is the best documentation to ensure assets are divided evenly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make informed financial decisions.

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

PMI is the common abbreviation for for Private Mortgage Insurance. It takes care of the lender in case a borrower defaults on the loan and the market price of the house is less than what is owed on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.


	Is PMI a lineitem in your monthly house payment?Call The Appraisal Firm today at (469) 854-1668 or send us an e-mail. Documentation of your home's current value could save you thousands.

Does the appraiser need anything from me in advance? (Back to top)

We start with an inspection of the property. 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. Is there anything you can do to help? Yes there is! First, be sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and relocate any items that would make it difficult to measure the structure. On the inside, make sure the appraiser can get to items like furnaces and water heaters.

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.
List of personal property to be sold with the building.
Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
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."

Once complete, who actually owns 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 bundled 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 situations, the appraiser may state how the appraisal can be used; 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.

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

The added value of a particular amenity truly depends on the local market. 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 weren't far behind, returning 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 an oddball for your neighborhood in terms of size.