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Nicholas Appraisals, Inc. has answers to "Frequently Asked Questions"

Nicholas Appraisals, Inc. is always willing to reply to any concerns you might have about appraisals or real estate in Montrose County. Feel free to contact us today.

Describe an appraisal
Describe what an appraiser does
What would cause me to need a real estate appraisal?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What's in an appraisal report?
Once the appraisal is done, how can I have confidence that the value conclusion is valid?
How difficult is it to become certified?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in Montrose County or other areas?
What can a full appraisal do for me?
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 is "Market Value?"
Does the appraisal belong to the bank or the consumer?
I want to get more for my house. Where should I spend money renovating?



Describe an appraisal   (List of questions)

The process of producing an appraisal consists of an investigation which forms an opinion of value. The appraiser will use a several "approaches," typically three, to come to the estimation of market value. One of the methods is the Cost Approach - which is what it would cost to replace the improvements, minus physical deterioration and other factors, then adding the land value. Another of the methods is the Sales Comparison Approach - which involves discovering a comparable analysis to other similar properties within a close vicinity which have recently sold. Generally speaking, the Sales Comparison Approach is the most accurate indicator of market value of a house. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to figure the value of a property based on what an investor would pay based on the income produced by the building.

Describe what an appraiser does   (List of questions)

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


What would cause me to need a real estate appraisal?   (List of questions)

There are many reasons to get an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
  • To obtain a loan.
  • If you would like to lower your property tax obligations.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove Primary Mortgage Insurance.
  • To fight high property taxes.
  • If you need to take care of an estate.
  • To provide you a leg-up when purchasing real estate.
  • To determine the most probable sales price when selling your home.
  • To protect your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Government agencies such as the IRS require an appraisal on every home.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
If you need more information regarding the appraisal process, please click here.


What is the difference between an appraisal and a home inspection?   (List of questions)

Appraisers do not do perform home inspections and are not home inspectors. A third-party home inspector will investigate the structure of the property, from the roof to the foundation. Usually, a home inspection report will evaluate the amenities and the necessities of the house: 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, visible insulation, walls, floors, ceilings, windows, then the foundation, basement and visible structures.

My agent performed a CMA for me. Is that the same as an appraisal?   (List of questions)

Simply put, it's like comparing broadband and dial-up. What the CMA depends on are superficial trends. The appraisal depends on specific valid comparable sales. The appraisal report will also contain neighborhood and building values. 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.

But the biggest difference is who's creating 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. A certified, Colorado licensed professional who has formed a career on valuing real estate in and around Montrose County is behind the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price - their commission - whereas the appraiser is bound by a code of ethics to collect only a flat fee for work they perform, regardless of their outcome.

What's in an appraisal report?   (List of questions)

Every report must indicate a supported estimate of value and should clearly state the following:
  • Who engaged the appraiser and other intended users.
  • How the appraisal is supposed to be used.
  • The appraisal's purpose.
  • 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 characteristics, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the appraisal, such as personal property, trade fixtures and even intangible considerations.
  • All 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 while working up the job.
For a more comprehensive look at what goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal is done, how can I have confidence that the value conclusion is valid?   (List of questions)

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

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

  • That appraisal services were delivered in a careful and conscientious manner.

  • The final appraisal report was clear, sound and defensible.
To become a state licensed appraiser, we must meet intense education and experience requirements that enable us to formulate an unbiased opinion. Likewise, appraisers must abide by a strict industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for working up an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (List of questions) Regulations regarding licensing and certification vary from state to state. However, licensing and certification is commonly associated with many hours of classroom study, tests and practical experience. Once licensed, he/she is required to engage in continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (List of questions)

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 an appraiser get the information used to estimate values in Montrose County or other areas?   (List of questions)

Compiling information is one of the primary things an appraiser performs. Data can be described as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specifics are noted by the appraiser while on site.

General data is received from a number of places. To look up recently sold homes to be used as "comps", an appraiser will often go to the local Multiple Listing Service. To double-check actual sales prices, we use items in the assessor's office and other public documents. 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 product.

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

What can a full appraisal do for me?   (List of questions)

If you're making any kind of financial decision and the value of your home matters, you'll want an appraisal. If you're selling your home, an appraisal helps you set the most appropriate price. 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. Don't make decisions in the dark with a professional appraisal.

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

PMI stands for Private Mortgage Insurance. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than the balance of 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.

The amount you keep from cancelling your PMI will make up for the price of the appraisal in no time. Nicholas Appraisals, Inc. stays current with real estate value trends in Montrose and Montrose County. Contact us today.

How do I get ready for the appraiser?   (List of questions)

The first step in most appraisals is the home 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. The best thing you can do to help is make sure the appraiser has easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and move 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.

You can make the inspection go faster and improve the quality of the appraisal report by having the following things on hand:
  • Information on any written private easements, such as a shared driveway with a neighbor.
  • List of personal property to be sold with the home.
  • Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .
  • A list of any 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 list of "proposed" improvements when the property is being appraised "as complete".

What is "Market Value?"   (List of questions)

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?   (List of questions)

In most real estate transactions, the appraisal is ordered by the lender. Even though it's the buyer that eventually pays for the report, the lender is the intended user. The buyer is certainly entitled to a copy of the appraisal - it's usually included 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 hiring the appraiser for things outside securing a mortgage. In these cases, the appraiser may stipulate the purpose of the appraisal; for PMI removal, or estate planning or tax challenges, for example. If not stipulated 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?   (List of questions)

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 investment. 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 weren't far behind, yielding 85%. Adding bedrooms and baths can also help the value of your home (when done well) as long as your home doesn't then become overbuilt for your neighborhood in terms of size.