GT Realty Services, Inc. has answers to "Frequently Asked Questions"

GT Realty Services, Inc. is eager to elaborate on any inquiries you might have about appraisals or real estate in Colorado Springs and El Paso County. Contact GT Realty Services, Inc. today to see how we can help you with your valuation problems.

What is an appraisal?
What does an appraiser do?
What are the reasons someone would request a real estate appraisal?
What is the difference between an appraisal and a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
After completing the report, what guarantee is there that the value conclusion is accurate?
What does it mean for an appraiser to be licensed?
Who do appraisers work for?
Where does GT Realty Services, Inc. get the data used to estimate values in El Paso 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 appointment
What does "Market Value" mean?
Does the appraisal belong to the bank or the consumer?
How can I get the most ROI out of home improvements?



What is an appraisal?   (Go to list of  questions)

An appraisal report is an inspection allowing the appraiser to come to an opinion of value. This opinion or estimate is figured through the use of a formal process that commonly uses the three main "common approaches to value". The Cost Approach is one of the approaches that real estate appraisers use to find the value of a house; it involves figuring what the improvements would cost less physical degradation, adding the land value. Easily the most common approach in figuring the likely sales price of a house is the Sales Comparison Approach which deals with making a comparison to similar properties nearby. Being the most popular approach, the Sales Comparison Approach tends to be the most precise and best indicator of market value for a home. One of the least common approaches in appraising homes is the Income Approach, which is mainly used to determine 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?   (Go to list of  questions)

An appraiser offers a fair and credible determination of market value, often in the context of a real estate sale. Appraisers exhibit their professional analysis in appraisal reports.


What are the reasons someone would request a real estate appraisal?   (Go to list of  questions)

There are many reasons to order an appraisal with the usual reason being real estate and mortgage transactions. A few other reasons for purchasing an report include:
  • To get a loan.
  • If you would like to lower your property tax obligations.
  • To build a case for a homeowner's equity and remove PMI.
  • To contest high property taxes.
  • To settle an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To figure out a likely sales price when selling your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS require an appraisal on every house.
  • It's possible you could be involved in a lawsuit - an appraisal will help.
If you need a more detailed explanation of the appraisal process, please click here.


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

Appraisers do not do complete house inspections and are not home inspectors. The point of a home inspection is to investigate the structure of the house from basement to attic. Usually, a home inspection report will discuss the amenities and the necessities of the property: air conditioning (weather permitting), electrical services, 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 other visible structures.

What is the difference between an appraisal and a comparative market analysis (CMA)?   (Go to list of  questions)

Honestly, they share nothing in common. The CMA uses market trends to generate most of their business. An appraisal is based on comparable sales that can be proven by records. Location and architectural values are also precedent in an appraisal. 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 behind the report is frankly the most significant difference between a CMA and an appraisal. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an unbiased voice, with no conditional interest in the value of a home, unlike the real estate agent, whose income is tied to the price of the home.

What are the contents of an appraisal report?   (Go to list of  questions)

The main purpose of an appraisal report is to provide a value opinion, and depending on the scope of the report, one will customarily see the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the report.
  • The appraisal's purpose.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.
  • Relevant property characteristics, including: location, physical description, legal attributes, economic attributes, the property rights in question, and non-real estate items included in the valuation, 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.
  • The scope of work used while working up the appraisal.
For a more comprehensive look at what goes into an appraisal report click here: Sample Appraisal Report


After completing the report, what guarantee is there that the value conclusion is accurate?   (Go to list of  questions)

In communicating an appraisal report, each appraiser must ensure the following:
  • That the information analysis utilized in the appraisal was proper.

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

  • That appraisal services were provided in a careful and cognizant manner.

  • The final appraisal report was easy to explain, credible and not easily discredited.
To become a state licensed appraiser, there are strenuous education requirements as well as practical experience that must be attained - all with the end goal of gaining the skills required to render unbiased value opinions. In addition, appraisers must obey a strict industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for developing an appraisal and documenting its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Go to 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 real world experience. Once licensed, he or she is required to complete continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who do appraisers work for?   (Go to list of  questions)

Commonly, appraisers are called upon by mortgage lenders to render a value opinion on property involved in a loan transaction - to make sure the real estate is indeed adequate collateral for the loan. Appraisers also provide opinions in litigation cases, tax matters and investment decisions.

Where does GT Realty Services, Inc. get the data used to estimate values in El Paso County or other areas?   (Go to list of  questions)

Collecting information is one of the primary things an appraiser performs. Data can be divided into Specific or General. Specific data is collected from the home itself; Location, condition, amenities, size and other specifics are gathered by the appraiser while on site.

General data is received from a variety of sources. To research recent sales to be used as "comps", we often use the local Multiple Listing Service. To verify actual sales prices, we use tax records and other public documents. Appraisers routinely need to report when a property is 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 doing assignments for other houses in the same market.


Why should I hire a licensed appraiser?   (Go to list of  questions)

If you're involved in some sort of financial decision and the value of your home is relevant, you'll want to hire a licensed appraiser. When selling your home, an appraisal will help you determine the most appropriate price. When buying, be sure you're not overpaying by getting an independent appraisal. 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.


What exactly is PMI and how can I get rid of it?   (Go to list of  questions)

PMI is an acronym for Private Mortgage Insurance. PMI protects the lender if a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan. You can have your PMI dropped once you've achieved 20% equity in your home through appreciation and principal payments.

The savings from dropping your PMI pays for the appraisal in a matter of months. GT Realty Services, Inc. has years of experience with real estate value trends in Colorado Springs and El Paso County. Contact us today.

Should I do anything in advance of the appraisal appointment   (Go to list of  questions)

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. 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 move any items that would get in our way while we 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:
  • Information on the latest purchase of the property in the last three years.
  • A list of any personal property that is part of the home and you intend to be sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and your well.
  • 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 if the property is to be appraised "as complete".

What does "Market Value" mean?   (Go to list of  questions)

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."



Does the appraisal belong to the bank or the consumer?   (Go to list of  questions)

For mortgage transactions, the lender requests 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 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.

This rule doesn't apply when a home owner hires an appraiser directly. In these situations, the appraiser may define 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.


How can I get the most ROI out of home improvements?   (Go to list of  questions)

This really depends on where the home is. For example, adding a central air conditioner in to a home in the South may add significant value, while putting one in a home near the Pacific Northwest might not have much impact.

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 were second, yielding 85%. On the contrary, something that may not add value would be painting just for the sake of redecorating.