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Michael Long has answers to "Frequently Asked Questions"

Michael Long is always more than happy to reply to any concerns you might have about appraisals or real estate in Highlands Ranch and Douglas County. Contact us today to learn how we can help you with your valuation problems.

Describe an appraisal
Describe what an appraiser does
Why would someone request your services?
How is an appraisal different than a home inspection?
What is the difference between an appraisal and a comparative market analysis (CMA)?
What are the contents of an appraisal report?
Once the appraisal has been delivered, what guarantee is there that the final number is legitimate?
What goes into an appraiser's certification?
Who hires an appraiser?
Where does Michael Long get the information used to estimate values in Douglas County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
What is "Market Value?"
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?



Describe an appraisal   (List of questions)

The method of performing an appraisal report consists of an estimation which forms an opinion of value. There are three "common approaches to value" which assists the appraiser come to this opinion or estimate. One of the methods in use is the Cost Approach, which is what it would cost to restore the improvements to the property, less the age and physical dilapidation, adding the land value. The Sales Comparison Approach deals with searching for comparable properties nearby and figuring out the value based on comparing those prior sales to the property in question. Usually, the Sales Comparison Approach is the most definite indicator of market value of a home. The Income Approach is mainly used for figuring out 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   (List of questions)

An appraiser provides an objective and well substantiated determination of market value, to be used in making real estate transactions. Appraisers summarize their professional conclusions in appraisal reports.


Why would someone request your services?   (List of questions)

There are many reasons to order an appraisal from Michael Long with the most common reason being real estate and mortgage transactions. A few other reasons for purchasing an report include:
  • To obtain a loan.
  • To reduce your tax burden.
  • To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
  • To challenge inflated property taxes.
  • If you need to take care of an estate.
  • To provide you a negotiating tool when purchasing a home.
  • To figure out an honest price when selling real estate.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS need an appraisal on every home.
  • If you are ever involved in a civil case.
For a more detailed description of the appraisal process click here.


How is an appraisal different than a home inspection?   (List of questions)

Appraisers do not do complete house inspections and are not home inspectors. A third-party home inspector will investigate the structure of the property, from the top to the foundation. For the most part, a home inspection report will evaluate the amenities and the requirements of the home: air conditioning (weather permitting), electrical functions, the condition of the heating system, the plumbing; then the structural integrity of the home such as the attic, accessible 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)?   (List of questions)

Frankly, it's like comparing sugar and saccharin. What the CMA relies upon are vague trends. The appraisal is based on specific valid comparable sales. Also, the appraisal verifies other factors like condition, location and construction costs. The CMA will provide a non-specific 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 behind the report. 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 bases their livelihood on valuing homes in and around Douglas County creates the appraisal. Likewise, the agent has something at stake since they get a commission based on the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for assignments, regardless of their value conclusion.

What are the contents of an appraisal report?   (List of questions)

Each appraisal must reflect a believable estimate of value and should document the following:
  • Who engaged the appraiser and other intended users.
  • 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 appraiser's opinions and conclusions.(Sometimes this is in the past or maybe the future for new construction!)
  • Characteristics of the property that have a bearing on the value, including: location, physical characteristics, legal attributes, economic factors, the property rights valued, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible items.
  • 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.
  • What was entailed in the activity of completing the assignment.
For a more detailed view of what goes into an appraisal report click here: Sample Appraisal Report


Once the appraisal has been delivered, what guarantee is there that the final number is legitimate?   (List of questions)

In the documentation of an appraisal, each appraiser must ensure 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 understandable, credible and conclusive.
There are rigorous education and experience requirements that must be fulfilled in order to get an appraisal license in Colorado. Likewise, appraisers must follow a strict industry code of ethics and respect national standards of practice for real estate appraisal. The guidelines for carrying out 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 of Real Estate Appraisers are different from state to state. However, licensing and certification is commonly associated with many hours of coursework, tests and real world experience. Once an appraiser is licensed, he or she must then complete continuing education courses so the license remains up to date. To see the specific requirements for any state click here.

Who hires an appraiser?   (List of questions)

Mortgage lenders are an appraiser's most likely client, requesting their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also hire appraisers for asset division and estate settlements.

Where does Michael Long get the information used to estimate values in Douglas County or other areas?   (List of questions)

Gathering information is one of the primary things an appraiser does. Data can be classified as either Specific or General. Specific data is taken from the home itself; Location, condition, amenities, size and other specific data are gathered by the appraiser while on site.

General data is gathered from a variety of places. Local Multiple Listing Services (MLS) provide information on recently sold homes that might be used as comparables. Tax records and other courthouse documents verify actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood service.

And last but not least, the appraiser assembles 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?   (List of questions)

An appraisal is a worthwhile whenever the value of your home is relevant to some financial decision. 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. If you're engaged in an estate settlement or divorce, it ensures that property is divided fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value means you can make the right financial decisions.


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

PMI is an acronym for Private Mortgage Insurance. It protects the lender if a borrower is unable to pay on the loan and the value of the property 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.

Is PMI something increasing your monthly mortgage payment?Call Michael Long today at 303-791-8885 or send us an e-mail. A current appraisal could save you thousands.

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

We begin with an inspection of the home. 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 we have easy access to the exterior of the house (gates aren't locked, etc). Trim any shrubs and relocate any items that would get in our way while we measure the structure. On the inside, make sure we can easily access items like furnaces and water heaters.

To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
  • Records on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the building.
  • Title policy that describes encroachments or easements.
  • Any inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • Any "Homeowners Associations" agreements or, if applicable, condo agreements or fees .

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."



Once complete, who actually owns the appraisal report?   (List of questions)

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 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 scenarios, the appraiser may define how the appraisal can be used; for PMI removal, or estate planning or tax challenges, for example. If not stated otherwise, the home owner can do whatever they want with the appraisal.


Which home renovations add the most to the price?   (List of questions)

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 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 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.