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Paul F. Smith Appraisals has answers to "Frequently Asked Questions"

Paul F. Smith Appraisals is ready to elaborate on any questions you might have about appraisals or real estate in Bexar County. Contact us today to talk about how we can help solve your valuation problems.

Describe an appraisal
What does an appraiser do?
What are the reasons a person would request a real estate appraisal?
How is an appraiser different than a home inspector?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Once the report has been completed, what assurance is there that the value indicated is veritable?
How difficult is it to become certified?
Who engages the services of appraisers?
Where does Paul F. Smith Appraisals get the information used to estimate values in Bexar County or other areas?
Why do I need a professional appraisal?
What exactly is PMI and how can I get rid of it?
Should I do anything in advance of the appraisal inspection
What is "Market Value?"
Once complete, who actually owns the appraisal report?
Which home renovations add the most to the price?



Describe an appraisal   (Top)

The procedure of creating an appraisal report deals with an estimation which forms an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or valuation. The Cost Approach is one of the approaches that appraisers use to find value; it involves discerning what the improvements would cost minus physical depreciation, plus the land value. Another of the processes is the Sales Comparison Approach - which concerns discovering a comparison to other similar properties within a close proximity which have recently sold. The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a residential property. One of the least common approaches in appraising residential properties is the Income Approach, which is mainly used to find the market value of a property based on what an investor would pay based on the income produced by the property.

What does an appraiser do?   (Top)

An appraiser generates an unprejudiced and well supported assessment of market value, often in the context of a real estate sale. Appraisers document their expert conclusions in appraisal reports.


What are the reasons a person would request a real estate appraisal?   (Top)

There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Some other reasons for obtaining an appraisal include:
  • If you are applying for a loan.
  • To reduce your tax burden.
  • To help a homeowner realize if they owe less than 80% of their home's value and remove insurance.
  • To contest high property taxes.
  • If you need to settle an estate.
  • To provide you a leg-up when purchasing a home.
  • To determine a likely 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 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.


How is an appraiser different than a home inspector?   (Top)

Home inspectors do not generate an opinion of value and do not use the same forms as appraisers. A third-party home inspector will investigate the structure of the house, from the roof to the bottom. Generally, a home inspection report will explain the amenities and the requirements of the house: air conditioning (weather permitting), electrical systems, the condition of the heating system, the plumbing; then the structural capacity of the home such as the attic, accessible 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?   (Top)

Simply put, it's night and day. What the CMA depends on are superficial trends. The appraisal is based on similar proven comparable sales. Area and building values are also precedent in an appraisal. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

Who's behind 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, state licensed professional who bases their livelihood on valuing properties in and around Bexar County creates the appraisal. Moreover, the appraiser is an unbiased party, with no vested interest in the value of a home, unlike the real estate agent, whose income is tied to the value of the home.

What does the appraisal report contain?   (Top)

The main objective 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 other intended users.
  • How the appraisal is supposed to be used.
  • The purpose of the appraisal.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraiser's opinions and conclusions.
  • Pertinent 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, items that are more or less permanently installed and even intangible factors.
  • 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.
  • The scope of work considered when completing the job.
For a more in depth view of all that goes into an appraisal report click here: Sample Appraisal Report


Once the report has been completed, what assurance is there that the value indicated is veritable?   (Top)

In the documentation of an appraisal, each appraiser must ensure the following:
  • The appraisal contained analysis of the data.

  • Whether individually or collectively, there were no substantial errors contained in the report, nor any relevant details left out.

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

  • That a trustworthy, defensible appraisal report was communicated.
To become a state licensed appraiser, there are strenuous education requirements as well as experience that must be attained - all with the objective of being able to render unbiased value opinions. Likewise, appraisers must follow a stringent industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for carrying out an appraisal and communicating its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Top) Regulations regarding licensing and certification of Real Estate Appraisers are different from state to state. In general, licensing and certification is most often associated with many hours of classroom study, tests and experience working under a supervisor. Once licensed, he/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 engages the services of appraisers?   (Top)

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

Where does Paul F. Smith Appraisals get the information used to estimate values in Bexar County or other areas?   (Top)

Collecting information is one of the primary functions of an appraiser. Data can be categorized as either Specific or General. Specific data is 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. To find out about recent sales to be used as "comps", we typically go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is available from FEMA data outlets, such as a la mode's InterFlood product.

And last but not least, the appraiser gathers general data from his or her collective knowledge gained from doing assignments for other houses in the same market.


Why do I need a professional appraisal?   (Top)

If you're making any kind of financial decision and the value of your home matters, you'll want a full appraisal. If you're selling your house, an appraisal will help you determine a price that maximizes profit and reduces time on the market. When buying, be sure you're not overpaying by getting an independent appraisal. For people settling an estate or divorce, an appraisal from Paul F. Smith Appraisals is the best way to ensure assets are divided evenly. 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?   (Top)

PMI is an acronym for Private Mortgage Insurance. It protects the lender if a borrower defaults on the loan and the value of the home is lower than what the borrower still owes on 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.

Does your monthly loan payment have a lineitem for PMI?Call Paul F. Smith Appraisals today at (210)650-0654 or send us an e-mail. A current appraisal could save you thousands.

Should I do anything in advance of the appraisal inspection   (Top)

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. On the home's interior, pick up any clutter and make sure we can access things like furnaces and water heaters. In the yard, trim any landscaping so we can be free to get an accurate measurement of outside walls.

You can make things go faster and improve the quality of the appraisal report by having the following things on hand:
  • A plot plan or survey of the house and land (if available).
  • List of personal property to be sold with the building.
  • Title policy that describes encroachments or easements.
  • A list of any major home improvements and upgrades, the date of their installation and their cost (for example, the addition of Insulation or roof repairs) and permit confirmation (if available).
  • Find copies of the current listing agreement, broker's data sheet and, in the event of a pending sale.

What is "Market Value?"   (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?   (Top)

For mortgage transactions, the lender orders 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 entitled to a copy of the report - 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 situations, 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?   (Top)

This really depends on where the home is. For example, installing an inline humidifier could be nice in arid regions, but completely useless near the coast!

As a rule, the most value returned 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, work that may not add value would be painting just for the sake of redecorating.