Ed Gray Associates has answers to "Frequently Asked Questions"

Ed Gray Associates is prepared to handle any questions you might have about appraisals or real estate in Bexar County. Contact us today to talk about how we can help you with your specific valuation problems.

Describe an appraisal
What does an appraiser do?
What would cause me to need 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's in an appraisal report?
After completing the report, how can I have certainty that the final number is veritable?
What are the requirements to be a certified appraiser?
Who employs appraisers?
Where does an appraiser get the data used to estimate values in Bexar County or other areas?
Why do I need a professional appraisal?
My mortgage statement has an item on it for PMI? Can I get rid of that?
Do you need anything from me in advance?
How does an appraiser define "Market Value"?
Who has rights to the appraisal report?
How can I get the most ROI out of home improvements?

Describe an appraisal   (List of questions)

The process of writing an appraisal consists of an inspection which forms an opinion of value. There are three "common approaches to value" which assists the real estate appraiser conclude this opinion or valuation. One of the methods in use is the Cost Approach, which evaluates what it would cost to restore the improvements to the property, less the age and physical deterioration, plus the land value. Easily the most common approach in figuring the value of a house is the Sales Comparison Approach which involves making a comparison to similar properties close by. The Sales Comparison Approach is normally the most definitive and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it deals with estimating what an investor would pay based on the money generated by the property.

What does an appraiser do?   (List of questions)

An appraiser provides an impartial and well supported opinion of market value, often in the context of a real estate purchase. Appraisers reveal the details of their expert analysis in appraisal reports.

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

There are a lot of reasons to order an appraisal with the usual reason being real estate and mortgage transactions. Other reasons for ordering an report include:
  • To receive a loan.
  • To lower your tax burden.
  • To show a homeowner has 30% equity and remove PMI.
  • To contest improperly assessed property taxes.
  • If you need to settle an estate.
  • To provide you an edge when purchasing real estate.
  • To determine an honest sales price when listing 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 need an appraisal on every home.
  • It's possible you could have to deal with being in a lawsuit - an appraisal will definitely help.
Click here for a more detailed explanation of the process of getting an appraisal.

How is an appraiser different than a home inspector?   (List of questions)

The appraiser is not a home inspector and does not do a comprehensive home inspection. The point of a home inspection is to investigate the structure of the home from basement to rooftop. Commonly, a home inspection report will evaluate the amenities and the requirements of the house: 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, accessible insulation, walls, floors, ceilings, windows, then the foundation, basement and other visible structures.

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

Frankly, they have nothing in common. What the CMA depends on are superficial trends. Appraisals use similar sales which are valid resources. The appraisal report will also contain neighborhood and construction prices. The CMA will provide a non-specific figure. Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is the person creating the report. 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. The appraisal is created by a licensed, certified professional who has made a career out of valuing properties. Further, the appraiser is an independent voice, with no conditional interest in the property's value, unlike the agent, whose income is tied to the price of the home.

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

The main point of an appraisal document 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:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • How the appraisal is supposed to be used.
  • The purpose of the assignment.
  • The type of value contained and a definition of that value.
  • The effective date of the appraisal.
  • Pertinent property characteristics, including: location, physical description, legal attributes, economic factors, the real property interest in question, and non-real estate items included in the appraisal, 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 the like.
  • 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 in depth view of the work that goes into an appraisal report click here: Sample Appraisal Report

After completing the report, how can I have certainty that the final number is veritable?   (List of questions)

In the documentation of an appraisal, each appraiser must ensure the following:
  • That the information analysis contained in the appraisal was suitable.

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

  • That appraisal services were not conducted in a careless or negligent manner.

  • The final appraisal report was clear, sound and conclusive.
To become a state licensed appraiser, we must satisfy considerable education and experience requirements that give us the background to produce an unbiased opinion. Likewise, appraisers must abide by a strict industry code of ethics and observe national standards of practice for real estate appraisal. The tenets for working up an appraisal and documenting its results are guaranteed 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 classroom study, tests and practical experience. Once an appraiser is licensed, he/she must then take continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who employs appraisers?   (List of questions)

Mortgage lenders are an appraiser's most likely customer, using their services to ensure real estate involved in a mortgage transaction is adequate collateral for a loan. Attorneys and CPAs also retain the services of appraisers for divorce and estate settlements.

Where does an appraiser get the data used to estimate values in Bexar County or other areas?   (List of questions)

One of the main things an appraiser does is to collect data. Data can be described as either Specific or General. Specific data is gathered from the property itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is received from a numerous sources. To look up recent sales to be used as "comps", an appraiser will typically go to the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Appraisers routinely have 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 most importantly, the appraiser assembles 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?   (List of questions)

An appraisal is a valuable tool whenever your home's value is relevant to a financial decision. If you're selling your home, an appraisal assists you in setting a price that maximizes profit and reduces time on the market. 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 house is often the single, largest financial asset anybody owns. Knowing its true value means you can make wise financial decisions.

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

PMI is the common abbreviation for for Private Mortgage Insurance. This additional policy guards the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the balance of the loan. Once you can prove the amount you owe on your home is less than 80% of the home's market value, you can make a case to your lender to drop the PMI.

Is PMI a lineitem in your monthly house payment?Call Ed Gray Associates today at 210-340-1137 or send us an e-mail. Documentation of your home's present value could save you thousands.

Do you need anything from me in advance?   (List of questions)

We begin with an inspection of the home. 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 condition of its amenities. 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 landscaping and move any items that would get in our way while we measure the structure. Indoors, make sure we 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:
  • A plot plan or survey of the house and land (if readily available).
  • List of personal property to be sold with the building.
  • Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells.
  • Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A bill for your most recent real estate taxes which should also contain a legal description of the property.

How does an appraiser define "Market Value"?   (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."

Who has rights to the appraisal report?   (List of questions)

For mortgage transactions, the lender requests 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 entitled to use the report for any other purpose without permission from the lender.

It's different when it's the homeowner engaging 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 stated otherwise, the home owner can use the appraisal for any purpose.

How can I get the most ROI out of home improvements?   (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.

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 are right up there with kitchens, returning 85%. Adding bedrooms and baths can also boost the value of your home as long as your home doesn't then become atypical for your neighborhood in terms of size.