Lutz Appraisals has answers to "Frequently Asked Questions"

Lutz Appraisals is always eager to answer any concerns you might have about appraisals or real estate in Greeley and Weld County. Contact us today to see how we can help you with your valuation problems.

What is an appraisal?
Describe what an appraiser does
What would cause me to request a real estate appraisal?
How is an appraisal different than a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What are the contents of an appraisal report?
Once the appraisal has been completed, how can I have a guarantee that the value indicated is accurate?
What does it mean for an appraiser to be licensed?
Who engages the services of appraisers?
Where does Lutz Appraisals get the data used to estimate values in Weld County or other areas?
What can a full appraisal do for me?
What exactly is PMI and how can I get rid of it?
How do I get ready for the appraiser?
How does an appraiser define "Market Value"?
Once complete, who actually owns the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Top)

The procedure of producing an appraisal consists of an evaluation which leads to an opinion of value. This opinion or estimate is arrived at by using a formal process that usually uses the three main "common approaches to value". One of the processes is the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, then adding the land value. The Sales Comparison Approach involves searching for similar properties in the vicinity and discovering the value based on comparing those houses to the home being investigated. The Sales Comparison Approach is commonly the most definitive and clearest indicator of a liklely sales price for a home. One of the least common approaches in appraising homes is the Income Approach, which is generally used to figure the market value of a property based on what an investor would pay based on the income produced by the property.

Describe what an appraiser does   (Top)

An appraiser produces a professional, unbiased determination of market value, often in the context of a real estate purchase. Appraisers show their professional investigation in appraisal reports.


What would cause me to request a real estate appraisal?   (Top)

There are many reasons to order an appraisal from Lutz Appraisals with the most common reason being real estate and mortgage transactions. Some other reasons for ordering an appraisal include:
  • If you are applying for a loan.
  • To lower your tax burden.
  • To build a case for a homeowner's equity and remove Primary Mortgage Insurance.
  • To fight improperly assessed property taxes.
  • To handle an estate.
  • To provide you a leg-up when purchasing a home.
  • To determine a reasonable price when listing your home.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS require an appraisal on every home.
  • It's possible you could be involved in a lawsuit - an appraisal will definitely help.
Click here for a more extensive explanation of the process involved in getting an appraisal.


How is an appraisal different than a home inspection?   (Top)

Appraisers do not do perform residential property inspections and are not home inspectors. A third-party home inspector will evaluate the structure of the house, from the roof to the bottom. Commonly, a home inspection report will explain the amenities and the necessities of the property: 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, exposed 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, they share nothing in common. What the CMA relies upon are ill-defined trends. The appraisal is based on specific proven comparable sales. Location and building values are also important in an appraisal. All a CMA does is generate a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

Who's creating the report is hands down the biggest difference between a CMA and an appraisal. A CMA is written by a real estate agent who may or may not be trained in technical valuation concepts or even have a handle on market trends. The appraisal is produce by a licensed, certified professional who has made a career out of valuing properties. Moreover, the appraiser is an independent voice, with no vested interest in the property's value, unlike the agent, who gets a commission based upon the price of the home.

What are the contents of an appraisal report?   (Top)

The main purpose 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.
  • The intended use of the report.
  • The reason for the assignment.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.(Sometimes this is in the past or maybe the future for new construction!)
  • Relevant property attributes, 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.
  • 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 considered when completing the appraisal.
For a more comprehensive view of what goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal has been completed, how can I have a guarantee that the value indicated is accurate?   (Top)

In communicating an appraisal report, each appraiser must make sure of the following:
  • The appraisal used an apropos analysis of the data.

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

  • That appraisal services were done in a careful and judicious manner.

  • The final appraisal report was understandable, legitimate and defensible.
There are rigorous classroom and real world experience requirements that must be fulfilled in order to achieve the designation of "licensed appraiser" in Colorado. Likewise, appraisers must stick to a meticulous industry code of ethics and comply with national standards of practice for real estate appraisal. The guidelines for developing an appraisal and documenting its results are insured by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Top) Licensing and certification requires coursework, tests and practical experience. Once an appraiser is licensed, he/she is required to complete continuing education courses in order to keep the license up to date. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Top)

Mortgage lenders are an appraiser's most likely customer, needing 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 Lutz Appraisals get the data used to estimate values in Weld County or other areas?   (Top)

One of the most important things an appraiser does is to gather data. Data can be categorized as either Specific or General. Specific data is taken from the property 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 sources. To find out about recently sold homes to be used as "comps", we often go to the local Multiple Listing Service. Tax records and other public documents verify actual sales prices in a market. Appraisers often 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 assembles general data from his or her collective knowledge gained from creating appraisals for other properties in the same market.

What can a full appraisal do for me?   (Top)

If you're making some sort of financial decision and the value of your home is relevant, you'll want an appraisal. For those selling a home, you'll want to determine the price that gets you the most profit but doesn't leave your home on the market too long; an appraisal can help with that. When buying, you can avoid overpaying by getting an independent appraisal. For those settling an estate or divorce, an appraisal from Lutz Appraisals is the best way to ensure assets are divided fairly. Simply put, 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. This additional policy takes care of the lender in case a borrower defaults on the loan and the market price of the home is less than what is owed 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.

The savings from cancelling the PMI required when you got your mortgage will make up for the cost of the appraisal in no time. Lutz Appraisals is a name you can trust when it comes to real estate value trends in Greeley and Weld County. Contact us today.

How do I get ready for the appraiser?   (Top)

The first step in most appraisals is the property 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. Inside, pick up any clutter and make sure we can access things like furnaces and water heaters. On the outside, trim any bushes so we can be free to get an accurate measurement of exterior walls.

To help expedite our work as well as ensure a more accurate report, try if possible to have the following items:
  • Information on any written private agreements, such as a shared driveway with a neighbor.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • Any "Homeowners Associations" agreements or, if applicable, condo covenants or fees .
  • Locate copies of the current listing agreement, broker's data sheet and, if the sale is "pending", the purchase agreement.
  • A list of "suggested" improvements if the property is to be appraised "as complete".

How does an appraiser define "Market Value"?   (Top)

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."

Once complete, who actually owns the appraisal report?   (Top)

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 bundled 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 stipulate the purpose of the appraisal; 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.

Are some home improvements more worthwhile than others?   (Top)

The answer to this is different depending upon the location of the home. For example, if you live in a cold region, insulated windows can be a real plus. But they aren't as attractive in a warm-weather climate.

As a rule, the best ROI 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, returning 85%. Adding bedrooms and baths can also increase the value of your home as long as your home doesn't then become overbuilt for your neighborhood in terms of size.