Bearing Commercial Appraisal has answers to "Frequently Asked Questions"

Bearing Commercial Appraisal is always eager to reply to any inquiries you might have about appraisals or real estate in Manitou Springs and El Paso County. Feel free to contact us today.

What is an appraisal?
Describe what an appraiser does
What would cause me to require a real estate appraisal?
What is the difference between an appraisal and a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
After completing the appraisal, how can I have confidence that the value indicated is valid?
What goes into an appraiser's certification?
Who are an appraiser's customers?
Where does Bearing Commercial Appraisal get the data used to estimate values in El Paso County or other areas?
How can a licensed appraiser help me?
My mortgage statement has an item on it for PMI? Can I get rid of that?
How do I get ready for the appraiser?
What is "Market Value?"
Who has rights to the appraisal report?
Are some home improvements more worthwhile than others?



What is an appraisal?   (Return to top)

An appraisal is an inspection allowing the appraiser to come to an opinion of value. This opinion or estimate is figured by using a formal process that usually utilizes three "common approaches to value". One of the processes in use is the Cost Approach, which is what it would cost to restore the improvements to the house, minus depreciation and physical dilapidation, plus the land value. The Sales Comparison Approach deals with finding similar houses in the vicinity and discovering the value based on making a comparison of those prior sales to the property being investigated. The Sales Comparison Approach is normally the most accurate and clearest indicator of value for a house. 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 capital produced by the property.

Describe what an appraiser does   (Return to top)

An appraiser forumlates a professional, unbiased determination of market value, to be used in making real estate transactions. Appraisers exhibit their professional findings in appraisal reports.


What would cause me to require a real estate appraisal?   (Return to top)

There are a lot of reasons to purchase an appraisal from Bearing Commercial Appraisal with the usual reason being real estate and mortgage transactions. Some other reasons for obtaining an report include:
  • If you are applying for a loan.
  • To reduce your tax burden.
  • To show a homeowner has 30% equity and remove insurance.
  • To challenge high property taxes.
  • If you need to settle an estate.
  • To give you a negotiating tool when purchasing real estate.
  • To find a likely property value when putting your home on the market.
  • To ensure parties are provided just compensation in eminient domain cases.
  • Government agencies such as the IRS need an appraisal on every property.
  • If you ever find yourself in a civil case.
Click here for a more extensive explanation of the process about getting an appraisal.


What is the difference between an appraisal and a home inspection?   (Return to top)

Appraisers do not do provide residential property inspections and are not home inspectors. The point of a home inspection is to investigate the structure of the house from basement to top. For the most part, a home inspection report will discuss the amenities and the necessities of the property: air conditioning (weather permitting), electrical functions, 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.

My agent performed a CMA for me. Is that the same as an appraisal?   (Return to top)

To be honest, they have nothing in common. The CMA relies on vague market trends. Appraisals use comparable sales which are valid resources. Also, the appraisal verifies other factors like condition, area and replacement prices. A CMA delivers 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 biggest 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, Colorado licensed professional who made their livelihood on valuing properties in and around El Paso County creates the appraisal. Moreover, the appraiser is an independent party, with no vested interest in the value conclusion, unlike the agent, whose income is tied to the value of the home.

What does the appraisal report contain?   (Return to top)

The main purpose 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, you'll usually see the following:
  • Who engaged the appraiser and whose purposes the appraisal is to serve.
  • 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 value opinion.(Sometimes this is in the past or maybe the future for new construction!)
  • Pertinent property attributes, including: location, physical attributes, legal attributes, economic attributes, the real property interest in question, 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 the like.
  • Division of interest, such as fractional interest, physical segment and partial holding.
  • The scope of work considered to complete the appraisal.
For a more detailed look at the work that goes into an appraisal report click here: Sample Appraisal Report


After completing the appraisal, how can I have confidence that the value indicated is valid?   (Return to top)

In communicating an appraisal report, each appraiser must make sure of the following:
  • That the information analysis utilized in the appraisal was suitable.

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

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

  • The final appraisal report was understandable, sound and conclusive.
To become a state licensed appraiser, we must meet extensive education and experience requirements that enable us to formulate an unbiased opinion. In addition, appraisers must abide by a meticulous industry code of ethics and observe national standards of practice for real estate appraisal. The rules for working up an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


   (Return to top) Licensing and certification requires coursework, tests and experience working under a supervisory appraiser. Once licensed, he/she must then engage in continuing education courses so that the license doesn't expire. To see the specific requirements for any state click here.

Who are an appraiser's customers?   (Return to top)

Mortgage lenders are an appraiser's most likely client, needing their services to ensure a home 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 Bearing Commercial Appraisal get the data used to estimate values in El Paso County or other areas?   (Return to top)

One of the most important things an appraiser does is to assimilate property data. Data can be split into Specific or General. Specific data is from the home itself; Location, condition, amenities, size and other specific data are documented by the appraiser during an inspection.

General data is gathered from a numerous sources. To look up recently sold homes to be used as "comps", an appraiser will typically use the local Multiple Listing Service. Tax records and other public documents reveal actual sales prices in a market. Flood zone data is gathered from FEMA data outlets, such as a la mode's InterFlood service.

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


How can a licensed appraiser help me?   (Return to top)

Any time the value of your home or other real property is being used to make a significant financial decision, an appraisal helps. For those selling a home, you'll want to figure out the price that gets you the most profit but also ensures you don't have to wait too long for a buyer to show up; an appraisal can help with that. If you're buying, it makes sure you don't overpay. For those settling an estate or divorce, an appraisal from Bearing Commercial Appraisal is the best documentation to ensure assets are split up fairly. A home is often the single, largest financial asset anybody owns. Knowing its true value is essential to making wise financial decisions.


My mortgage statement has an item on it for PMI? Can I get rid of that?   (Return to top)

PMI stands for Private Mortgage Insurance. It guards the lender if a borrower is unable to pay on the loan and the value of the house is lower than the loan balance. 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.

Has your home value appreciated since you first purchased? Contact Bearing Commercial Appraisal today at 719-694-1054. You may be able to get rid of your Private Mortgage Insurance payment.

How do I get ready for the appraiser?   (Return to top)

We start with an inspection of the property. 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 features. The best thing you can do to help is make sure we have easy access to the exterior of the house . Trim any shrubs and move any items that would get in our way while we measure the structure. Indoors, make sure we can easily access items like furnaces and water heaters.

You can make things go faster and improve the accuracy of the appraisal report by having the following things on hand:
  • Any information on the purchase of the property for the last three years.
  • A list of any personal property that will be left behind and sold with the home, such as an oven, or a washer and dryer, if applicable.
  • Information on "Homeowners Associations" or condominium covenants and fees.
  • Find 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.

What is "Market Value?"   (Return to 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."



Who has rights to the appraisal report?   (Return to 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 included with all the other closing documents - but is not allowed to use the report for any other purpose without permission from the lender.

The exception to this rule is 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.


Are some home improvements more worthwhile than others?   (Return to top)

The added value of a particular amenity truly depends on the local market. For example, while quality appliances are attractive, a $7000 built-in refrigerator won't pay off in a neighborhood of moderately priced homes

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 weren't far behind, yielding 85%. On the contrary, work that may not add value would be painting just for the sake of redecorating.