Lone Star Appraisals has answers to "Frequently Asked Questions"

Lone Star Appraisals is always willing to handle any concerns you might have about appraisals or real estate in Midland County. Don't hesitate to contact us today.

Describe an appraisal
What does an appraiser do?
Why would someone require your services?
Is an appraisal the same as a home inspection?
My agent performed a CMA for me. Is that the same as an appraisal?
What does the appraisal report contain?
Once the appraisal is done, how can I have a guarantee that the value indicated is accurate?
What are the requirements to be a certified appraiser?
Who engages the services of appraisers?
Where does an appraiser get the information used to estimate values in Midland 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?
How does an appraiser define "Market Value"?
Does the appraisal belong to the bank or the consumer?
Which home renovations add the most to the price?



Describe an appraisal   (Back to top)

The procedure of creating an appraisal consists of an evaluation which leads to an opinion of value. This opinion or estimate is discerned by a formal process that typically utilizes the three main "common approaches to value". One of the three is the Cost Approach - which is how much it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. The most common approach in finding the likely sales price of a house is the Sales Comparison Approach which concerns figuring a comparison to similar houses close by. Being the most popular approach, the Sales Comparison Approach is considered the most precise and best indicator of market value for a home. The Income Approach is primarily used for finding 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.

What does an appraiser do?   (Back to top)

An appraiser forumlates an objective and well justified assessment of market value, to be used in making real estate transactions. Appraisers present their professional findings in appraisal reports.


Why would someone require your services?   (Back to top)

There are a lot of reasons to order an appraisal with the most common reason being real estate and mortgage transactions. Other reasons for ordering an report include:
  • To receive a loan.
  • To reduce your tax burden.
  • To build a case for a homeowner's equity and remove PMI.
  • To contest improperly assessed property taxes.
  • If you need to settle an estate.
  • To offer you an edge when purchasing a home.
  • To figure out a reasonable price when putting your home on the market.
  • To defend your rights if your property is being taken by means of eminent domain in a condemnation case.
  • Government agencies such as the IRS require an appraisal on every house.
  • If you are ever involved in a lawsuit.
For a more detailed explanation of the appraisal process click here.


Is an appraisal the same as a home inspection?   (Back to top)

The appraiser is not a home inspector nor does he/she do a full home inspection. A third-party home inspector will judge the structure of the house, from the top to the foundation. Commonly, a home inspection report will explain the amenities and the necessities 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?   (Back to top)

To be honest, they share nothing in common. What the CMA relies upon are ill-defined trends. An appraisal utilizes comparable sales that can be proven by records. In addition, the appraisal checks other factors like condition, location and construction costs. A CMA delivers a "ball park figure." Delivering a defensible and careful analysis, an appraisal will give a clear opinion of value.

But the largest differentiator is who's creating the report. Real estate agents, who may not have a true grasp of valuation methods or the entire market, write CMA's. A certified, state licensed professional who bases a career on valuing real estate in and around Midland County creates the appraisal. Likewise, the agent has a vested interest in the property's selling price whereas the appraiser is bound by a code of ethics to accept a previously agreed upon sum for work they perform, regardless of their outcome.

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

The main objective of an appraisal document is to give a value opinion, and depending on the scope of the report, you'll usually see the following:
  • Who engaged the appraiser and other intended users.
  • The intended use of the appraisal.
  • The purpose of the appraisal.
  • Precisely what "value" attribute is being reported and what that value means.
  • The effective date of the appraisal.
  • Relevant property characteristics, including: location, physical attributes, legal attributes, economic factors, the property rights in question, and non-real estate items included in the appraisal, such as personal property, permanent equipment installations and even intangible items.
  • 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.
  • What was entailed in the process of completing the job.
For a more in depth look at all that goes into an appraisal report click here: Sample Appraisal Report

Once the appraisal is done, how can I have a guarantee that the value indicated is accurate?   (Back to top)

In the documentation of an appraisal, each appraiser must see to it that each of the items below are covered:
  • That the information analysis contained in the appraisal was proper.

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

  • That appraisal services were rendered in a careful and judicious fashion.

  • The final appraisal report was easy to explain, credible and defensible.
To become a state licensed appraiser, there are extensive education requirements as well as real world experience that must be attained - all with the end goal of being able to render unbiased value opinions. Likewise, appraisers must obey a meticulous industry code of ethics and respect national standards of practice for real estate appraisal. The rules for developing an appraisal and communicating its results are guaranteed by enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).


    (Back to top) Regulations regarding licensing and certification of Real Estate Appraisers vary from state to state. However, licensing and certification is most often associated with many hours of coursework, tests and practical experience. Once licensed, he or she must then take continuing education courses in order to keep the license current. To see the specific requirements for any state click here.

Who engages the services of appraisers?   (Back to top)

Mortgage lenders are an appraiser's typical client, requesting their services to ensure a home involved in a mortgage transaction is enough to cover a loan balance in the case of default. Appraisers also provide opinions for legal settlements, tax matters and investment decisions.

Where does an appraiser get the information used to estimate values in Midland County or other areas?   (Back to top)

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

General data is received from a number 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 reveal actual sales prices in a market. Flood zone data is retrieved from FEMA data outlets, such as a la mode's InterFlood system.

And last but not least, the appraiser gathers general data from his or her past experience in creating appraisals for other properties in the same market.

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

An appraisal is a valuable tool anytime your home's value is relevant to some financial decision. If you're selling your home, an appraisal helps you set the most appropriate price. When buying, you can avoid overpaying by commissioning an independent appraisal. For people settling an estate or divorce, an appraisal from Lone Star Appraisals is the best documentation to ensure assets are split up evenly. Simply put, a home is often the single, largest financial asset anybody owns. Without knowing its real value, wise financial decisions are impossible.

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

PMI is an acronym for Private Mortgage Insurance. It takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on 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.

The savings from getting rid of your PMI will make up for the cost of the appraisal in a matter of months. Nobody is more qualified than Lone Star Appraisals when it comes to analyzing real estate appreciation in Midland and Midland County. Contact us today.

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

We start 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. 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.

The following items, if available, will help your appraiser to provide a more accurate appraisal in a shorter period of time:
  • Records on the latest purchase of the property in the last three years.
  • List of personal property to be sold with the home.
  • Any documents, such as a title policy with information on encroachments or easements encroachments or easements.
  • A list of any major home improvements and upgrades, the amount of their purchase and date of their installation (for example, the addition of Energy efficiency upgrades or roof repairs) and permit confirmation (if available).
  • A list of "suggested" improvements if the property is to be appraised "as complete".

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

Does the appraisal belong to the bank or the consumer?   (Back 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 report - 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.

The exception to this rule is when a home owner hires an appraiser directly. In these cases, the appraiser may state 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.

Which home renovations add the most to the price?   (Back to top)

It really depends on the market. 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.

No matter where you go, however, renovating a kitchen is almost always a safe move. 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 were second, yielding 85%. On the contrary, an improvement that may not increase your value would be painting just for the sake of redecorating.