Monthly Archives: January 2017

Understanding the Appraisal Process

What is an Appraisal?

Knowing the appraisal process

An appraisal is simply an expert opinion of the value of something.  Understanding the appraisal process will help you better navigate through your mortgage process.

What is the Appraisal Process?

The appraisal process is a series of actions that provides you with a final opinion of value.

First, your lender will order the appraisal (usually through a 3rd party).  This puts them as the client, not you, even though in most cases you will be paying for the appraisal.  You are entitled to a copy of the appraisal, which will be provided by the lender, after the appraisal is complete.

Next, the appraiser receives the order and does preliminary research of your home, neighborhood and market area.  They will be looking for homes of similar “dominant features” or “market movers” that could be used as comparable to your home.

The appraiser then calls the contact listed on the order to schedule the appointment and gather any specific information about the home.  At this time, it is a good idea to let the appraiser know the following:

– Have you added or subtracted any square footage since purchasing the home?

– Does the home have a basement?  Is it finished?

– Have there been any updates or remodeling recently?

Any information that may have changed since the last transaction of the home is helpful to the appraiser in order to get a good idea of the property beforehand.  Alert your appraiser if your home has had any added or subtracted bathrooms, bedrooms or garages.  Be clear, concise and try not to exaggerate the condition of the home.

Do Not Talk About Value

An appraiser cannot talk to you about value.  Don’t ask.  Guidelines do not allow an appraiser to talk to you about value, it jeopardizes the process so it is best to not go there.

Inspection

Home inspection

The inspection is the shortest part of the appraisal process.  The appraisal inspection will take 15 – 45 minutes depending on the size and complexity of your home.

The appraiser will take interior and exterior photo’s, measure the property, and determine the quality and condition of your home.  The appraiser will note any deferred maintenance, upgrades, functional obsolescence, and/or safety hazards.

Analysis and Final Report

After the inspection, the appraiser takes the data gathered and compares it to homes of  similar “dominant features” or “market movers”.  The appraiser will select homes and drive the neighborhood to gather additional data.  All data collected is reviewed, analyzed and communicated into a supported value opinion known as a final report.

Submission

The final report is submitted to the 3rd party AMC, reviewed and transmitted to the lender who then provides a copy to you the borrower.

Now that you know what an appraisal is and you understand the process get to know How to Prepare for an Appraisal To Get The Highest Value.

 

For more information check out US News

Deferred Maintenance

Deferred Maintenance

Getting the Highest Value From Your Appraisal and Avoiding Deferred Maintenance

What is Deferred Maintenance?

Deferred Maintenance is neglecting to fix any worn or broken things in your home.

Generally speaking, allowing deferred maintenance in your home can decrease the value of your asset.  It may result in higher costs over time and in some cases, cause health and safety hazards.

How does Deferred Maintenance Impact My Home Appraisal?

Deferred maintenance can impact your home appraisal in a couple of different ways.  At one end of the spectrum, it can effect the value of your appraisal or sale.  At the other end of the spectrum, it can kill the possibility of your loan or home sale.

Properties must meet certain minimum standards before a lender will accept a loan.  If the deferred maintenance is significant enough, the mortgage company will ask for repairs or decline the loan.  If a buyer needs a loan and the lender will not accept the condition of your home – no sale.

Broken windows, water issues, electrical problems, and even peeling paint can delay the process and impact the loan acceptance.  Less significant items like, stained and worn carpet, missing baseboards, patchy paint, holes in the walls or ceilings, etc. can also have an impact on your appraisal process.  These items might not kill the deal but they won’t help.

Interior and Exterior Deferred Maintenance

Repairs can be found on both the interior and exterior and frankly anywhere on your property that has been neglected.  Fences, in disrepair may be considered a safety issue.  Broken hand rails and even peeling paint can all effect the condition of your home appraisal and impact the green light on your loan.

Deferred Maintenance and the Condition of Your Property

Today, an appraiser rates the condition of your home considering the deferred maintenance and the general condition of your property.  They do this by using a series of condition ratings numbered from one to six.  C1 is generally new construction.  C2 or C3 have few, if any, deferred maintenance or repair issues.  C4, C5 or C6 homes, have visual deferred maintenance and repair issues requiring sometimes significant attention.

Once your home has been assigned a condition rating, it is compared to other home conditions in the neighborhood.   If the condition of your neighborhood is generally above that of your home, the appraiser will make an adjustment down for the difference.  This is not necessarily what you want when trying to obtain a loan for maximum value.

Deferred maintenance further impacts your home when trying to sale.  Prospective buyers might not appreciate your worn out carpet or the paint job your friend tried to help you with.  The offers you receive might take repairs into consideration with the overall price offered.  This often costs you more then it might have to just fix it in the first place.

How to avoid Deferred Maintenance?

Keeping your home up to date, free of repairs and in general good condition not only helps you with your home appraisal and loan possibilities but it keeps you free for all transaction possibilities.  This allows for the highest asset appreciation, which in the end is good for everybody.

If you are in need of a real estate appraisal, it is a good idea to walk around the inside and outside of your home.  Look for anything you can easily repair prior to the inspection.  This saves you time and money and speeding the loan process for a smooth transaction.

Take a look at the following pictures to get an idea of what an appraiser sees as they enter a room.  Broken fences and windows, missing flooring and dirty carpet give you a less appealing view of the condition.  New flooring, windows, paint and fence gives an overall feeling of “pride of ownership” and thus a higher condition rating.

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