Lets talk about getting a home appraisal on your house. Most home appraisals are done before refinancing or purchasing a home. Some are done for equity splits or insurance reasons as well.

 

The first question that most people asks me is "why do we have to have an appraisal done before I get a mortgage". The simple answer is that the investors who lend money want to make sure that your home (collateral) is worth the money they loan on it. If you were buying a $100,000 car from me wouldn’t you look at the Kelly blue book before forking out the money?

 

Another question I get asked by clients is if they can use their old appraisal. This question is usually in response to me asking them to buy an appraisal up front to begin the new deal.

 

The short answer is "yes" depending on which investor, you can sometimes use an old appraisal up to 6 months old. However, most of the time you will be urged to order a fresh appraisal regardless of the age of your last appraisal.

 

The primary reasons loan officers prefer to use a fresh appraisal is for underwriting reasons and to get an investment on the borrowers part so that they won’t back out mid-way through the deal. Also, experienced loan officers know that using an old appraisal means they have to call the old lender to have the appraisal released.Having to do this opens the door to competition that they really do not want.

 

The main reason I always like to use a new appraisal is because underwriters are suspicious of older appraisals, especially in today’s market. Using an old appraisal practically invites underwriters to study the appraisal in depth. This may cause them to condition the loan or counter offer values, nobody wins when the investors start questioning the validity of an appraisal.

 

What most lenders will not tell you is that the appraisal is owned by the lender. So, if you "fall out of love" with your lender halfway through the loan process you will most likely have to buy another appraisal. This is why I advise you to make sure that you are given the best and worse case scenarios before getting an appraisal done.

 

The number one variable that kills most mortgages is the home appraisal. Two to three thousand off of the loan officers "projected" value and your rate could start with an "8" instead of a "6". Always ask your lender what appraisal value they are using when they quote you. Then ask them to quote you at the worst case scenario.

 

I have listed some more of the most common questions I have fielded over the years. Understand, I am not an appraiser, I am a loan officer that has ordered close to a thousand appraisals though. If you are an appraiser, and you feel there is a better answer to one of these questions please shoot me a line.

 

 

Are there different types of appraisals? Yes, as follows:

• Sales Comparison Approach – This is the most common, in this appraisal the appraiser basically compares your home to three or four different homes in the vicinity to yours. They develop a base price then add and subtract square footage and features to get a value. The factors used in the comparison
  include square footage, number of bedrooms and bathrooms,
  property age, lot size, view, and property condition.

• Cost Approach – This type of appraisal considers the land and building should it be developed further. This is common for new construction commercial tear downs and renovations. Refinances and re sales will usually list this value on the appraisal but it is only used to see the current condition as compared with its potential.

• Income Capitalization Approach – Strictly done on commercial and investment properties. The truth is I am clueless about these appraisals I have only been a residential loan officer. However I do know that the potential for income that the property can generate is the deciding factor in the value. Never done for residential home appraisals.

 

What is the Home Appraisal Cost – The average home appraisal, as of this article, is about $350. They can go up to $550 or even up to $1000 depending on the size and difficulty of the job. The cost of a home appraisal is dependent on these factors:

• Type of Appraisal
• Type of Property
• Location of Property
• Use of Property

Who owns the Appraisal – The bank, mortgage company or investor 99.9997% of the time. You are entitled to a copy to it by law though.

 

How to increase a home appraisal – For the most part you cant, that is without major renovations or additions. Appraisals are much more science than art. Investors usually have specific rules to the vicinity, style and age of the comparable’s "comps" that are used.

 

This being said, there are some things that you can do to ensure your home appraises for all it is worth . Believe it or not, as with any profession, there are some lazy appraisers out there and some subtle prompting on your part may make a difference.

 

We suggest that you make a list of the following and make sure the appraiser gets this during the inspection. We do not recommend following the appraiser from room to room and giving an account of all the extras, nobody like to be told how to do their job. A nice list will be viewed as helpful though. For Example:

• If your home sports an in home wiring sound system , or an unseen feature that they can not see, by all means, let the appraiser know (on your list).
• If you paid for upgrades during construction prepare a list and give it to the appraiser when he/she does their inspection.
• If you know of recent sales in your neighborhood that are to new to show up in their data bases that are helpful to your value add this to your list as well.

My lender said I don’t need an appraisal why do you need one? – For some home equity lines and second mortgages some lenders will use an estimate that is called an AVM, or a drive by appraisal. These are less expensive estimations of your homes value and the cost is usually covered by the lender.

 

Keep in mind though, they are simply averages of home sales in your area. Meaning homes that have sold in a radius of your home are averaged and a value is assigned to your home. This is NOT very helpful if you live near a mobile home park or in a neighborhood with a lot of foreclosures. If the value is close and pricing (rates) is on the line we suggest that you "pony up" for a full appraisal.

 

Should I use an online home appraisal? – The last few years there have been quite a few "free" online home appraisal websites that have popped up. A lot of loan officers will use these websites when quoting their clients. I have found the "free" variety to be wrong a large percentage of the time. Because over estimated appraisals are the number one reason mortgage deals "die", I do not use them when quoting my clients.

 

However, there are some online home appraisal websites that are professionally ran but will charge a fee for their services. Their fee is usually a small percentage of what a full appraisal would cost and I have found them to be extremely accurate with their values. If you are considering selling your home, an equity split or any transaction that will not be scrutinized by an underwriter you might consider using an online home appraisal.

 

How do I prepare for a home appraisal?

• Clean your house !!!!
• Rake or mow your lawn.
• Make the list we mentioned earlier.
• If you live in Florida pull the blue tarp off of your roof.
• If you have exposed sheet rock or studs finish and paint this area.
• If you have water stains from an old roof leak paint this. Appraisers have to mention this in their report as a possible roof leak.
• Do not tell the appraiser about the things that are wrong with your home that you plan to fix with the loan or in the future.
• Finish any construction or repair projects you have prior to the inspection.
• Hide your drugs … (you would be surprised) one of my good friends is an appraiser and a retired deputy sheriff.