Should I have an appraisal done before purchasing or selling a home?

An appraisal will provide you with an objective opinion and help you to determine the Fair Market Value on the home you are considering to purchase or sell. The fee for a high quality appraisal report will be a small investment in the confidence that you will receive about your purchase agreement.

Lenders will require an appraisal to determine the value of the property that is being sold. You can relieve some of the stress of selling or buying a home by having an appraisal done before the sale. As a seller, an appraisal will assist in marketing of your home to prospective buyers.

What is the purpose and function of the appraisal?

The sole purpose of the appraisal is to form an opinion of the market value of the property. For mortgage loan purposes the function of the appraisal is to assist your lender in evaluating the subject property as collateral for your mortgage loan. An appraisal can also be used for state purposes, tax reasons or simply to know the value of your home.

What is the definition of market value?

Market value is the most probable price a property brings in a competitive and open market under all conditions requisite to a fair sale. A fair sale occurs when the price is not affected by undue stimulus and when both the buyer and seller act prudently and knowledgeably.

How does the appraiser arrive at his/her opinion of market value?

The appraisal is based on information gathered by the appraiser from public records, inter-office data, inspection of the subject property and neighborhood, and selection of comparables within the subject's market area. The appraiser is required to select a minimum of three recent closed sales similar to the subject in regards to style, location, square footage and physical amenities. The appraiser then makes a dollar adjustment either negatively or positively when appropriate to reflect the market reaction to those items of significant variation. Remember, the dollar cost of an individual amenity of additional feature does not always reflect the contributing value of that item.

What is involved in the appraisal process?

The initial physical inspection will begin the appraisal process and several key points are listed below to help you understand what goes on:

• The interior inspection will last about 10-35 minutes, depending on the size and complexity of your home. Please don't feel that the appraiser is working too fast or overlooking certain features, they are well trained and have a lot of experience.
• Please allow the appraiser to access every room in your home. Don't worry about the kids, toys, unmade beds, vacuuming or other clutter, the appraiser is only looking at the structure, condition, and features of your home.
• There are several different ways to obtain the measurements of your house. An appraiser may physically measure the house with a tape measure or a measuring wheel; he/she may obtain the measurements from a previous appraisal report they completed, a prior mortgage survey, or from assessor's records at your township or city hall.

• During the next step of the process, they will search through data of your neighborhood for homes that are similar to yours in location, size, design, number of rooms, and extra features. We call these homes Comparable Sales or "Comps". Our appraiser makes dollar adjustments to reflect differences in "Comp" properties. Upgrades like fireplaces, air conditioners, or major structural improvements add value to a property (usually not dollar for dollar, but they will add value).
• Third, a finished report requires extensive research, computer time, and an additional 6-8 combined hours by the appraiser and staff to complete. We submit our completed report to your lender.

All our appraisers are friendly, courteous, and interested in providing any information you may need. Ethically, we have a client relationship with your lender. Therefore, by State and Federal laws, all of our communication must go through your lender. However, feel free to ask questions while we are in your home!

12 Most Common FHA Repairs

These conditions are listed to help you understand and erase any worries you may have about financing through HUD for your mortgage purposes.The purpose of repair is to correct deficiencies which may affect the health and safety of the occupants or the continued marketability of the property. If possible, we suggest that you make any repairs to your home prior to the appraisal. This will improve the marketability and help the sale or refinance of your home go smoothly.

1. If the home was built prior to 1978, chipping, peeling paint must be scraped and painted. This includes interior, exterior, garages, sheds, fences etc.

2. Roof should have at least 2 years of useful life remaining and no more than 2 layers of shingles.

3. Broken or cracked windows must be replaced.

4. The cause of wet basements should be cured (i.e., improve drainage away from house, gutters, etc.)

5. Electric service must be 60 amp or greater. Electric certification may be required if 60 amp appears to be overloaded (i.e., homes larger than 1000 sq. feet with many major electrical appliances).

6. Abandoned inoperable wells must be capped and sealed by a licensed well sealing contractor.

7. Safety handrails should be installed in open stairwells or stairways with three or more steps.

8. Infestation of any kind should be exterminated (i.e., termite, carpenter ants, insects, mice, bats, etc.).

9. Damaged or inoperable plumbing, electric and heating systems should be repaired. The appraiser will check these areas.

10. Structural or foundation problems must be repaired.

11. If there is a crawl space, it will be the homeowner's responsibility to make this area accessible so that it can be thoroughly inspected by our appraiser.

12. The attic area must be accessible for the appraiser to inspect.

Does the appraiser know the value of my home immediately after he/she inspected my home?

No! The inspection process is a valuable asset in determining the appraised value of your property. However, it is only a small percentage of the appraisal process. The appraiser usually has 3-4 more hours of work in the office either prior to or after the inspection is completed.

If I disagree with the appraised opinion of market value, what should I do?

For mortgage loan purposes the best way to handle this is to contact your loan officer or mortgage banker and explain to him/her why you disagree. If you have some additional sales data you think the appraiser should have utilized or considered, feel free to submit them for review. The appraiser should be more than happy to review your data. Remember, this is an opinion of market value for mortgage loan purposes, based on historical current sales data of comparable homes within your neighborhood and is not an exact science. If this is a personal appraisal you will want to contact your appraiser.

If I pay for the appraisal directly to the appraiser or the appraisal company, may I receive a copy of the appraisal from the appraisal company?

For mortgage loan purposes the determining factor is NOT who pays for the appraisal or how it is paid, but who contacted the appraiser in the first place and placed the appraisal order. For a federally related transaction, federal law requires the lender to be the one to engage the appraiser's service. In many, if not most cases, the homeowner pays for the appraisal either directly to the appraiser or indirectly through the lender, thus payment for services is not the determining factor. Of course if you order an appraisal for personal use you will receive the copies of the appraisal.