The appraisal process when buying a home that needs bank mortgage lending house valuation.
The lender that knows the combination to the big stainless hardened steel safe tumblers wants to know what you are eyeballing for a home sweet home measures up in the condition standards department. For the A-Z mortgage underwriting conditions and the quick sale of the paper on the secondary market to investors.
And the money people fronting the money want an appraisal real estate market snap shot to know this collateral is going to be worth something to pay off the loan if you go belly up and it ends up back in their lap.
Buying a property for more than it is worth when it is a real estate sale going through the bank mortgage lending pipeline means it has to be realistically priced. The purchase and sale agreement house price has to be in line with the market values in the current inventory of home listings and sold recent comparable sales.
What happens when the appraiser with the clip board shows up at the property listing, starts his or her process of measuring, study of the town property card?
And sizes up what is found with boots on the ground at the actual real estate listing under contract for sale?
Because besides examination of the property for sale inside and out, the further study of the real estate around it affect the value.
High tension power wires that glow blue and hum when it is pitch black at night over head are not a real estate property feature that buyers ask for in their home search.
Neither is being in proximity of a pig farm or industrial setting or next to a busy highway with strip malls and fast food outlets. Right of way easements, clickity clack railroad tracks and wump wump wump windmill turbines don't help a real estate house sale either.
If the home for sale needs a new roof, there is already leaking, mold and ceilings are drooping inside the house you want to buy, corrections are needed. Just like adding GFI electrical outlets in the bathroom and kitchen. Replacing broken windows, scraping and re-painting clapboards and trim.
The bank and appraiser don't know if you ever are going to re-paint again but at least at the time of this appraisal everything has to be up for snuff.
Cash sales are not like that. A buyer would have to accept the property loose ends. And the property price for the home reflects what needs to be done that the seller is going to concede and discount because the buyer takes on the responsibility. And can close quickly or allow the seller to keep possession rent free, etc that all fit into the home owner's needs today.
Owner financing a home
also avoids the appraisal visit to the property for sale but they are rare on decent housing.
The terms on owner, seller carried financing though fit perfectly. Should be hammered out, can be custom made to meet the financial situation with the buyer at this moment in time.
The down payment, the monthly installments can be what works for the buyer and turns the sale into an annuity for the seller.
Off course no existing mortgage on the home, to avoid the acceleration clause to kick in and a seller who does not need to replace the home has to be factors in the house sale. For owner financing a home to work, the payment can not be so large it chokes the buyer and yanking the house keys back has to happen in the eviction process due to lack of payment, being in default in the home mortgage fine print conditions.
So the appraisal process, if you deal with a local lender in rural Maine, your professional that is tapped to valuate the home is from the community. The appraisal process goes much smoother when who is performing the valuation paperwork is local. They know the market, it is cheaper than bring in someone from far away that is more expensive in time delay and money outlay who does not swim in the local competing listings and sold comps. The results can be not what the buyer and seller were hoping for and one expensive let down. With the result no home loan from this lender. Sorry Charlie.
Can you challenge an appraisal valuation and does everyone doing the sneak a peek arrive at the exact same conclusion?
Yes. Nope. In that order.
Not always but if the right three sales, the best three competing listings are used, the opinion of value should come out pretty much to the same valuation conclusion.
But like the first doctor who says you need a knife in your back operation and the next one says just a life in one shoe. Opinions vary. Same with legal advice you want to take or not.
It is an opinion of value with a house appraisal, a science to arrive at today's market value considering everything the home has or does not and what is going in the market the property lives in.
Real estate is a fixed base commodity. Tied to the rise and fall of market values in the surrounding area in the community. If a mill closes, pink slips get handed out and factory windows are boarded up, that increasing supply of housing will affect the market value. Simple economics 101 at play with supply and demand. I have seen a bank stand by the home appraiser results and the only way to move ahead is around that bank. Starting over with another one and a re-roll of the dice.
The appraiser looks for hazards, may recommend further inspections by a qualified tradesman to study the defect and suggest solutions. The corrections to whatever is wrong with a property needing bank financing have to done by someone involved in the sale. The buyer if he has the money and expertise is the first stop.
The seller can get step up to the plate and agreed to fix the missing deck railing. Or slide in some new steps to the back door to replace the rotten ones that are a hazard. But if no one agrees to do the repairs that the appraiser doubles back to sign off on their completion, the home sale can stall, derail. Unless another financing method with in house portfolio lending at a higher interest rate and more severe terms are agreed to by the buyer making the home payments.
My Dad was a licensed Maine real estate appraiser.
He loved going on the mission of another house valuation and to compare this home for sale to another that had sold. The last six months to a year is where the comps house sales come from and if they are too old, adjustments for time have to be made if the lender will allow. If what is used for a sold and competing three to six homes are so different that too many adjustments are being made, that can blow up in the mortgage underwriting. In small rural housing markets, you don't have three hundred lot subdivisions to create plenty of both sold and listing inventory to use in the comparison.
The rural house appraiser has a more difficult task to find comps than his counterpart in the urban city settings.
The fee for the house appraisal is lower too and lots of the comp sales for houses are hard fought for in the tiny towns.
With very small hit or miss municipal offices only open so many hours or days a week.
Inter family sales and anything not arms length for a transaction can't be used as quality house transfers in the appraisal exercise.
If special owner financing terms were involved, or concession made that the sale price does not reflect, the appraiser makes lots of calls to uncovered the details of the transfer. Repossession, short sales, pressure to sell quickly because of that third tax bill lien that could cause the seller to lose the home are factors that sway the value and need to be examined closely.
Fair arms length house sales without lots of personal property included in the inflated price and retained possession or use of part of the premises all affect the market value and why the home sold for what it did.
Fair market value of a home is what you could reasonably expect in today's market to receive. If the house is placed on the open market, exposed to the current inventory of buyers and there is adequate time to showcase the features to locate the ready, willing and able buyer that ends up in the property. Curb appeal for a home increases when the supply of musical homes dwindles. To set your family down inside for the three meals and head to bed, rise and shine.
Appraising a home, my advice is to obtain local lending because you want to do business that helps the area economy. The turn around service time is faster and the lender knows the local market.
What do appraisals look for and what are the odds the house won't appraise for the sale price on the purchase and sale agreement? For starters, home appraisers want to be touring something safe and sound. Nothing that smells of electrical, fuel oil, black mold or other odors that indicate something is wrong.
The place does not have to be spotless clean and they over look clutter but an appraiser is human.
They can tense when the big dog on the little chain is straining to make them lunch just like property home buyers who share the same nervous anxiety.
Deferred maintenance and hazards are the biggest concern of the appraiser assigning the house valuation.
What are the odds the appraisal on the house will come in too low to get the clear to close memo circulated? It all goes back to who the listing agent or real estate broker was. If the property is way over priced, it won't clear appraisal hurdles. Realistic properties marketed aggressively sell quickly and with less hassles. Those way to high priced for the current market sit and rot on the MLS. They are like parked vehicles in the middle of a very busy highway.
The agent or broker is to blame for over priced properties, not the seller. Because politely they could have told the property owner I can not help you because your expectations exceed the market. Just say no and avoid losing the listing in a year when it had no hope of selling going in.
You the real estate professional are not doing the seller, any buyers brave enough to sign a purchase and sale agreement on a bloated priced property any favor in taking over priced listing.
The big bad appraiser has to throw a wrench into the home sale by asking am I missing something?
Is there more land, valuable gold or oil deposits in the back yard or missing property acreage that would help justify this nose bleed high real estate sale price?
The appraiser has a tough job of bringing everyone back to reality. The current market value in his appraisal report could be flawed if the wrong comps are used or just too hurried and from many hours away where he usually services the appraisal requests. Also, getting a pre-approval home buying letter
that is worth the paper it is printed on saves time wasted too for buyers, sellers, the real estate professional guiding the process from listing through marketing to the property closing.
I have had an appraisal $45,000 low on a property valuation be reassigned with the blessing of the bank making the house loan to another appraiser.
Who starts fresh, with no knowledge of the previous inspection and that flies the second time around. How can that happen? Such a variation in the property valuation happens because of flawed comps. Or too hurried a job scanning and picking the best to use in the flock of what's available for current listings for sales and selected from the sold inventory from the last year or less in time.
Again far from the local area appraisers are expensive, pulled in at the last minute liked hired guns on a long journey when the far from the property lender is at the end of their rope.
After a long delay filling the valuation assignment order because the area appraisers service the lenders nearby, close to home and around the property for sale.
Whoever appraises the home, the clipboard notes will consider the lot, the location, the current real estate market. But also the condition of the major elements like foundation, roof, siding, windows, plumbing, electrical and heating elements of the house for sale. What the seller considers improvements like say a swimming pool or granite kitchen counter top may not come back to them in a home sale valuation.
Many of the expensive improvements a home owner considers important are merely the garden variety "joys of ownership" costs that come with being responsible for the housing maintenance.
The colors, fads in home interior design are not what the appraiser uses to raise or lower the valuation marker used to bull's eye the value of the home today. In small rural areas of Maine especially having a garage is more important than stainless steel appliances or moisture sensitive sky lights that open and close depending on what the weatherman dishes out.
Practical considerations trump the items to ooh and ahh or impress in small down to Earth Maine town living.
The garage that has the extra bay or a big warehouse may not add to the valuation and could be considered more of a white elephant or burden to maintain, pay extra property taxes on.
How the wheels turn in the head of the appraiser of a home, to arrive at the value today factors in the life of the housing elements. The curling, lifting or missing sections of asphalt home roofing may be a deal stopper. Because it is not leaking but is not going to last five years until the new home owner can address the replacement of those house shingles.
The leaking oil hot water furnace boiler is not something the appraiser ignores. He or she wants a qualified expert in the trades to give their opinion on the condition, the remedy for the whatever is wrong with all the elements of the home being appraised for the mortgage lender. The appraiser works for the bank... not the seller, not the buyer. The lender picks the appraiser, the buyer or the seller don't give him or her a jingle and invite them over.
The seller who has an appraisal kicking around from the estate valuation can not save the buyer money by sharing it.
The bank mortgage lender on the home wants to be in the driver's seat.
Ordering the appraisal, indicating the loan program underwriting standards to compare the house to in the tour of the property. The buyer hears about the appraisal results before the agent or broker or seller too.
The day of the appraisal, what should everyone do to make this valuation process easier? The copy of the deed, the legal description is needed. Any survey plans copied and if the seller has images of the home construction, a book that shows the septic system going in, foundation being poured, the appraiser looks all that over.
When the major operating systems were installed are also helpful for the insurance agent who does the coverage on the property that needs a home binder for the closing to move forward to the part about pass the keys, get up, shake hands and wish everyone good luck in their new home, in the life ahead.
Make the inspection wide open easy and don't follow the appraiser around or try to sell them on the home's merits. They know what it feels like to be hustled and they have two more house appraisals to collect the town and property data on. They measure, take photos and know what they are doing so leave them alone unless they ask for information. Make their job easy by providing all the information upfront so the calls and emails back to the office or seller time suck can be avoided.
Anything and everything that delays the moving conveyor belt from the time the purchase and sales agreement ink is drying to the more signatures needed at the sit down real estate closing helps assure the property house sale happens.
Take too long in the process and the seller does not extend the contract because the home has been off the market long enough in their opinion and they move on. "Next" hollered for who wants to buy my home today?
The home appraisal process, it is a science, there are roles for everyone to do their part in helping the valuation process without interfering with it.
The property disclosure that says the well water won't pass a safety test, the foundation cellar crack big enough to throw a cat through and where you see lots of blinding daylight.
The property appraiser is going to call a spade a spade. Details the list of what needs fixing, does the run down of what ails the home. And the steps needed, that have to happen. For he or she to sign off and protect their real estate valuation license to appraise which is how they buy groceries, fund their life expenses.
How to make sure your home appraises for the real estate house sales price?
Pick local, shop in your region of Maine. Make sure the real estate professional in Maine
you use did a thorough job in the physical inspection of the house, the study of the current market values to assure this sticks and bricks will fetch this much in today's real estate Housing market. Keep what you want for the house price realistic and in tune with the current market means adjusting the price as the local supply and economy shift. Never ignore the market that like the weather changes.
Thinking of buying or selling, please consider me to handle your property listing sale. I have been a licensed real estate broker in Maine for over 37 years and consider it an honor, a joy to help you in your search for new home in Maine or the sale of your existing one to help your relocation to something that works better for your lifestyle and housing needs.
I'm Maine REALTOR Andrew Mooers, ME Broker
MOOERS REALTY 69 North Street Houlton ME 04730 USA