You may need and use the services of a professional real estate appraiser for a variety of reasons. Depending upon an appraiser’s designation and qualifications, he or she can provide some or all of these services: Appraisals – Residential or Commercial; Counseling and Consulting; Evaluations; Expert Witness Testimony; Litigation Preparation; Feasibility Studies; Market Analysis; Market Rent & Trend Studies; Tax Assessment Review and Advice or Zoning Testimony. Stout Appraisals specializes in 1-4 Family Residential Appraisals.
The physical inspection of the real property being appraised can take from twenty minutes to several hours, depending upon the size and complexity involved. After the initial inspection of the property the appraiser also spends time evaluating the neighborhood or area. The purpose of this is to search for other properties that are similar to the property being appraised that have sold within the last year or so. When the field work is finished, the appraiser completes returns to his or her office and gathers even more information for the report. The report can consist of a short form report (typically under ten pages) to a long narrative report which can sometimes exceed a hundred pages. A short form report usually takes between three to six hours to complete. A narrative report can take weeks or sometimes even months, depending upon how complex the assignment is.
Home inspections are just a small part of the appraisal process. The appraiser spends many hours researching the market before and after the inspection, gathering, verifying and analyzing market and specific data. The appraiser is required to analyze three approaches in determining your market value. The Sales Comparison Analysis is the essence of the appraisal. This is the section that compares recently closed comparable sales from your specific market area or neighborhood to your home, adjusting for the variations in the homes used for comparison. The second approach to value is the Cost Approach. The appraiser determines what your home cost to build new, determines any depreciation, and determines your land value as though it were vacant. And lastly, the Income Approach determines your home value based upon market rents, if applicable. After considering all approaches to value, the appraiser then reconciles the most appropriate market value or range of values for your property.
Private Mortgage Insurance (PMI) insures a lender (bank or mortgage company usually) against loss on homes purchased with a downpayment of less than 20%. Once your equity is 20% of your appraised value, then the PMI is eliminated and your savings are immediate. To get rid of your mortgage of PMI, you will contact your mortgage lender and ask for specific instructions for eliminating PMI. All mortgage lenders require a professional appraisal for this process to prove your home’s value in relation to your equity. So this is a way to lower your mortgage costs once you have built up some equity in your home.
Upon receiving the appraisal request, one of our appraisers will contact you for a convenient time and date for the inspection. The appraiser will come to your property, take measurements from the outside, photograph the exterior and any pertinent items, and perform an interior inspection if applicable. An average size dwelling inspection will take from 20-60 minutes.
To speed things along, it is helpful to have the following available for the appraiser:
To simplify a complex definition, “Market Value” is the most probable price your property would sell for in a competitive and open market under all conditions requisite to a fair sale. This assumes that the sale is “at arms length” meaning that the buyer and seller are not related, or there are no special circumstances or undue stimuli, which would bias the sale.
The standard Fannie Mae 1004 (URAR) form is the most extensive single-family form and is the most widely requested for a conventional or FHA loan by all lending institutions. The form contains comprehensive information with addenda necessary for underwriters to make lending decisions. It is the most costly single-family form.
The Fannie Mae forms 2055 and 2065 are very similar to each other and are often referred to as “Limited” or “Drive-By” appraisals. The appraisals actually require the same amount of data to be gathered, analyzed and reconciled; however less written reporting is required. Therefore, the processing time is shorter than for the 1004 and less costly. These forms are especially useful for sellers trying to price their home for sale, for an estate tax situation, tax assessment grievance, divorce settlement, helping a buyer to decide how much to pay for a home, and for PMI removal, when approved by the lender.
Short form “2055” Vs. “URAR Fannie Mae” Form Appraisal Report
A “Fannie Mae” – URAR form report has many items required by the secondary mortgage lending market, that are not necessarily needed for a simple report to find market value. Both types rely primarily on a direct sales comparison or market approach with a comparison grid to determine the market value of the property being appraised. The lenders report has many additional requirements which have little bearing on the value found by a report needed for many other purposes. The traditional “lender” reports need census tract & SMSA information for tracking lending patterns. Some lender reports require a lot of the appraisers effort to determine and substantiate how much additional rental income is available to support a higher mortgage. In addition, a great deal of detail is required to help the lender determine what if any, necessary repairs might be needed before the property meets their underwriting requirements. All of these things and much more, may be quite important for a lender, but probably are useless for most people, who just want to know what a property is worth for a variety of reasons. Our short form reports are particularly well suited for helping a seller to price a home for sale, helping a buyer to decide how much to offer or pay for a home, for estate tax, gift tax, tax grievance, uncontested divorce & most any other potential use other than for obtaining a mortgage or in litigation where the report will be used in conjunction with expert testimony.
Many states require all real estate appraisers to be, at a minimum, state licensed or state certified and have fulfilled rigorous education and experience requirements and must adhere to strict industry standards and a professional code of ethics as promulgated by the Appraisal Foundation. For Qualifications Standards go to: http://www.asc.gov/content/category3/page0.html
The appraiser is not a whole house inspector, engineer, architect, electrician, plumber, H.V.A.C. technician or contractor. The appraiser briefly walks through the house to get an idea of the general condition and room count. An appraisal is not a guarantee of condition. The appraiser will ask about any visible problems and those which may not be visible, and will do his/her best to gauge any impact on value attributable to those problems. You are encouraged to seek the advice of experts if you have any questions about the structural or mechanical aspects.
Under the Equal Credit Opportunity Act, your lender must provide you with a copy of the appraisal report upon your written request. If you are dissatisfied with any information contained in your appraisal report, you should contact your lender immediately.
Appraisal Standards Board (ASB)
The ASB sets the rules for developing an appraisal and reporting the results. The ASB also promotes the use, understanding and enforcement of the Uniform Standards of Professional Appraisal Practice (USPAP).
FIRREA requires that real estate appraisals used in conjunction with federally-related transactions be performed in accordance with USPAP. More than 80,000 state certified and licensed appraisers are currently required to adhere to USPAP. USPAP contains the recognized standards of practice for real estate, personal property and business appraisal. The authority of USPAP extends beyond FIRREA. Since 1992, the Office of Management and Budget (OMB) has required federal land acquisition and direct lending agencies to use appraisals in conformance with USPAP.
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