1. When will the appraisal report be completed?
Most lenders and AMCs are giving appraisers 3-7 days to complete an appraisal report. Because of the erratic nature of incoming orders and sometimes inspections (think procrastinating tenants or out of town owners) the time to complete a report will vary. Generally 48-72 hours after inspection is reasonable. Sometimes I will inspect a property the day after the order is received but not start the report for two or three days due to inspections already scheduled or other deadlines. Keep in mind the AMC and/or lender will be updated with an expected due date. Once delivered the appraiser has no control over lender reviews or the progress of the loan
2. Where did you come from?
No, I generally don’t look like I came from Mars. As a business decision I restrict my coverage area to Lee County to focus on areas I appraise most frequently. In the past some appraisers were working neighboring cities and counties that they were not familiar with. This was especially common in the years after the housing collapse, and was often blamed for appraised values coming in below contract price. The truth is that distance from an appraiser’s office does not automatically impact the quality of the report or disqualify him or her from completing an appraisal. Many neighborhoods 20-30 miles from my office are very straightforward and easy to appraise in. Since I hear this question often, it appears there is still some concern on the part of realtors and consumers.
3. Isn’t the buyers purchase offer the market value?
Well, maybe. The most commonly accepted definition of market value assumes typically informed buyers and sellers acting in their own best interest, without undue influence or pressure to buy or sell, with the sale completed as of a specific time and financing in terms of cash or a cash equivalent. The appraisal analyses the actions of buyers and sellers in the market place, looking specifically at recent sales of houses similar to the subject house, and taking into consideration changing market conditions. So if the buyers purchase offer is reasonable and supported by the actions of other buyers in the market then, once the sale is settled, it will be used as a comparable to support other purchases (market value). Until then the offer is a relevant piece of market data but not automatically market value.
4. What do you mean you can’t discuss the report? I’m paying for it!
Appraisers have a legal, ethical, and contractual obligation to discuss a report only with the person or entity that engaged the appraiser. For lending purposes, the lender or management company that engages the appraiser is the appraiser’s client in a mortgage transaction and the only entity that the appraiser can disclose the results of the appraisal to. Payment is not a consideration in this matter. Borrowers can obtain a copy of the appraisal report from their lender.
There are plenty of myths regarding appraisals and what we look for when inspecting a house. I've broken the inspection down into five very broad categories to help homeowners and other users understand the process.
1. Design and Quality - Does the house fit in with other houses on the street and neighborhood? Is it a similar quality? In my area ranch homes dominate the market, but two story homes are present and accepted by many buyers. Are there enough bathrooms? A five bedroom house with one bath may sell for a lower price than a two or three bath house.
Quality refers to the quality of construction. Is the house a basic house with few features and inexpensive materials? Does it have higher quality windows, doors, tile roofing, many offsets, 10' ceilings?
2. Condition is the next item I address. This ties into the age of the property, and addresses the depreciation present. I look at the flooring, cabinetry, counter tops, bath fixtures, and other systems to see if they have been well maintained, or updated. Updates and renovations can have a significant impact on the sale price of houses, especially older houses.
3. Amenities include items such as a fireplace, swimming pool, spa, extra rooms, decks, sheds or barns, fencing etc. Again these items may have a significant impact on values.
4. Living Area is the total area used for living space. Living area is heated and cooled in most areas of the country. Fannie Mae does not generally consider a basement as living area even though it may be finished and heated/cooled. However, a finished basement may contribute to the value of the house and likely will be considered in an appraisal. For single family housing the living area is determined by measuring the exterior of the house, excluding porches and garages. Condominium living area is measured from the inside of the unit.
5. Safety and habitability refers to any hazardous or unsafe conditions or features in the house and surrounding neighborhood. Exposed electrical wiring, mold and mildew, pool fencing or screening, missing railings, broken windows all can be considered a hazardous condition and may have to be repaired before closing.
These are just a few of the items we look for when appraising a house. There are too many items to list individually. By making sure your house is safe and accessible the appraisal process will be quick and easy!