New Rule for Appraisals

Let's thank the CFPB for another new rule.  Just this month, they introduce the new requirement for lender's to qualify buyer based on their ability to repay.  Just recently, they announced that lender will provide a free copy of appraisal and other home value estimates to mortgage applicants.   This sounds like a great rule to me! 

Within three days of receiving a loan application, creditors will inform consumer of their right to receive  copies of the appraisal. Better yet, creditors would be required to provide appraisal copies and other home valuations to consumer at least three days before closing.

How is this different with today's appraisals?  

simple. Today, consumers pay for appraisals but the current law does not require lenders to send appraisal copies unless the homeowners request it.  

so if you are currenlty in escrow and using lending to finance your home.... request a copy of the appraisal report! It's your right.  

As for this new rule... it will take effect in January 2014 and will apply to first-lien mortgages. 

Until then....get your free appraisal copy. 

Why is An Appraisal ordered?

by Yvette Betancourt

An appraisal can be ordered for many reasons. See the top four reasons why an appraisal is ordered on a property. 

Did your home appraisal come in below Selling Price?

Yikes! this is one situation that most sellers don't want to be part of.  Don't despair. Here are a few tips if your home appraisal does come lower than your selling price. Even if your property is in a blessed multiple offer situation. 

Tip 1: Preventing a low appraisal

Get an appraisal before hitting the MLS. Have your agent bring the most relevant comparable and give them to the appraiser.  Remember, the appraiser doesn't have to take them however, it brings

Because of the new third-party rules, the appraiser who is assigning a value to your home may not be from the immediate area.

Options if an appraisal is low

Despite all the best efforts of the agents involved, sometimes an appraisal will come in low. At that point, the buyer has four options:

●Negotiate a lower sales price.

●Dispute the appraisal with the original lender.

●Get a fresh appraisal with a new lender.

●Make up the difference in the mortgage amount from savings.

Lenders’ hands are tied when it comes to the size of a mortgage, which is typically pegged at 80 percent of the property’s value. Because the bank always represents the buyer, the lender’s first choice would be to negotiate a lower purchase price.

If this happens, generally, sellers will grant an extension of that contingency deadline so there’s time to negotiate or challenge the appraisal. If not, the buyer has the right to walk away from the contract under the appraisal contingency. 

If you are in a multiple offer, you could lower the price to second highest bid and see if the buyer could make up the difference.  

If negotiations fail, lenders may be willing to reevaluate the appraisal.

Evers & Co. Real Estate in the District recently sold a renovated Chevy Chase, Md., farmhouse for $1.54 million, after a bidding war raised the price from the $1.495 million listing. The initial appraiser — who drove in from Baltimore — valued the home at $1.45 million, but the sellers refused to renegotiate. When the buyers challenged the appraisal, their bank ordered a fresh appraisal, and a competing lender ordered an appraisal of its own. Both new appraisals came back at the sales price.

However, government-backed mortgages have special restrictions. Appraisals for loans backed by the Veterans Administration or the Federal Housing Administration stick with a property for six months, meaning you can’t just get a fresh appraisal or switch lenders to start with a clean slate.

If negotiations fail and the low appraisal stands, the buyer may be left with no option but to pay the difference — or to walk away under an appraisal contingency in the sales contract.

Best of luck!

Low Appraisals are Complicating Selling and Refinancing Homes

by Yvette Betancourt 

The appraisal process has become a challenge, especially for homeowners who are looking to secure historically low interest rates.  Let's not forget the challenges of a low appraisal for home buyers purchasing with a loan. 

N.A.R. (National Association of Realtors) conducted a national survey to real estate agents  and found that a low appraisal has caned a contract to be canceled (11%), contract was delayed (9%), and a contact renegotiated to a lower sale price because of a low appraisal valuation (15%).  

But Why?

Some appraisals are being conducted by large appraisal management companies who may not be experience in the neighborhood.  In Los Angeles, a one-mile radius in Valley Village, CA will include homes from affluent Studio City and up-and-coming North Hollywood which has drastic home values.  

What can be done if you are caught in a low appraisal fiasco?

If your property has multiple offers, ask the appraiser to note the number of bids in the report to show that the market is appreciating and the amount of interest in the property.  This may or may not work but it's worth a shot.

Remember that an opinion of the appraiser doesn't always determine the sale price.  It's the data.  

If you are a home buyer and a home you are in escrow in has a low appraisal, the lender will cap the loan and the difference (if you are to continue with the purchase) is on you, the home buyer. 

In the end, the appraiser isn't the bad villain in these situations.  For the most part, they are trying to do the best work they can.  Its the location and it's current local market that makes the difference.  If you have a high number of foreclosures and REOs in your area, this will cause problems, especially there aren't homes similar to your property.

Source: latimes.com/business/realesate

Through an Appraisers eyes: What your home is really worth

Appraisers have a different approach value your home that the banks can use to extend credit to a borrower.  It's a "make it or break it" sale or refinance.  Appraisers say the following five areas are where homeowners often misjudge the worth of their home. 

1. The Outside

Appraiser sees: Overgrown bushes and chipped paint.

What he does: Slices as much as 3% off the value of an average-size home. 

Why: Curb appeal is primo. And an unkempt yard is a sign that there may be other issues.     If your neighbors are meticulous about grooming, the more your appraiser will downgrade the value of your home.  

2. Basic Systems

Appraiser sees: A brand-new roof.

What he does: Nothing.

Why:  Just as a knee replacement won't make you look 20 years younger, a new roof, furnace, or boiler isn't considered an improvement to your home.  However, if your roof is in disrepair, replace it. Signs of leaks or discoloration can knock a significant amount off the home's value. 

Be advise, that a new roof may not help you in your appraisal but could help you chances of a quick sale.

3. The Basement

Appraiser sees: A recently finished basement with a half bath.

What he does: Adds about 2% to the value of the home.

Why: Yes, your finished basement adds value but don't expect it to count like a first floor space.   

The addition of a bedroom and a quarter bath on the ground floor could increase your home's value by up to 20%, especially if you've got only one other bathroom.  

A below ground basement normally isn't included in the square footage of the home.  This rule applies to outbuildings like pool-house casita, painting shed, or studio. 

4. The Market

Appraiser hears: Two nearby homes just went into contract above their asking prices.

What he does: Nothing

Why: While a broker might pump up a home's asking price based on the sense that the market is "hot," by and large, appraisers are bound by the data of recent comparable sales. 

What if prices are suddenly up in your area, and you're nervous that your house won't appraise for contact price? In that case, you might want to delay your appraisal until one of those recently contracted sales closes. 

5. A Remodel

Appraiser sees: An expensive, custom-made, built-in entertainment center.

What he does:  Makes a negative adjustment to the valuation

Why: Renovations that are at all trendy or not in keeping with the historical period of the home will be assessed at the cost of ripping them out. 

Timeless improvements, such as a deep sink or new wooden cabinets in the kitchen, will add value.  

So if you're thinking of remodeling, contact me for today's buyer's wish list when looking for a home. 

Source: Money.cnn.com