Understanding the Appraisal Process Beginning to End

The appraisal is a central part of the home buying/selling process. Knowing the valuation of your property in relation to comparable homes in your area–whether it is one you’re looking to purchase or one you wish to list–is extremely important, especially when considering the financial steps involved with any type of real estate transaction.

If you don’t know a great deal about how appraisals work or what the process entails, then now is definitely a good time to learn. Landmark Homes is always interested in giving our customers as much information as we possibly can. Here you can find useful insight regarding what an appraisal is, how it works and why it’s so important.

Appraisal 101

Let’s say you have the largest, most luxurious home on the block. Granite everything, stone façade, the works. At 3500 square feet, your home should easily be worth half a million dollars. However, your particular property tends to be over built for the neighborhood, meaning that on average, properties on your road and nearby streets are selling for around $200,000-250,000. Odds are, you’re not going to be thrilled with how your appraisal comes back.

Based upon a number of factors–one of the more significant being comparable home values—appraisers are going to essentially rate your home in relation to recent sales in your market. If the most expensive home only sold for 295,000, you probably won’t get that 500k number you were hoping for.

What are the determining factors in a property’s value…Square footage, condition, year built, are all central to generating that magic number. But as the professionals at Landmark Homes can tell you, comparables or “comps” generally tend to be a dominating factor. So, whatever value the appraiser assigns to your home (or potential home) is what the lending institution is going to stand by; that is to say, if the appraiser determines that the house is worth 310,000, you will only be able to borrow up to a certain percentage of that amount, as 100% financing is a rarity these days.

Appraiser selection

Most lending institutions have one or two appraisal management companies with whom they work. Once assigned to the project, the appraiser will come to the home, assess the value and then begin their research. Again, this is largely linked to finding adequate comps and investigating the subsequent market a bit more thoroughly.

The appraiser will then compile a report and send it to the lender for their review. It’s not uncommon for lenders to ask the appraiser to revisit a couple of items in their report, especially if they know the home is appraising much lower than they’d anticipated. As ultimately, your mortgage is going to be based on this report.

A mortgage is a loan granted on the basis of collateral—the collateral being the property itself. The banks need to understand exactly how much this collateral is worth as they have to affirm that should anything unforeseen happen with the mortgage, they could ultimately resell the house at the value for which the defaulted loan now stands.  An appraisal ultimately gives them this value.

Rural Areas: Appraisals the Hard Way

Now, as appraisals are largely based on comps in the area, rural appraisals can sometimes take quite a bit longer than those in more urban environments. Fewer houses mean fewer sales, especially recent sales, so coming up with similar properties against which to evaluate a home can be a very difficult task.

Additionally, the rural areas have seen a significant drop off as far as the number of available appraisers.  The work just isn’t there, so newly minted appraisers are hesitant to call the country home. Properties are vastly spread out equating to longer drive times and huge territories to cover. And with the lack of homes to compare…let’s just say, not the ideal situation for any appraiser.

One thing you can do if you intend to list your home in a rural area is to check and see if there are going to be other sales in the immediate future. Selling your home the same time another property hits the market can help alleviate the need to “dig up” those elusive comps. Sellers and buyers have found themselves waiting months for a decent appraisal to come through.

At Landmark Homes, we’ve seen issues like this arise. This is why we want you to be prepared, we want you to understand that it’s not necessarily the appraiser’s fault, nor is a low or non-existent appraisal your fault, it’s simply a matter of geographic region and a scarcity of nearby comps.

Is there a shortage of appraisers?

Producing solid and accurate appraisals takes training. Especially since the housing crisis of the 2000’s, lending institutions are getting more and more stringent on their guidelines, to include appraisals.

Requiring a four year degree, certification exam and over 2500 hours of apprenticeship experience, it’s certainly not a career choice for the faint of heart. That said, the number of appraisers in the United States has plummeted by over 20% in just the past few years. So what does this mean for the home buyer and seller? Simply put it means you may have to wait a bit longer than expected throughout your real estate transaction. Start your home search early, be prepared for the challenges you may encounter, and trust your REALTOR and lender when they offer you advice.

At Landmark Homes, we pride ourselves on walking clients through every aspect of the process, beginning to end. And we also strive to keep you updated on all that is going on concerning your home purchase or sale. Yes, there may be some slow going when it comes to the appraisal, you may not get the number you want, but it’s okay, the team at Landmark Homes will help you deal with whatever may come your way. That is what we do best!

The Final Walk Through

The Final Walk Through: A Must Have Checklist to Ensure Your New Home is Move-in Ready

Negotiations wrapped up, all requisite inspections complete, there’s nothing left to do but move in, right? Not so fast…We understand that excitement can certainly get the better of you, but you want to make certain that everything is in order and in line with your expectations. After all, this is a huge investment. Purchasing a new home is probably going to be one of the biggest investments—if not the biggest investment—of your life.

Taking your time, thoroughly surveying and noting everything you see (or don’t see) is critical for ensuring a smooth and productive transaction for all. This final walk through is your last chance to inspect the product you are buying. At Landmark Homes we understand the value of taking your time and approaching this final stage very carefully. That is why we’ve compiled this checklist to help guide you through this crucial phase of your home buying process.

Always Bring Backup

Backup in this case comes in a few different forms. The primary reinforcement being your real estate agent, and secondly, a means of documentation. Generally, as we are of course in the glorious days of smartphones, we all have access to a camera; you might also want to grab a pen and paper in case you wish to take some notes or jot down questions you may wish to ask the seller and/or his/her agent later.

Making sure that your REALTOR® is on hand for this final walk through is a no-brainer. He/she provides an incredibly useful extra set of eyes and given their experience, can potentially identify issues that you may not see at first glance.

A House Has A lot of Moving Parts – Make Sure They All Work!

Don’t be afraid to get your hands dirty. Again, this is a lot of money we’re talking about here…You want to understand exactly what you’re getting for that money. Verify that all noted repairs have been addressed, and not just addressed, but done so in a satisfactory manner. For the repairs that have been performed, be sure to inquire about warranty info.

Beyond what should have been done, look to anything else that may need to be done. For instance, are all the windows and doors opening and closing as they should. Check for faulty latches or uncooperative locks. Replacing window and door hardware isn’t exactly a cheap fix.

What about the plumbing system…are bathrooms functioning properly? Flush the toilets, test the spigots, look for any glaring leaks. Go slow and keep your eyes (and ears) open. The professionals at Landmark Homes have been through this time and time again. The thing we hate to see most is when a brand new homeowner regrets not having taken more time with their inspection and is subsequently left feeling disillusioned about their purchase.

The electrical is another major component that you absolutely want to make sure is in perfect working order. Not only are electrical issues a major inconvenience, but they can also be a fire hazard. Check to see that all outlets are working. Flick the lights on and off. Test everything you possibly can. Same can be said with the HVAC system. Even if it’s freezing outside, blast the AC and make sure that it works.

And some of the things you may not think about…The doorbell, garage door openers, alarm system. Remember a house is a complex structure, you have this one last walk through to check as much of it as you can.

What’s Inside?

As much as you want to make sure that everything is in working order and that repairs have been taken care of accordingly, you also want to double check the contents. In your purchase agreement, there were more than likely various items stipulated as being included as part of the sale of the home. Check for those items! In addition, look to see that the builders have cleared out their belongings, along with lingering trash and construction debris that may have been left behind. This is your new property, you deserve to move into a clean home, a blank canvas waiting for your personal touches.

Mold, Mildew and Water Damage Oh My…

Something you definitely don’t want to come across after you’ve moved in, signs of mold and/or water damage need to be addressed immediately. Examine those spaces where there tends to be excessive moisture, to include: the kitchen, bathrooms, laundry room and basement. Make a note of anything you see and certainly take some pictures.

Explore the Outdoors

The landscape should look exactly as it did when you signed the purchase offer. Look for shrubs, flowers or other elements of the home’s exterior that have been perhaps dug up or somehow destroyed.

Should be Pest Free

No one wants to move into a new home only to find that they share their abode with termites, carpenter ants, or worse, tiny four-legged mammals. Checking for signs of infestation is absolutely essential. Not sure what to look for exactly…Google it, and we guarantee you will find example pictures galore.

At Landmark Homes, we pride ourselves on smooth transactions and happy customers. This is why we are so diligent when it comes to keeping our clients informed. The final walk through may not seem all that critical, but trust us, it is. Do your homework, take good notes and your home purchase will go that much better.