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The Appraisal...Page 2
Strange things may be revealed when he inspects
your home. I once had an appraiser call me the day after an inspection and say: "Did
the borrower tell you about the nut next door to him?" I probably said something
like: "Doesn't everyone have a nut living next door?". He continued; "No, I
mean a real nut. The guy next door had recently decided to break all of the windows in his
home. Needless to say, this did not exactly enhance the salability of property on that
street.
Having chosen about four comparable recent sales, the appraiser finds the prices that
those homes sold for and makes adjustments for: lot size, gross living area, room count,
location, view, modern kitchen and anything that would affect the value of your home
relative to the comparable sales. A number is derived that is the estimate of value from
the "sales comparison approach." This is, essentially, the bottom line. The
appraisal will also include an economic estimate from the cost approach. The cost approach
estimates the cost of the land and construction and diminishes it somewhat for age. This
method of ascribing value has little use and represents a different age of appraisals.
Some Points
The perception that borrowers have about the value of their home often comes from mailings
that they receive from Realtors in the area. Realtors send information about recent
comparable sales with the intention of letting people know how valuable their homes are.
This is often biased toward the upside. Realtors are more likely to tell you about the
homes that sold at higher prices then they are about the ones that sold at lower prices.
From my experience, this gives borrowers a slightly higher than realistic estimate of the
value of their property.
If you are doing a loan with a mortgage broker you are better served to let the broker
pick an appraiser who is familiar with the area and is on the list of approved appraisers
of the lender or lenders to whom the broker may be taking your loan.
Help Yourself
If you are contemplating refinancing, obtain and retain all the information that you can
on recent sales of homes in the area. You may know of a sale that just took place that is
not in the database available to the appraiser. I have had cases where we have done a
preliminary estimate, found that it was low and then had the borrower note a sale that was
at a price that made the appraisal work. From a practical point of view, you-as the person
in the neighborhood-are best able to track this. If you have any relationship with a
Realtor in the area, they can do this also.
Mortgage Calculators:
-----------------------
• How much will my payments
be?
• Which is better: fixed or
adjustable?
• Which is better: 15 or 30
year term?
• What will my closing costs
be?
• What will my refinancing
costs be? |
