What Is Really Behind the Appraisal?

One of the most important variables in the loan process is the appraisal. What most people don’t realize is that the appraiser’s opinion of value isn’t the only thing that underwriters consider when approving a loan for a clear to close. When considering the value of a home there are three indicated value approaches; sales comparison approach (most recent sales), cost approach (what it would cost to rebuild), and income approach (what it could be rented for). However, primary emphasis is placed on the Sales Comparison Approach due to the fact that it best reflects what a typical buyer is willing to pay in the present market.

Appraisals are securitized every day from underwriters. The following are just some of the indicators that they look at:

1. Neighborhood Characteristics:

• Neighborhood Location: Is it urban suburban or rural.

• Neighborhood Built-up: Is it fewer than 25%, 25-75%, or over 75% built up.

• Neighborhood Growth: Is it rapid, stable, or slow.

2. Housing Trends:

• Property Values: Is it increasing, stable, or declining.

• Supply/Demand: Are there shortages, in balance, or over supply.

• Time on Market: Under 3 months, 3-6 months, or over 6 months.

3. Housing price/age: What is the low, high, and predominate.

4. Present Land Use Percentage: One-unit, 2-4 units, multi-family, and commercial.

5. Are the utilities and off-site improvements typical for the market area? Yes or No.

6. Is the subject property currently offered for sale or has it been offered for sale in the twelve months prior to the effective date of this appraisal? Yes or No.

7. Condition of the property (including needed repairs, deterioration, renovations, remodeling, etc.). Conditions range from anywhere between C1 (being brand new) to C6 (being the worst).

8. Are there any physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property? Yes or No.

9. Does the property generally conform to the neighborhood (functional utility, style, condition, use, construction, etc.)? Yes or No.

10. Comparable sales:

• Proximity to the subject property (for suburban properties, less than 5 miles is preferred).

• Sales price.

• Price per square foot of gross living area.

• Financing concessions.

• Date of sale.

• Location.

• Site/view/design/quality of construction.

• Actual age/condition.

• Room count: Bedroom & Bathroom.

Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.

Matt Pell,  Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Matt@mortgagewarehouse.com
www.facebook.com/themortgagewarehouse
Company NMLS ID – 137154
Individual NMLS ID – 1018529
Better Business Bureau Rating = A+