Conventional Appraisal Quick Tips

This is a quick summary from our friends at Wright Patt Credit Union

Conventional Appraisal Quick Tips

Cosmetic repairs are not required; however, they are to be considered in the overall condition rating and valuation of the property, condition ratings of "Fair" or "Poor" are reasons for rejection. 

Unacceptable Locations

Conventional guidelines require that a site be rejected if the property being appraised is subject to hazards, environmental contaminants, noxious odors, offensive sights or excessive noises to the point of endangering the physical improvements or affecting the livability of the property, its marketability, or the health and safety of its occupants.  Rejection may also be appropriate if the future economic life of the property is shortened by obvious and compelling pressure to a higher use, making a long-term mortgage impractical. 

Site Hazards and Nuisances

The appraiser must note and comment on all hazards and nuisances affecting the subject property that may endanger the health and safety of the occupants and/or the structural integrity or marketability of the property, including: subsidence, operating and abandoned oil and gas wells, abandoned wells, slush pits, heavy traffic, airport noise and hazards, runway clear zones/clear zones, proximity to high pressure gas, liquid petroleum pipelines or other volatile and explosive products, residential structures located within the fall distance of  a high-voltage transmission line, radio/TV transmission tower, etc., excessive hazard from smoke, fumes, odors, and stationary storage tanks containing flammable or explosive material.

Soil Contamination

Conditions that could indicate soil contamination include pools of liquid, pits, ponds, lagoons, stressed vegetation, stained soils or pavement, drums or odors.  If any of these conditions exist further analysis or testing is required.

Note the proximity to dumps, landfills, industrial sites or other sites that could contain hazardous wastes. 

If there is any readily observable surface evidence of leakage from an underground storage tank, further analysis or testing is required. 

Grading and Drainage

Proper drainage control measures may include gutters and downspouts or appropriate grading or landscaping to divert the flow of water away from the foundation. Any readily observable evidence of standing water near the property indicates improper drainage. 

Private Road Access and Maintenance

Private streets must be protected by permanent recorded easements or be owned and maintained by a HOA. Shared driveways must also meet these requirements.    

Structural Conditions

Appraiser must address physical deficiencies affecting structural integrity. If there is a question to the structural integrity, the appraiser or lender may require a Structural Engineer Certification.

Foundation

Appraiser must note if there is any dampness or settling of the foundation and if remediation is required.

Roofing

Appraiser is to note if there are any curling or missing shingles or if there is evidence of leaks in the ceiling, attic or scuttle.

Mechanical Systems

Check mechanical, plumbing and electrical systems in the subject property to ensure that they are in proper working order.  This examination entails turning on the applicable systems and observing their performance.  The water and electric must be turned on for the appraisal.

The following is not an all-inclusive list, but a listing of the more common readily observable property deficiencies.  

Electrical System

• Examine the electrical system to ensure that there is no visible frayed wiring, or exposed wires in living areas and note if the amperage appears adequate for the property. 
• Operate a representative number of lighting fixtures, switches and receptacles inside the house, garage and on the exterior walls and note any deficiencies.  If the appliances present at the time of the inspection do not appear to be reasonable (undersized), determine if there is adequate amperage to run "standard" appliances, as per local code. 

·    The appraiser is not required to insert any tool, probe or testing device inside the panels or to dismantle any electrical device or control. 

 Plumbing System

·    Flush the toilets and turn on a representative number of faucets to determine that the plumbing system is intact, that it does not emit foul odors, that faucets function appropriately, that both cold and hot water run and that there is no readily observable evidence of leaks or structural damage under fixtures.

·    Turn on several cold water faucets in the house to check water pressure and flow.  Flushing a toilet at the same time will also reveal any weaknesses in water pressure.

·   If the property has a septic system, examine it for any signs of failure or surface evidence of malfunction. 

Other Health and Safety Deficiencies

Address all health and safety issues, physical deficiencies or adverse conditions that affect the livability, soundness or structural integrity of the property.  The nature and degree of any health and/or safety issues will determine if repair is required.

Property Use:

• Income producing properties are not normally allowed.
• 10 acres or less is preferred when the LTV exceeds 80%

Conventional appraisals are no guarantee that the property is free from defects. The appraisal only establishes the value of the property for lending purposes.  Buyers need to secure their own home inspections through the services of a qualified inspector and satisfy themselves about the condition of the property.