Ah, the home selling and buying process. It feels as if someone scooped you up and dropped you in a country where you don’t speak the language. But the way a Bank Appraise Homes and way a professional Real Estate Agent will determine Market Value of a House are very similar.

Homes are valued a lot like everything else: They are worth what people will pay for them. The Maybach Exelero, one of the most expensive car in the world, sells for $8 million because that’s what people will pay for it. By the same token, you can ask for $8 million for your Hyundai, Ford or Chrysler, but don’t count on getting it you’ll get what the market says it’s worth.

So, how do we know what a willing buyer will spend for a house? Although we may never be sure, by looking at the recent past, we can come up with a pretty good idea. This is why the market value of a house is based on sold homes that are comparable in various ways.

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In other words, it doesn’t matter what amount Tom, the next door neighbor, lists his house for. The only thing that matters is what Jessica, your former neighbor, got for her house.List prices are fantasies while sold prices are a reality.

Determining an accurate asking price for your home is vital, and the best way to find that price is by having the home professionally appraised. The second best way is to ask a real estate agent for a comparative market analysis. While both the appraiser and the real estate agent use the prices of sold homes as a basis, the appraisal process is a bit more in depth.

REQUEST A FREE COMPARATIVE MARKET ANALYSIS FOR YOUR PROPERTY, if you are planning on selling.

How do Banks Appraisal Homes?

Before answering this question lets start with the basics

Who is an Appraiser?

Licensed appraisers aren’t house experts, but they are analysts, able to pull together myriad facts and statistics to arrive at a home’s value.

To avoid a conflict of interest, most lenders adhere to the Home Valuation Code of Conduct (HVCC) and use the services of an appraisal management company.

STEP BY STEP INFORMATION  HOW Do Banks Appraise Homes?

The First Step in the Appraisal Process

Shortly after a seller has accepted an offer to purchase, they will receive a call f to set up an appointment for the appraiserto see the home. The time he or she spends inspecting the home varies, depending on the appraiser, but plan on it taking at least 30 minutes.

The appraiser makes note of the floor plan and any improvements and takes measurements of the exterior of the home to determine the square footage.

Step Two

The appraiser uses statistics from the multiple listing services, public records, or a combination of both to find recently closed sales that are similar in age, size, location and features to your home. Typically, the appraiser relies on sales within the last 90 days, but may go back as far as six months. They will also look at homes within a 1-mile radius of yours.

 The Final Steps

The final steps of the appraisal involve comparing your house, which the appraiser calls the “subject,” to the comparable homes. They use a list of criteria that includes the age of the homes, size, number of bedrooms and bathrooms, location and any improvements made to the homes.

They will add or subtract value from your home depending on how it stacks up to the comparable houses until she arrives at the market value of your home.

How Does The Appraisal Process Work When Buying A Home, And What To Do If You Disagree With The Appraisal

An appraisal obtained by the lender is paid by the purchaser, and, therefore, belongs to, the purchaser. So the bank won’t send you,  the seller, a copy. It is up to the purchaser to supply you with a copy if he or she is willing.

That said, if the appraised value is determined to be lower than what the purchaser has agreed to pay, the lender will typically not lend on the property and the buyer and seller have some decisions to make.

The purchaser can come up with a larger down payment (which brings down the amount of money he needs to borrow). Most purchasers think long and hard about this option – nobody wants to overpay for a house.

The seller and the purchaser can agree to split the amount that is over the appraised value, with the purchasers bringing half the cash to the deal and the seller lowering the price of the home to meet his half of the deal.

Another option and the one most commonly used is that the seller reduces the price of the house to meet the appraiser’s evaluation.

Finally, the seller can just walk away from the deal.

Before any of these steps are taken, however, the purchaser and the seller should review the appraisal to ensure that the appraiser used accurate information in his determination. Appraisers are human and do make mistakes. If errors are found, the purchaser can notify the lender (proper steps must be taken, ask your Real Estate Agent ) and ask for another appraisal.

Home Appraisal or Home Inspection?

Now that you know How the Appraisal Process Works When Buying a Home, don’t confuse a home appraisal with a home inspection

A home appraisal is not the same thing as an inspection. If you’re buying a home, you’ll want to hire an experienced and licensed home inspector to point out any potential problems that could turn into costly nightmares in the future. Property appraisers will likely make note of any obvious issues, but they won’t test your heat and air, check the chimney, or determine if your plumbing is up to code. That is the job of the inspector.

WHAT DOES A REAL ESTATE APPRAISER LOOK FOR?

If you are buying a property, you should also be aware of what does a real estate appraiser look for. Depending on the type of financing you will be using (Convectional, FHA, VA or other) the appraiser will be looking at different aspects of the property.  To get a clear to close repairs may be requested.

We have compiled a list of most common conditions that a real estate appraiser will look for, in red conditions that will be looked at for an FHA appraisal inspection

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WHAT DOES A REAL ESTATE APPRAISER LOOK FOR? Continue

EXTERIOR:

• Type and condition of roof
• FHA: A roof inspection by a licensed and insured roofing contractor may be needed if there is evidence of leakage, if it is worn or if the roof appears to have a remaining life of fewer than two years. If the life of the roof is less the two years most likely it will have to be replaced.
• Condition of trim, soffit and fascia
• FHA: All gutters and downspouts must be functional and typical for the area.
• FHA: Exterior wood surface has to be replaced if rotted
• Type of exterior siding and condition
• Types of windows and if there are storm windows
• If there are porches, what is the condition?
• FHA: Balconies without railings require access door that has a deadbolt at least 60” from the floor
• Are there garages? What is the condition?
• Landscaping, Driveways, walkways?
• Condition of surrounding properties and general price range
• What public utilities serve the property?
• Make of the neighborhood. How does the subject property fit with the others?

• FHA: The rejection of the location of a property only in situations where the subject property may be affected by environmental hazards, noxious odors, offensive sights or excessive noise to the point of endangering the physical improvements or seriously affecting the livability of the property, its marketability or the health and safety of its occupants

• FHA: No dwelling should be located within 10 feet of the outer boundary of a high voltage transmission line easement, not may be site be any closer than the fall distance of a structural tower supporting lines.
• FHA: Chimney should not have cracked or chipped mortar or loose bricks or cap
• FHA: The grading of the lot must provide drainage away from perimeter wall of the property
• FHA: Private water systems must be tested according to local codes and regulations

 

 

 

 

 

 

INTERIOR:

 

• Detailed notes number of rooms, uses, flooring materials, wall, and celling condition
• Square footage
• Number of bedrooms closets in bedrooms, condition
• If there is an attic, if it is insulated if it has a floor
• Attic – Is there evidence on the celling of water leakage from the roof?
• Wall outlets in each room
• FHA: There must be electrical outlet(s) in each room
• Baths – run water in bathroom, check water pressure, flooring, surround walls and materials used
• FHA: There must be a permanently affixed and fired by gas, electric, propane or oil heat source
• FHA: Space heaters are acceptable if they are common area, controlled by a thermostat, located centrally for heat disbursement, permanently affixed vented and are adequate to heat the property
• FHA: Any broken or missing fixtures must be repaired/replaced
• FHA: Smoke and carbon monoxide detectors are required by New York State Law
• FHA: Insect infestation must be addressed by qualified contractors
• FHA: If there is evidence or indication that suspected asbestos-containing materials are present in the property, the appraiser must note on the report if is not contained or it is decorating
• FHA: Handrails must be in place in stairwells, interior or exterior steps
• Condition of the kitchen, cabinet materials, and appliances if any
• FHA: All utilities must be on and in operating condition at the time of appraisal
• FHA: Lead-based paint hazard: Correct all defective paint surfaces for homes build before 1978. This includes entire interior and exterior of the property, as well as garage and any exterior components such as barns, fences, etc.

BASEMENT:

• FHA: There must not be structural deficiencies in the foundation, floor support system, framing, and roof. If structural problems are apparent a report from a qualified engineer may be required, stating conditional and required repairs
• FHA: The attic, basement and crawl space must be accessible and be adequately ventilated
• FHA: The crawl space/basement must be dry. If dampness is noted, a qualified inspector must submit evidence that the problem has been corrected. The crawl space must be at minimum 18” from the bottom of the floor joist.
• FHA: In most situations Hot water heaters cannot be located within the living space (kitchen, bathroom, bedroom, etc). If hot water tanks are in closet, these areas must have permanent vent
• Water heater size and condition
• Type of water lines
• Type of  AC
• Is there floor drain or sump pump?
• Is there outside entrance?

 

If the property has water a well, what type, location, what type of pump and location.

If the property has a septic system, how large is the tank, is it the appropriate size to service the property.

 

 

Provided courtesy of SANDRA DEVARGAS Real Estate Salesperson and The DeVaargas Team at

Keller Williams Realty Buffalo Northtowns

Call or Text 716-316-1629 for information on Buyer’s Representation Services (NO COST TO HOMEBUYERS)

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