This week has been a little rough for us when dealing with appraisals. More than once this week, we had a home that didn’t appraise for what the borrower “thought it was worth” and as a result, we have had to restructure their loans.
In today’s market, often the entire loan will hinge on what the property appraises for, so I thought I would share a few simple things that you can do to be informed about the appraisal process.
1. Know What Your Home Is Worth
Have a good idea of what your home is worth before you even consider getting an appraisal. There are many tools that you can use to research the value of your home, and probably the most popular one is Zillow. While none of these tools should be relied on as the “absolute value”, they are good tools to use to give you a general idea of what your home is worth. The best way to get an understanding of what your home may be worth is to talk to a quality Realtor.
2. Comparable Market Sales
Find out what the comparable market sales of homes in your neighborhood were. You also can find these online – one of the simplest ways for people who live in Arizona is to look at the AZCentral’s recent home sales tool for this. These comparable market sales are also called “comps” and will have a *significant* impact on the value that your home will appraise for.
3. Use a Local Appraiser
Try to use a local appraiser when at all possible. There are some national appraisal companies who really just “outsource” the work to someone local – and rather than start with the national company, start by finding a local appraiser first. They will have a much better knowledge of the immediate area and understand the things that drive the value of your home up or down.
4. You Paid For It – It Is Yours
Usually you will pay for the appraisal at the time that the appraiser comes to the home. Since you paid for it, it is yours — make sure that your loan officer sends you a copy.
5. Sometimes You Need 2 Appraisals
Because of tightening guidelines, sometimes 2 appraisals from 2 different appraisers is required. Get ready for the appraisal bill to be closer to $700 – $800 rather than $300 – $400 if your home is worth more than $1million or you are trying to get cash out of your home with a loan to value of 85% or higher.
6. If You Are Getting An FHA Loan, Make Sure Your Appraiser Is FHA Approved
If you are getting an FHA loan, make sure that your appraiser is FHA approved and is doing an “FHA appraisal”. You may be surprised how many times someone needs an FHA appraisal and doesn’t find out that the appraiser they want to use is not FHA approved until late in the process.
7. Appraisal Rules Are Changing
Know that soon, the appraisal rules will be changing – lenders will require that they order the appraisal, not the broker or borrower. This means that you will have much less “control” over the appraisal process – but by understanding the key components of what goes into an appraisal, you can still be an informed buyer.
No matter how you say it – the appraisal process is more difficult than it was 2 years ago. It is more difficult to know what your house is worth, it is more difficult to find a “good” appraiser to work with and it is more difficult to get an appraisal through underwriting without having the underwriter cut your value.
Will following these 7 simple steps guarantee that the appraisal process will go smooth? No. But it sure will help!