Appraisal – About the Appraisal
Whether it is for a refinance or new home purchase, the home appraisal plays an important role in the mortgage application process. However, many consumers are unsure of their role and the role of their lender in the appraisal process. At California Mortgage Advisors, we understand how uncertainty and confusion can lead to stress and frustration on the part of our clients. We strive for maximum clarity and disclosure throughout the entire loan process. Our Mortgage Advisors are available to answer your questions at (800) 927-6560 or click here to apply online.
One of the most important aspects of the home appraisal process is objectivity and independence on the part of the appraiser. While the borrower handles paying for the appraisal, the appraiser does not technically work for the buyer. Nor does the appraiser work for the lender. As per governmental regulations, the appraiser is considered an independent third-party. Their job is to provide an opinion of value or market value. This is considered a fair valuation of the home based on current market trends that protects both the borrower from spending too much and the lender from lending too much. This is done using a fairly straightforward process.
During the property inspection, a licensed appraiser will measure the property to confirm the square footage of the building and the property and provide a floorplan of the building in the final report. The appraiser will confirm the number of bedrooms, bathrooms and other rooms in the house. The appraiser will visually inspect the property for obvious structural and systems damage. The appraisal inspection is not the same thing as a home inspection. A buyer should order a home inspection to get a better understanding of actual condition of the structure, plumbing and electrical systems. The appraiser will list all permanent features and upgrades to the home and state the current condition of the property and if there are any deferred maintenance issues.
During this portion of the appraisal process the appraiser will research sales data on similar homes within the vicinity of the subject property. The appraiser is generally looking for 3 to 6 properties sold within the last 3 months in similar size, age and condition. The appraiser will most likely include 2-3 current listings (homes on the market for sale) if they are available. The more comparable sales and listings the better since the appraiser will have more data to support the value. In suburban neighborhoods, comps should be within 1 mile away while rural neighborhoods may have comps up to 5 miles away. Sometimes appraisers may not have comps within the timeframe or distance and they will have to explain this in their final report.
The final report is the official document that the appraiser presents to all relevant parties during the conclusion of the appraisal process. The report will include very detailed information on the property and the area which includes maps, lists of comparable home sales, comparable listings and a detailed market analysis. The appraiser will compare the comparable properties to the subject property and make adjustments to the comparable sales to establish a market value on the subject property. The appraiser will put more weight on the comparable sales which are most similar in size and bedroom count as the subject property. The final report also explains how the appraiser used all of the relevant data to come to a conclusion regarding the value of the property.
At CMA, our role in the appraisal process itself is limited. However, what we can do is work with borrowers to understand what the final documentation means and how it impacts the closing process. Our Mortgage Advisors can also help borrowers determine if a particular property may not be the value that they are looking for.
Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to contact us online.