FHA Friday – Appraising New Construction
When completing an assignment in which the FHA appraisal is of a home under construction or proposed construction there are a few things to be considered.
First off the client will provide the appraiser a copy of the executed sales contract (must be signed by both builder/seller and buyer), plans, specifications, and site, dated no more than 30 days prior to the date of appraisal ordering and documents related to the constructions including plans and exhibits that will assist the Appraiser in what is to be built. We don’t always get all this from the Lender but can certainly get this from the Builder easy enough.
In most cases I find the home is already completed or just in need of some cosmetic finishing in the case of more track developments. Custom homes may sometimes request the appraiser to complete a “subject to” appraisal and follow up with subsequent draw inspections for the Lender to have validation of the progress and stages of the construction.
When new construction is less than 90% complete at the time of inspection the Appraiser must document the floor plan, plot plan, and exhibits necessary to determine the size and level of finish. When the new construction is 90% or more complete the Appraiser must document a list of components to be installed or completed after the date of appraisal.
While inspecting/observing the subject home the Appraiser is looking for compliance relating to the Safety, Soundness, and Security of the home. These items are referred to as Minimum Property Standards (MPRs). This cannot be fully completed until the home has utilities operational.
I typically do not find many issues with MPRs on newly built homes. Occasionally there may be some grading needed as water has to be able to run away from the foundation. For more information on these or any other appraisal related questions feel free to give us a call 480-595-0188.
Paul Johnson | SunPointVMS
Paul began his real estate career while in college by working as a leasing agent renting out student apartments in the early 90’s. His senior year of college obtained his Realtor License in IL and began working for Coldwell Banker. After working at the Chicago Board of Trade by day and Realtor in the evenings and weekends found greater success in the real estate industry. As a Realtor and experiencing a few canceled closings with no commission turned his attention to the appraisal industry. He obtained his license in 1998 and has not looked back.
Before you even start to think about crunching the numbers you need to decide if being a Landlord is something you are prepared for. What if the Refrigerator or Air Conditioning goes out? What if you do not receive the Rent Check? You can always hire a property management company however this takes away from monthly cashflows, but may be worth it.
Crunching the numbers. If you do not need the money from the sale of your home to purchase a new one it can be very appealing to hold on to the existing home, collecting rent, to see positive monthly cash flow and potential equity growth. Real estate has been and appears will continue to be a very good investment. If choosing to become an investor and rent out the home you may want to get a accountant/tax professional that has real estate investor clients and is up on all and any new IRS guidelines when it comes to real estate. Also check with local agents and appraisers to see how is the rental market currently and how do you see it in the future? Is the amount of rent to be collected covering the expenses such as taxes, maintenance, reserves to replace items as they need replacing, utilities your including in the rent, current mortgage payments, HOA dues, ect ?
I personally have been very fortunate when being a landlord however the nightmares do exist. You need to establish a good screening process. This would include credit check, possibly a background check, and questions on how many people to occupy the home, pets, ect. Keep in mind that as people live in a home its going to depreciate, in some cases more than others.
With the help of a real estate appraiser you can get the current market value of the home as well as the current rental rate. The appraiser can also estimate the operating income and expenses illustrating cash flow.
What does a Realtor do?
So many people I talk to think a Realtor just puts a sign on your property and lists in the local mls.
While this is part of it as a "salesperson" they are looking for a successful closing. This is not as easy as one would think. While there are several transactions that run smoothly many items are out of ones control and need management.
Many times the real work begins once a purchase contract is signed. Home inspections, termite inspections, appraisals, loan approvals ect are just some of the remaining obstacles. Many times these items create additional issues and subsequent negotiation. These issues you can add to additional delays and times for moving, closing, funds moving from sale to purchase of new home all get shifted.
Selling a home is an emotional family event and many times the human element of an agent on your side should not be overlooked. More and more tech/investor companies have gotten into the business promoting benefits of no showing and quick close. If considering any of these look at their fees, no much if any savings, and may not be getting you the best price the market would bare.
Get yourself a good Realtor and Appraiser. An appraiser hired prior to listing ensures you are pricing your home correctly and leaves the marketing to the Realtor. Price too high and the good market may pass you by. Price too low and you leave your families money in someone elses pocket.
If you need some referrals let me know... #loans #inspection #appraisers#approvals
Role of the Real Estate Appraisal
If you’re refinancing you’re home or buying a new home, a major component obtaining a loan is the home appraisal. Since a home appraisal determines the value of the home you are interested in or already own, it also plays a role in how much a mortgage lender is able to lend you for your home financing. Pretty big deal for sure!
Today I’m going to talk about things you should know about home appraisals, like how they are performed, what the appraiser is looking for & what they are not looking for.
What Is A Home Appraisal?
A home appraisal is a comprehensive several page report on a property done by a licensed real estate appraiser, which determines the fair market value of the home. The report is based on a number of factors, including, but not limited to:
· The size of the living space aka square footage
· The values of surrounding homes or what your neighbors sold for based on what the market at the time of your appraisal will pay
· The neighborhood
· The year it was built
In the home-buying world, once you and the seller have agreed on a purchase price, your lender will order the appraisal from a 3rd party appraiser. The homebuyer is responsible for the cost of the appraisal, which typically ranges from $400 to $1,200+ depending on the size and complexity.
Is ZILLOW Affecting Your Homes Value?
Unfortunately, while Zillow is a great starting point for home values, it’s not always accurate. According to Zillow's website, which I’ve copied and pasted on 4/9/2018, here is what they say.
“The Zestimate® home value is Zillow's estimated market value for an individual home and is calculated for about 100 million homes nationwide. It is a starting point in determining a home's value and is not an official appraisal. The Zestimate is automatically computed daily based on millions of public and user-submitted data points. “
So if your home’s value is lower on ZILLOW than what your appraisal says, it’s important you update it. This won’t be super easy, but it is necessary for your home’s marketability.
We suggest having a Professional Licensed Real Estate Appraiser, appraise your home and then upload those results to Zillow’s Home Evaluation Updater. It’s the only way we know works when getting Zillow to change their mind about your home’s value because it is based on a professionals opinion and not your own. If you contact Zillow on your own without a professional Real Estate Appraisal, here is the likely response you will get per Zillow’s website:
“We do not delete Zestimates. We monitor customer feedback for systematic issues with the algorithm, but do not change individual Zestimates in response to customer feedback. The Zestimate is designed to be a neutral, unbiased estimate of the fair market value of a home, based on publicly available and user-submitted data. For this purpose, it is important that it be based on identical information about homes (e.g., beds, baths, square footage, lot size, tax assessment, prior sale price) and that the algorithm itself be consistently applied to all homes in a similar manner. This ensures that there is no preference for some homes relative to others nor are there valuations based on facts that are not accessible to all Zillow users. Some homes may be very unique in ways that are not well captured by existing data, and the Zestimate may be less accurate on these homes. To provide more data on your Zestimate, you can post your estimated value and comment in the Owners Estimate section.”
Sorry, I don’t have an easier answer to this question but sometimes it is what it is. Feel free to contact our office to schedule a Real Estate Appraisal for your home today by calling us at 480-595-0188 or visiting us online at www.SunPointAppraisals.com.
How Are Appraisals put together?
The first part of the appraisal process is the real estate inspection. An appraiser will visit your home and examine the house’s interior and exterior, taking measurements and recording data about the house as mentioned above. Many things can affect the value of a home, whether you did the dishes that day or not, should not play a factor. However, 1st impressions are important so try and tidy up!
If you’ve done any sort of home improvements like remodeled a kitchen or bath, replaced flooring, repainted the exterior of your home, had a new roof installed or new HVAC system installed, remember to keep your receipts because this is important information the “Real Estate Appraiser,” will need to know.
The appraiser will then compare your current home or hope to live in soon home, to other homes in that neighborhood that may be similar in square footage and lot size. If your home is updated or completely remodeled the appraiser will look for similar homes in the area based on his or her access to SOLD homes that include data and pictures. In other words, the appraisal is not determined solely on the Appraisers professional opinion but mainly is based upon what the market is currently willing to pay for a home like yours, in your neighborhood. If you live in a neighborhood where many bank foreclosures have occurred, no need to worry, an experienced appraiser will take that into consideration and when possible, not rely on those types of sales as they are usually lower than the typical sales price under normal conditions would be.
What Do The Appraisal Results Mean For You?
There are two potential types of outcomes that have very different impacts. Example:
1. You and the seller have agreed upon a purchase price of $350,000, and the appraisal value of the property comes out to $360,000. This is great news for the buyer. Assuming everything else is in order, you can proceed to close your loan as planned with $10,000 of instant built-in equity already in your home. Score!
2. But what if the appraisal comes back with a value lower than the offer price, like $320,000? A few things can happen in this scenario.
· The 1st should be to ask your Realtor to renegotiate your purchase price to reflect the appraised value. This is why hiring an experienced Realtor is so important. People are usually emotionally attached to their homes and usually feel they are worth more than what the market is willing to pay so trying to negotiate can get a bit sticky.
· Your lender may ask the appraiser for a reconsideration of value by sending a form that will explain justifying a higher value and should also include additional addresses within 1 mile of home that are comparable and can support a higher appraisal amount.
· Another option is to order a new appraisal from a new appraiser.
If purchasing a home, a lower than expected appraisal value can become inconvenient for both buyer and seller. You’ve technically offered to pay more than the home is worth, and because the mortgage lender won’t give you a loan for more than the home is worth, the deal may get dicey. If you have tried all of the above and nothing has worked but you really have your heart set on that home that you now know you will be overpaying for; you can put more money towards your down payment to reduce the overall loan amount.
I hope this helps clear up any misconceptions of the Real Estate Appraisal process and helps you realize how important a real estate appraisal really is to the consumer. It’s one of your most important safe guards when buying a new home.
For more questions or to “Order An Appriasal Today,” follow this link or give us a ring 480-595-0188. We’re always happy to help! - Angela Johnson, VP SunPoint Appraisals
Angie Johnson VP | Business DevelopmentSunPointVMS
Forecast for Mortgage Rates in April 2018
If you’ve been watching the news regarding mortgage rates, in late 2017, when thirty-year fixed rates were still in the high-3s, economists put rates in the mid-4s this year. And guess what? They were right. Rates have shot past 4-year highs by approaching 4.4% by mid-February.
However, rates are still low by historical standards, and should not deter home buyers. Home sales are up 1.1 percent from a year ago according to the National Association of Realtors.
So if your considering a refinance or a home purchase it’s not advisable to sit by and hope for a massive rate drop because the chances of which are slim to none. Rates available now are likely the best we'll see in 2018, despite the recent push upward.
Freddie Mac: Mortgage rates reach a 4 year high
Mortgage rates just broke a barrier not surpassed in the prior 220 weeks.
Since January 2014, rates had remained below 4.45%, until the late stages of March, according to mortgage agency Freddie Mac.
The 30-year fixed rate average is up 67 basis points, or 0.67%, compared to lows reached in September.
What does that mean for the home buyer or refinancing homeowner? Unfortunately, it means a higher monthly payment. However, please keep in mind that these rates are only high when compared to some of the lowest levels ever recorded.
(The 30-year rate eclipsed 6.5% in 2008).
Looking at the entire 2,450 weeks Freddie Mac has been recording data, only 350 weeks offered mortgage rates lower than today's levels so let’s keep that in mind.
Locking in today yields a rate better than could be had by 85% of homeowners in history. How’s that for turning a frown upside down?
When considering a Real Estate Appraiser, consider that Paul Johnson and his staff at Sun Point Appraisals, Inc., have been keeping clients happy since 1998. Experience matters. Call us today to schedule your next real estate appraisal 480-595-0188 or visit or website to place your order there at www.SunPointAppraisals.com
- Angela Johnson
REALTOR and VP of Sun Point Appraisals Inc.
There has always been that debate of whether to rent for a while or buy. It has always been a great debate. Everyone has there differing life situations and that will ultimately make the decision for you. For instance if you know you may not be in a location for very long due to job transfer or relocation for personal reasons, need to get your finances in order, just started a new position, and have no desire to maintain a home then renting may be a great fit. However when you own a home you have an opportunity to build equity (investment) and later sell at a profit. There are also tax benefits and the secure feeling that you have more control over your housing situation.
If you're thinking of becoming a homeowner at in the near future here are a few things to considered..
In late 2017, the Federal Reserve once again raised interest rates. With economic factors getting better every day there is no reason for the Federal Reserve to significantly lower rates any time soon. If you are considered a purchase or a refinance you need to lock your rate ASAP! Every fraction higher is more money out of your pocket every month. We all like to save money, right?
If for example you have excellent credit (meaning a score of 780 to 850), you might qualify for a 3.613% APR on a 30-year, $300,000 fixed mortgage. If your credit is good but not outstanding, you can snag a 3.835% APR on that same sort of loan. These are still extremely favorable rates compared to what we've seen historically, but we don't know how long they'll hold steady. Therefore, if you're thinking of becoming a homeowner at some point, 2018 is a good year to pull the trigger.
You should check with your accountant however as these items do change. Also if you take the standard deductions and do not itemize this may impact you tax benefits of ownership. Consulting with a good accountant can also bring to light many other deductions you may not have consider. These might be deducting the portion of the home you use as a home office for work related activities, do you ever AirBnB you home, improvements made to your home ect.
From the markets SunPointVMS services we have seen inventory shortages for the most part. This problem may be less dominant as rates rise and buyers qualify for less. In real estate most things are relative. For instance in a great market you may be able to sell your home quickly and for a awesome price only to find that your next ideal home is also priced higher and in high demand. When financing comes into the equation however this is never better for you to wait as rates are going higher.
Going from Renter to Owner is typically a great financial move, especially in a increasing market that we have experience in the past couple years. If you are ready to take the plunge let us know. We can direct you to one of our great Lender partners and assist you in making sure you are getting a decent deal on your new homes. Sun Point Appraisals 480.595.0188.
By Paul Johnson
When an appraisal is completed more times than not the results will be reported on a form. The actual appraisal is the data file and notes of the appraiser and the results and reconciliation are reported verbally or on some type of report.
Form reports are an efficient way to relay the information to the Reader/User of the report as it is layed out in a very organized format. If a User receives many appraisals of a similar type, say residential single family home for financing, then items and results are illustrated the same way in each report making their life that much easier. FNMA and FREDDIE MAC typically create the reports they prefer or require to see when an appraisal is to be used in a financial transaction that their agencies may back financially. Many software companies which provide report writing software to appraisers (ie Alamode, ACI) will have several of their own forms to use. Many times these forms are used when appraising for individual in the case when financing is not the end use. These forms are typically refered to as GP or GPAR forms. These acronyms represent "General Purpose" reports. It is common to see these in the use for Bankruptcy Appraisals, Divorce Appraisals, Pre Listing Appraisals, Estate Appraisals, and when individuals are just inquiring about the value of their home.
In most every case a professionally licensed appraiser is going to provide you with a complete and accurate report. Many times the more experienced the appraiser the better, but not in all cases. It is a good idea to interview the firm or appraiser a bit prior to scheduling. You can read reviews and get referrals from friends and real estate agents that service the market. Here a just a few things to think about when considering hiring an appraiser:
Hope this is helpful. If you have any further questions give me a call.
By Paul Johnson ~ Sun Point Appraisal
Review of an appraisal is the most important aspect of a firms production. Appraisals with misleading and confusing analysis make a report less reliable and does not serve the public well. Lets face it we all get busy and if working from home, as many appraisers do, there can be many distractions. While the majority of reports we review only require an occasional suggested to expand explanation and commentary some may have major flaws. Outside of the occasional human flaw there is instances when reports are not saved properly within the appraisal software and uncheck the report gets delivered. Whatever the case may be the review of a report prior to delivery to the end user is the essential buffer zone to get all things in order.
Characteristics of a Quality Appraisal Report
Whether its a FNMA form or a narrative they all get a review here at Sun Point. The characteristics we look for are:
A good report should discuss market conditions on a Micro and Macro level. An appraiser is responsible for a report for a minimum of 5 years. Many things may and most likely will change in that time. Having some level of detail regarding the market at the time of the effective date of the report is needed.
The report must comply with USPAP and the appropriate regulatory requirements. Several of our clients/investors have specific items they have requested in the scope of the assignment which will need to be addressed as well.
All in all the key to a good report is it is well written, clear, concise, readable, has good logical flow, no unneeded useless information, its factual, organized, well written comments, competent and most importantly reliable.
Thank you, we'll be in touch!