You're now on your way to a mortgage loan approval! Just a few things you need before a final decision can be made.
Lets start with the appraisal of the property. This is a crucial part of any mortgage loan. This must be completed by a State Licensed/Certified Real Estate appraiser. The appraisal must be ordered by the lender to be acceptable in most cases. If you have an appraiser you know and trust, certainly give that information to either your loan officer or your mortgage processor but let them be the ones to place the order. If you don't know of anyone specifically that you would like to use, it's probably best to go with whomever your lender recommends. Most lenders have an approved appraiser list and will use someone from that list.
The appraiser will visually inspect the property, measure it and take photographs of the property inside and out. Please don't confuse the appraiser with a home inspector even if the appraiser may make comments about the condition of the property. They are there to determine the market value of the property not the structural soundness. Typically an appraiser will only note obvious defects as they relate to the marketability of the property.
After the inspection is completed the appraiser will research comparable sales. These are often call "comps". Some of the guidelines for this depend on the lender, property type and location but here are a few basics. The appraiser looks for recent (within the last 3-6 months) sales of similar properties that sold near the subject property. In urban areas they could be looking within blocks, suburban areas 1-2 miles and rural areas 5-10 miles. Once the appraiser finds several sales, usually 3-5, they will make adjustments for differences between those "comps" and the subject property and arrive at a fair market value for the home.
**See my next post about the title report**
GREAT EXPLANATION, BUT I IMAGINE IN TODAYS MARKET, WITH EVERYTHING THAT IS HAPPENING AND PRICES LOWERING WEEKLY IT MUST BE HARD TO COME UP WITH A FAIR MARKET VALUE!
Nice series of posts. May I suggest you embed backlinks to the other related posts, both for the benefit of the consumer and to benefit you with the search engines.
Great post but right now suggesting an appraiser is not a good thing for a Realtor to do but to qualify the appraiser and their knowledge of the marketplace is something that we as Realtors ought to be doing. Also, it should be noted that come January 1st, 2009, the lesser of the value/selling price is where the loan amount will be based.
I've worked with the same appraiser in the Lehigh Valley market for over 15 yrs. Only one reason, his accuracy, reliability and his candor. As a home buyer, a good appraiser will insure that you are paying no more than the homes Fair Market Value. In times like these that's hugely important! As a customer looking to refinance your home, a good appraiser will not allow you to 'over borrow', wasting or exceeding the actually value of your home in your loan balance.
Geneie- Is it ever difficult. I'm very glad I'm not an appraiser.
Vickie- Thank you so much. I will link these all as soon as I figure out how to do it!
Barb- Lenders do like the appraisal to be independent of the Realtors involved in the transaction. As far as the purchase price/appraised value and going off of the lower of the two, that's the way it's been since I've been in the business.
Scott- Most reputable lenders have an appraiser like the one you have described. That's why I say to go with the one your lender recommends if you don't have a relationship with an appraiser already.