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Appraisals baffle consumers

St Paul, MN: The appraisal process often baffles consumers.  May people feel that their home is worth more than true fair market value, so the appraised value doesn’t always make sense to them.

The bulk of your homes value is based on finished square footage.

It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae.

In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules. In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal. Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren’t uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity. The general rule is ‘same or similar, sold within the last six month, within a one mile radius’ of your home. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed.

Maintenance items don’t increase value. That new roof you just added doesn’t really add any value.  It was maintenance. If your home previously didn’t have a roof, and now you added a roof – that would add value!

Don’t confuse curb appeal with maintenance. Following the same roof theory. A brand new roof sure makes a potential buyer feel better about your home – but how much more would a buyer pay? Not much.

Mortgage lenders and Loan Officers must follow  the guidelines in the Home Valuation Code of Conduct, which among other things prohibits a lender picking the actual lender (must be randomly assigned),  from having any contact with, or influence on how the appraiser values a home.

Wondering what your home is worth? Thinking of selling your home, or refinancing to a lower interest rate? Only an actual appraisal from a licensed appraiser will give you a true number, but here is a online tool that can help give you an idea of what your home is worth.

 

What is your home worth? Find out for free

What is your home worth today? Wish you could get a free appraisal?

Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, it is important to have an accurate idea of what your home is worth.

There are many sites that claim to give you are idea, including Zillow, Trulia, and more. It is also a well known fact those sites have very questionable data, giving values that range from close, to crazy far off. The big problem is, where is the data they use coming from and how accurate is it?

There is a better free tool to answer the estimated appraised value of your home question. This system uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, it can be a much more accurate than Zillow to gauge fluctuations and trends in your market which affect your home’s value.

CLICK HERE FOR A FREE HOME VALUE ESTIMATE (MN and WI properties only)

 

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