How the Appraisal Report Affects Sarasota Home Owners
The appraisal plays an important role in almost every mortgage in Sarasota. While some loans will allow property inspection waivers, or PIWs, in lieu of an appraisal, most lenders will want to establish some idea of what the property is worth prior to lending. Since the home is the only thing the lender has to secure the loan, a low appraised value can cause some major issues for borrowers hoping to buy or refinance their dream home. By law, most loan types require the lender to provide a copy of the appraisal to the borrower. Upon first glance, the appraisal can come across as very confusing and tough to understand for someone who has never seen one before. This simple guide will help walk you through the highlights of the appraisal that affects you and your family.
General Home Facts
The first page of the appraisal will have a variety of headings and topics that describe the different features about your home. This page will list any improvements, negative internal or external factors about the neighborhood or layout of the house, and general information about the neighborhood that the home is located in. While some of the information may be new to you, take a minute to scan through the facts and make sure that all the information is correct to the best of your knowledge. The front page is important to the final value of the appraisal, with the information being used to determine which comparable homes should be considered when evaluating the home’s value. If you notice that the information is not accurate or something is missing, you should immediately contact your mortgage company.
Often referred to as "the grid," the second page of the appraisal is where the appraiser lists the sales of comparable homes that they used to determine the market value of your home. The page breaks down every part of the home and property, reflecting the value determination of the appraiser. The grid lists up to three comparable homes, referred to as comps, to the right of the subject property, with the homes' values broken down by property feature. The appraiser seeks to find comps that have sold in the last six months and are as close to your future home as possible, using these tight guidelines to try and match up the external characteristics of the subject property as close as possible to those of the sold comps. At the top of the grid, the appraiser will note when the houses were sold and for how much. Since no two homes are exactly identical, the appraiser will attempt to make adjustments to the sold comps to try and make it as similar to the subject property as possible. This section can be very confusing to understand, especially when trying to follow the different adjustments that the appraiser has made. Certain adjustments, such as quality of construction, can be a point of contention on refinances, with homeowners believing that their homes are built better than the sold comps. After all of the adjustments have been made, the appraiser will combine the adjustments together and will either add or subtract the value from the price that the home sold for.
Appraised Market Value
At the bottom of page two, the appraiser will list the amount that they believe is the fair market value for the subject property. If the home is a purchase, this value combines with the purchase price for determining the loan-to-value ratio, or LTV, of the loan. The LTV is essential because LTVs that are too high can require mortgage insurance or make the loan ineligible to continue. Most appraisals include upwards of 25 pages, most of which are pictures and further analysis of the subject property. These additional details may help give you further insight into your subject or future home before you sign on the dotted line.
If you have any questions about buying or selling a home, please "Ask An Expert." Don't hesitate to contact the team at Key Solutions Real Estate Group for assistance, or call (941) 894-1255.