This A Reprint of An RGJ Article By:
Pam Robinson, A Vice-President & Loan Manager of a Reno-based Bank:
A very important part of the lending process is the appraisal of the property you are
purchasing or perhaps refinancing. Most borrowers tend to concentrate more on
whether they qualify for the loan based on income and credit, but your lender will also
be very concerned with the type of property being purchased or refinanced.
An appraisal is required on every real estate loan. The type of appraisal may vary from
one as brief as the county tax assessors valuation or may be as extensive as a very lengthy,
narrative report. The most common appraisal used for residential, single-family homes
is called the “Uniform Residential Appraisal Report,” which was developed jointly by,
Freddie Mac, (The Federal Home Loan Mortgage Corporation) and Fannie Mae,
(The Federal National Mortgage Association). These two agencies publish the majority
of lending guidelines for the mortgage industry.
In most cases, the appraiser is required to inspect both the interior and exterior of the
home. This inspection comprises the very beginning of a very comprehensive report on
the value and type of home.
The appraiser reports on the area, for example, whether it’s urban, suburban or rural,
how much its been built up, the average marketing time of homes in the area, etc.
The appraiser describes the neighborhood and its various trends, lot dimensions, and
zoning of the home. The appraiser will also indicate the types of utilities, off-site
improvements, lot shape, drainage, easements, and any unusual characteristics of the lot.
The home is also measured and described indicating type of construction, number of rooms,
type of foundation, garage, insulation, interior details such as flooring doors, trim and walls.
The appraiser reports on type of appliances, heating and air conditioning systems along with
other amenities. The cost or constructing the home is also indicated on the appraisal report,
which gives the lender an idea of the replacement value of the property. This figure is also
useful for determining the appropriate amount of coverage need for your house, by your
insurance agent.
The appraiser will also compare the home you are buying or refinancing with at least three
other homes in the general neighborhood which are similar to yours and have sold within
the last six months. The appraiser will research local multiple listing records as well as
recorded documents through the county to obtain comparable home information.
Your Realtor will also assist in this research which can be difficult in neighborhoods where
few houses have sold in recent months. Each of the three homes, called “comparables,” is
compared with the ‘subject’ home, and the appraiser makes dollar adjustments, both up
and down, to arrive at the value of the home being appraised. For example; If your home
has a finished basement, the appraiser will attempt to locate other homes that also have
finished basements. If there are no homes in your neighborhood with finished basements
which have sold recently, then the appraiser will probably make an adjustment. The value
of the basement will then be added to the value of the comparables with no basements to
bring their value more in line with your home.
Many times, depending on the type of home being appraised, the appraiser will also attach
additional pages describing various adjustments or market conditions that may influence
the value of the home. The appraiser is also required to attach various certifications to the
report.
As you can see, the appraisal report is much more than just the initial visit to your home.
It gives the lender a complete description of the property serving as security for the loan.
Contact your Realtor or Lender for more information about appraisals and/or qualifying
for a home loan.
