Today, we are going to talk about appraisals and the mortgage appraisal process. When you go to get a mortgage, lenders approve YOU, and your specific financial situation. A lender will begin by looking at your credit, your income and your debts, the sources of your income, and the specific property you are buying or refinancing. The lender will check that the cost of the home is where you need it to be from a financial standpoint, and that it comes in at the right value by doing an appraisal.
Finding an Appraiser
When doing an appraisal, a qualified appraiser is brought in to appraise the value of the home. Previously, we could pick the appraisers that we brought in to do the appraisal that knew the area well. However, today there is more of a blind system: appraisers are assigned to come in and look at the home, and hopefully they have done their homework and know the area well.
Calculating Appraised Value
When an appraiser comes to look at a property, they will take pictures, look around the home and measure everything, and then compare your home to other homes that have sold recently. This can be open to interpretation: sometimes you will look at similar homes that have sold recently and think that they are not entirely comparable, but the appraiser will make adjustments to their calculated value to compensate for features that are added or missing in order to come up with a fair value for your home.
When they do the appraisal, we look at two things: the value of the home that was determined by the appraiser, and the condition of the property. When looking at the value of the home, we want to make sure that the value of the home comes in where we need it to be in order to qualify for the mortgage. When doing a refinance, the value of the home needs to hit the mark as well in order for the financing to go through. The condition of the property is also important – if there are any health or safety issues, they may need to be fixed before closing and will be noted as part of the appraisal.
Sometimes properties will not appraise at a value that is under the amount required for the mortgage to go through. In these circumstances, there is an appeal process that allows for fact-checking, where information can be cross-checked with the appraiser’s comps to make sure there are no factual errors. Many times, getting this information in front of a review appraiser can help to turn it around. Sometimes new information can adjust the appraised value in your favor, and other times another appraisal may need to be ordered. The good news is that there is a mechanism for making it all work.
If you have any questions about the mortgage appraisal process, contact Pete Thompson, your Chicago area mortgage guy, at (630) 481-7188 or at www.PeterThompson.team.
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