Watch-It Wednesday: Home Appraisal Explanation

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In this week’s Watch-It Wednesday, Home Loan Expert Allison Snell walks us through the appraisal process:

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Video Transcription:

Hey everybody, I’m Allison Snell from Quicken Loans and I’m here to give you some important new information on appraisals.  It seems like everyone is talking about appraisals these days and a lot of people have questions about the whole process.

So what’s an appraisal? An appraisal is what determines the fair market value of your property. The appraisal is performed by a licensed appraiser who provides a professional opinion of the value of your property based on a variety of factors. It’s an important part of the mortgage process that needs to happen before the transaction can be finalized.

It’s easier to understand the whole process by breaking it down into three main parts. There’s the Real Estate Inspection, the Comparables and The Final Report of Value.

The real estate inspection will take anywhere from 10 to 30 minutes based on the size of your home. The appraiser will record things like square footage, the dimensions of your property and the number of rooms in your home. He’ll verify his findings with information provided by third parties such as the real estate multiple listing service and county records.

The next step is for the appraiser to evaluate Comparables. Comparables are recent home sales in and around your neighborhood. Analyzing these recent past sales helps an appraiser determine the current market value of your home. And when I say recent, I’m talking 3 to 6 months. This is important because comparable sales from many years back may not reflect true home values today.

When selecting comparable properties, the appraiser is looking for some very specific things: Homes that have recently sold, homes that have sold near where you live, homes that are similar to yours in terms of size, age and style – such as ranch, colonial or tri-level , for example.

You should also know that home values from Real Estate websites do not give you accurate comparable values. The information they provide may be outdated and isn’t verified by third parties such as real estate multiple listing services. Basically, an accurate appraisal can only come from a licensed appraiser.

Here’s a question a lot of people are asking these days: Will a foreclosed house in my neighborhood affect the appraised value of my property? The answer is that it depends on the amount of foreclosed properties that have sold in your area. Much like artwork, baseball cards or any other product, the value of a house is based on what people are willing to pay for it. And the bottom line is that foreclosed homes sell for less than other homes.  And the more foreclosures in your area, the more average home prices will fall.

The important thing to remember is that appraisers can’t treat foreclosure sales any different than non-foreclosure sales. A sale is a sale regardless of whether a comparable property happens to be in foreclosure. But here’s the good news: By keeping your property well-maintained and up-to-date, you’re doing what you can to increase the appraised value of your property.

Next, an appraiser will move on to the final step: Preparing a Final Report of Value. This report will detail the appraiser’s analysis of the value of your property based on a combination of the inspection and the comparables. Also, if you’ve done home improvements and upgrades to your property, the appraiser may take these things into consideration when writing his final report of value. Both you and your mortgage lender will get a copy of this report.

So speaking of the mortgage lender, what’s our role in the whole appraisal process anyway? Here’s the simple answer: Mortgage companies like Quicken Loans, by law, cannot do appraisals.

Appraisals can only be performed by a state-licensed third party. That means that by law, we have no influence on the appraised value of your property.

In fact, if an appraisal on a property comes in too low, we won’t be able to write a loan on it. The bottom line is that we at Quicken Loans want what you want: A fair appraisal of your property that accurately reflects today’s market conditions.

An accurate appraisal is the best way to ensure that everyone’s interests are protected throughout the entire home refinance or purchase process.

I hope I’ve cleared up some of the questions you may have about the appraisal process and the role that Quicken Loans plays in it.  If you’re interested in learning more, just call your mortgage expert and they’ll be happy to answer any questions you may have.  Thanks again for tuning in.

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