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We offer a complete line of Texas mortgage loans, Texas
home equity loans and Texas mortgage refinance loans for all types of borrowers
with low Texas mortgage rates.
Appraisals
What is a real estate appraiser?
A real estate appraiser is an individual that is licensed and experienced in
the valuation of property. They give an opinion of value for that property, and
the opinion is used in the mortgage process to verify that the loan amount is
appropriate for the property.
A real estate appraiser comes to its final opinion of value through a
combination of three different approaches. The first and most widely used
approach is the comparable sales approach. This is where the appraiser uses
comparable properties as the main determining factor to come up with the
properties final value. The second approach is the cost approach. The cost
approach determines value by using the replacement value of the property as the
basis for the final value. Finally, the third and last approach is the income
approach. With this approach, the appraiser treats the property as an investment
and calculates potential income and revenue versus expenses to come to a final
value.
An appraisal is one of the first steps of the mortgage process. It is vital to
both you the borrower and the lender because the appraisal will determine the
actual value of your home based on similar home sales in your neighborhood. Your
mortgage professional will schedule the appraisal so be sure to be home so the
appraiser can have access to the interior of your home.
Most appraisers will charge anywhere between $250 and $500+ to appraise your
home depending on size and location of your lot.
Your mortgage broker can order the appraisal for you and can make arrangements
on your behalf, but the fee is typically collected COD.
The purpose of an appraisal is not to determine "what your home worth". Their
job is to determine what the "fair market value" of your home is. The fair
market value is not just what you think the property should sell for, but what a
buyer in the current market would be willing to pay for the property.
In the comparable sales approach, Appraisers use similar homes which have closed
recently to determine the value of your home. The key word here is "closed" as
homes simply listed for sale or a neighbor's home that has not sold recently
cannot be used to determine value.
Although both an FHA appraisal and a conventional appraisal will look
substantially the same, appraisers charge more for the FHA appraisal because
they are required to examine the property in much more detail and meet stricter
guidelines in preparing the appraisal report.
In residential real estate lending, the comparable or fair market value approach
to arriving at the appraised value is the value used in determining how much you
can borrow when purchasing or refinancing your home.
The cost approach is given very little weight. An extreme example can show why
this approach is not a reliable indicator of value. Imagine a home that costs a
million dollars to build is built on top of a toxic waste dump. How much would
it be worth? Not much. Certainly not a million dollars.
The income approach is primarily used when appraising commercial properties. Due
to the nature of commercial property it can be difficult to find recent sales of
similar properties or comparables. Plus the value of a commercial property lies
in how much income the property can generate.
The Appraisal Report
The appraisal report is completed by a licensed appraiser who determines what
the value of the inspected property will be. There are three methods that the
appraiser will use to validate his opinion in the appraisal report: Comparable
sales approach, Cost approach, and Income approach.
The comparable sales approach is determined by recent sales of similar homes in
the area of the subject property.
The appraisal report helps determine the value of a property, which in turn will
help in determining the LTV, or Loan to Value, of a property. The LTV of a
property is calculated by dividing the appraised value of a home and the amount
being financed, or the loan amount, of a home. This will determine your LTV.
Therefore, the appraisal report is a crucial part of financing a home.
When originating a mortgage loan, the lender looks at risk factors in two basic
areas; the borrower and the collateral. The appraisal report is a very detailed
document that provides the lender with almost all of the information that is
needed to make a proper risk assessment of the loan's collateral.
On investment properties, the appraisal report will often use the income
approach to determining value. This approach looks at comparable properties in
the area, and compares the income each property produces to come up with a
value.
Don't always judge a book by it's value, currently, many lenders are doing
secondary reviews of legal, valid appraisals and cutting their values...The
value on an appraisal is not written in stone nor is it something the broker or
appraiser can control once submitted to a lender...Your loan may need to be
resubmitted to a new lender if value is cut below value needed, current
borrowers should be forewarned of this trend in the industry...
Ask your mortgage professional what their appraisal review process is. Many
lenders currently order an automated valuation model or AVM on a property. If
there is a significant variance from the AVM to the appraised value, further
appraisal review is required.
Call me today 281-597=9234 or e-mail me.
Vinni100@netzero.net
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