Sep 21, 2009
Home Appraisal – Determining The Home'S Value For A Short Sale Package
One of the most important aspects of the short sale business is determining the value of the property you have under contract. It’s impossible to formulate your offer to the short sale lender without knowing the home appraisal value of the property you are interested in. Likewise, knowing the appraisal value of the property is just as important to the loss mitigator at the bank. The loss mitigator must establish an appraised value for the short sale property so he has a baseline price for negotiation. The appraised value of the property establishes the playing field on which we negotiate the short sale price of the property.
Getting Property Comparisons The best way to determine the home appraisal value of a property is by using property comparisons (comps). Look at the properties in the same area of the short sale property.
You can get these comps with a little effort. There are a few ways to find market value comparisons for your area:
• Subscription programs (one is Haines, a subscription service on disc)
• Multiple Listing Service (MLS) if you have access
• Network with a realtor who can pull comps for you
• Free comps services on the Internet
It’s not recommended that you use the free market comparison services found on the Internet. These free services are worth about as much as you pay for them. If you have to spend some money getting comps, that’s a good thing. It means that someone is actually doing research behind the website or program.
Finding Home Appraisal Value: An Example A busy real estate investor may outsource their home appraisal needs to another company or a certified FHA appraiser.
When a deal comes in the real estate investor will email the FHA appraiser, the address and owner’s name. In about 24 to 48 hours the appraiser will send back a limited desktop appraisal with three comparison prices on other similar sold properties and the market value that the appraiser has determined for the property that the company is interested in. The appraisal may also include some additional information and a map.
This appraisal gives an idea of the market value of the property in comparison with other distressed properties in the area. When looking for comps, don’t look for sales of well maintained properties, instead look for comparisons of other properties in foreclosure, REO properties, or corporate-owned properties.
Be Prepared to Pay for it!
Companies spend money getting their comps because they want good, accurate market value comparisons. When you are figuring the budget for your short sale business, remember to allocate some funds to pay a company or a certified FHA appraiser for that home appraisal. It’s well worth it to pay for a home appraisal so that you have accurate comps from third person parties or neutral parties outside of your short sale deal. You present their appraisals as objective evidence to convince the bank to accept your short sale offer.
Factoring in Cost Estimates for Repairs The physical condition of the property is just as important as comps in a home appraisal. See if there are any repairs to be made on the short sale property. Make notes of what’s wrong, take photos, and get construction estimates for the cost of repairs.
When you do your cost estimates remember that the bank will be making the repairs, not you. Get cost estimates from a general contractor the bank would typically hire.
The best way to get cost estimates for your home appraisal is to hire a certified home inspector. You can look one up in the yellow pages. There’s also an organization called the National Association of Home Inspectors (NAHI). NAHI has high standards and finding a home inspector affiliated with this organization is a good way of making sure you get a thorough inspection.
A typical home inspection can take two and a half to three hours. The inspector gets up on the roof, checks the crawlspace and goes over the home with a fine-toothed comb. On completion of the home inspection the inspector hands over a report that can be 20 pages with detailed information about the property defects. Home inspectors may also takes photos and provide detailed cost estimates.
Paying a home inspector to get cost estimates is a great way to calculate the home appraisal value for your property. You’ll know exactly what’s wrong with that house because you’ve gone to a neutral third party expert.
Getting the Cost Estimates: An Example Dan Shields is a typical home inspector. He’s a member of NAHI and does all of the home appraisal evaluations and repair estimates for many investors.
Dan states that a home inspector will start an inspection from the outside of the property to get a look at the big picture. He’ll check the roofing, gutters, siding, and windows to make sure they’re properly installed and flashed. He will also check out porches, columns, etc.
From there the home inspector enters the home for the interior survey, to document built-in amenities, appliances, and flooring. He will next go to the mechanical room and check the heating/cooling package and plumbing. Finally, the home inspector will check the attic and find the insulation factor for the short sale property, literally working from the ground up on the home inspection.
A Broker’s Price Opinion Value
When you complete your home appraisal and submit the short sale package to the bank you will be assigned to a specific loss mitigator who will want to determine their own estimate of property value.
The loss mitigator orders the bank’s appraiser to go look at the property and get a broker’s price opinion (BPO) or market value. Sometimes it’s done by a realtor, sometimes an appraiser. It’s your job to be the contact person that the appraiser goes through to get into that property. It’s very important that you meet the appraiser at the property to convince him your home appraisal value is about the same as the BPO value.
When you meet with the bank’s property appraiser let him know the property is in foreclosure and that you’ve been working with the seller to try to do a short sale with the bank. Get that point across immediately.
You don’t want the meeting with the bank’s appraiser to be a confrontation. This is first impression time, so just be yourself and let your personality shine. Shake hands with the property appraiser. Get to know him for the five minutes before you start shoving your material on him.
The whole BPO process will probably take less than 15 minutes. You have 15 minutes to let your personality shine so make it your best effort.
During the BPO When you go out to these appraisals, take three things; a copy of the Real Estate Purchase Contract with your offer amount, your market value comparisons and a copy of your home inspector’s report
Try to present the material in a conversational tone. Ask if he’d like a copy of the offer you have made on the property and so on. If it’s an appraiser, he will always want a copy. Realtors are a different story—you can never tell what they’re going to take. Just ask and see what he’ll take from you. An appraiser will always take the property inspection report because it’s a good, neutral indication of property damage.
Let the appraiser know that your Purchase Contract has been at least preliminarily accepted by the bank and that’s why he is appraising the market value. You’d be surprised how often the bank’s appraiser doesn’t even realize the property is in foreclosure.
You also want to share comps with the home appraiser. Most of the time, app
raisers have pulled comps before they go out to the property, so you may be able to share comps to get an idea of the BPO. Make sure the appraiser knows about specific problems with the property such as; mold, termites, or foundational problems that are not readily apparent. This is something the appraiser won’t spot during his 15 minutes with the property.
Once you get these three documents into the hands of the bank’s home appraiser chances are higher that the bank’s BPO comes in close to your home appraisal value. When you get a good home appraisal value and cost estimates on that short sale property. You’ll have armed yourself with the best tools in convincing the bank to accept your low short sale offer.
Pick up more information about real estate shortsaling at Real Estate Investor.com. This is the place to go for the latest real estate news and advice. You’ll find a network of other real estate investors ready to help you out, along with free articles, blogs, contracts and documents for your use
Watch the video related to home appraisal
Quicken Loans TV takes you through a full home appraisal inspection in this informative video – part 2 (kitchen appraisal and basement appraisal) of the Quicken Loans Appraisal series. A home appraisal is something youll need when getting a mortgage. For more information on appraisals go to www.quickenloans.com
Help answer the question about home appraisal
Do I have to pay for another home appraisal?
I paid for a home appraisal for refinancing. My loan agent told that she could use that appraisal for another lender just in case things didn’t work well. Now she told me I needed to do another home appraisal for another lender. Do you have any advice for me not to waste my money?
About Author
Colin Egbert is an experienced
Real Estate Investor with plenty of short sale techniques to aid fellow investors in their quest to succeed and make huge profits. He’s the author of the ebook “Getting Started with Short Sales” providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.
Your loan documents should have included a page telling you about your right to a copy of your appraisal and how to go about obtaining one. Try looking through your document copies for thatinformation. Although, remember, a 2 year old appraisal is pretty meaningless today, unless you need proof supporting the value and price you paid for some reason unrelated to trying to sell it now or value it for refinance.
Just make sure the house is free of clutter! Fix any visible damages and paint walls that appears old and dirty, paint does wonder as people say. Repair or update any outdated amendities will greatly improve your value of the home. Exteriors too!
The room may or may not bring up the appraisal by 10K. IF proper permits were not pulled then you are in for a lot of trouble and can even be made to remove the addition.
You are mistaken about what it takes to get PMI stopped, here read this
How Do You Cancel or Terminate PMI?
Cancellation
Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.
Appraisers normally start out in a radius of about a mile of the property being appraised. If nothing have sold in that radius they will extend the radius.
Because you added certain things to your house, does not necessarily mean that what you added will give value or increase the value of your house.
If you upgraded the landscape to what the other landscape is in the neighborhood then that will add little value to the property.
Your remodeled kitchen and bath will do that.
The REOs sold in your area will be the established criteria for an appraisal in your area. Your appraiser might list that in his appraiser report which might be of some benefit, but the value of the property is what the lender/bank will eventually established the value of your property.
Your property might have lost a little value in the year that you have owned the property.
I hope that this has been of some benefit to you, good luck.
"FIGHT ON"
I don't think you can do that yourself, you'll need a licensed appraiser. It doesn't cost that much, maybe $220, at least that's what it cost me here in PA. It also doesn't take that long, maybe a 1/2 hour or less. Check out the yellow pages as well as the Better Business Bureau to be sure. In the end you should get a detailed report about your property as well as the surrounding area.
The actual appraisal itself usually never takes more than a full days work once the house has been visited, it's more scheduling it into the appraiser's work load and getting him out there that takes a while. When I bought my house, that process took 3 days total.
Pay the $30 because no site can give you a real estimate on a mobile home they have not seen. Is it in a park or on some land?
Truly, I was in the business of selling mobile homes for about a year and none of them are worth the money. You are much better off paying rent on an apartment and saving your money until you have a down payment on a real bricks and mortar home.
You can, but if the appraisal is over 90 days old, it is no good. Also, the previous lender has to transfer it over, which you have to request in writing.
Good luck!