You’ve finally decided to move forward and refinance your existing mortgage and at the same time pull out some extra cash to make a couple of home improvements and take some time off for a well-deserved vacation. You speak with your loan officer to get an update on rates and monthly payments and to confirm that a refinance makes sense in your situation. Your loan officer does confirm you could benefit so it’s time to review all your loan options. You’ve decided on a 20 year fixed rate loan and finalized a loan amount that will pay off your existing mortgage, include any closing costs and pull out additional cash to take care of your future plans.
You submit your application and provide the necessary documentation to your loan officer. The loan officer puts your loan file together while at the same time placing an order for the property appraisal. This is one of the more important parts as the final value of the home can determine how much cash you can put in the bank once the transaction has closed. The higher the value, the better off you are. After a few days, the appraiser visits your home and researches recent sales in your area. After the report has been completed it is delivered to the Appraisal Management Company which oversees the appraisal process who then forwards the appraisal to the lender. But there’s a problem. The final appraised value came in $25,000 lower than you had expected. This lower loan amount will definitely impact your decision-making and whether moving forward makes sense.
Your immediate thought is “How can this be? Why is my home value so low? My neighbor’s home was recently appraised more than mine and my home is newer, bigger and on a larger lot!” You come to the conclusion there must be a mistake somewhere. So what do you do? You talk to your loan officer.
When an appraiser compiles an appraisal report, lots of homework is done upfront before ever visiting the home. This homework consists of collecting data of recent sales in the area of homes similar to yours. After that has been completed, the appraiser will visit the property for more information such as condition of the home and any other amenities that were not included with the original sale. For instance, you’ve installed a swimming pool and cabana since you’ve purchased the home.
The cabana is a nice one, too, with utilities and half bath. And, one of the sales in the area used as a comparable sale on the report was a distressed sale because the owners sold quickly in order to avoid a foreclosure. Additionally, one of the comparable homes listed was sold more than two years ago. There are several issues with this report but as a homeowner, you may not know what to look for. That’s where I come in.
I know what to look for as I’ve reviewed countless property appraisals over the years. Mortgage lenders and loan officers involved with a transaction are not allowed to speak with the appraiser while the appraisal report is being put together. All a lender can do initially is provide the appraisal management company with a homeowner’s estimated value. What I can do however is review the report and identify relevant information that would affect the value of the home. In short, I know what to look for whereas a homeowner may not.
To dispute an appraisal, we’ll review the report together and check for errors. Appraisers are human too and mistakes can be made. Is there a square footage issue? Was something missed? Did the appraiser not mention your brand new upgraded kitchen with granite countertops and shiny new stainless appliances? These are the types of things that can affect the value of your home and if they were not included, I can point these items out and have the appraiser take a second look.
If your appraisal is coming in low and you believe the appraiser is missing some very important information, we can take that information and forward it. Appraised values don’t come in much lower very often but when they do it’s very possible some valuable information is being overlooked. We want to make sure your transaction goes as smoothly as planned.