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APPRAISERS:
What are they? What do they do?

Obtaining a mortgage requires the work and cooperation of a large number of people. The appraisers are least appreciated and probably the least understood. The lender wants your home as collateral. The task of the appraiser is to estimate the market value of your home so that the lender can decide if it provides sufficient security. Appraisers are licensed by the state. They present their credentials to lenders and, barring unforeseen circumstances; they are added to the list of approved appraisers that lenders require. This makes their appraisals more "portable"

Valuable asset to a mortgage broker who wants to take the loan to the lender with the best rate. A non-approved appraiser can cost the borrower money if the broker cannot send the loan to the lender with the best rate. So, mortgage brokers are very careful when ordering the appraisal.

Appraisers each have their specialties. The appraisers that we use on a routine basis are those who do residential properties. A residential property is described as 1-4 family homes. There are commercial appraisers - they appraise large commercial properties such as office buildings, shopping centers, and other sorts of commercial properties. Mortgage brokers use them as needed. Some appraisers work directly for the lender while others work for themselves and serve the lending community in general. These are usually called "fee appraisals" as they charge a fee for each appraisal. Skagit Valley Mortgage only uses independent fee appraisers. Work between the loan officer and an appraiser may begin soon after the borrower makes application for their loan. If the transaction is a purchase, the appraisal will come in at almost exactly the purchase price. Exceptions may occur if the buyer is paying much more or much less than other comparable sales would indicate. If the transaction is a refinance, the loan officer will sometimes check with an appraiser first to determine if the value is in the property.

Appraisers look at all the specifics of the property: location, lot size, size of the gross living area, number of bedrooms, size of the garage and any amenities. Generally, the appraiser has access to an online database on recent sales in the area. They try to get the most recent sales of similar properties in the area to determine the market value. Homes in newer subdivisions having identical plans are easier to appraise than homes in a diverse neighborhood. Appraisals in rural areas are generally more difficult that those within the city limits. Another difficult situation is the custom built home in a new sub-division, but no two are alike. With no sales for comparison, the task is much more difficult. The appraiser may have to go miles away to a similar situation to gain comparable sales. The appraiser always does their best to substantiate and prove the price with the most likely comparables.

What the Appraiser Does Many times I have heard from a borrower…” That appraiser only spent 15 minutes at my home, and it cost me $400.00!” Please remember that prior to the appraiser ever coming to your property, he has done a study of all recent sales, neighborhood conditions, etc. He has pulled county records to verify square footage and zoning. After all his research, the appraiser will call you to schedule an appointment. . He will then come to your home, and then measure the size of the rooms and make a sketch. The appraiser checks under the home and inspects the roof. He may call for a pest inspection of the home to insure against dry rot and/or infestation. When the appraiser leaves your home, he still has the majority of the work to do on the appraisal. He then photographs the outside of your home, a street scene, and any views that may support his allegation that the house has "a view" and then drives around and photographs the other 5- 6 potential comparables. After physically viewing everything, his initial assessment may change. In this case, he may need a come up with a new set of comparables. Strange things have revealed to appraisers when he inspects a property. Many of the items revealed to him may or may not affect the property. Some will have to be disclosed on the appraisal. I once ordered an appraisal for a refinance, and when the appraiser called, and said that the homeowner had revealed to him that the home was haunted, he informed me that it would have to be revealed on the appraisal. He wrote in:” The homeowner claims it is a friendly ghost.” It has to be revealed because it may affect the future market value and marketability. Having chosen about 4 comparable recent sales the appraiser finds the prices that those homes sold for and makes adjustments for: lot size, gross living area, room count, location, view, updating. Upgrades, kitchen and anything that would affect the value of your home relative to the comparable sales. A number is derived that is the estimate of value from the "sales comparison approach". This is, essentially, the bottom line. The appraisal will also include an economic estimate from the cost approach. The cost approach estimates the cost of the land and construction and diminishes it somewhat for age. This method of ascribing value has little use and represents a different age of appraisals.

Please take note

Many homeowners and/or borrowers depend on (Realtors) to send information about recent comparable sales with the intention of letting people know how valuable their homes are. This is often biased toward the upside. Realtors are more likely to tell you about the homes that sold at higher prices then they are about the ones that sold at lower prices. From my experience, this gives borrowers a slightly higher than realistic estimate of the value of their property. If you choose a mortgage broker for your real estate lending needs, you are better served to let the broker pick an appraiser who is familiar with the area and is on the list of approved appraisers of the lender or lenders to whom the broker may be taking your loan. If you are contemplating refinancing, obtain and retain all the information that you can on recent sales of homes in the area. You may know of a sale that just took place that is not in the database available to the appraiser. I have had cases where the borrower has added much needed information to the appraiser. From a practical point of view, you - as the person in the neighborhood - are best able to track this. If you have any relationship with a Realtor in the area, they can do this also.

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