How Home Apprails Can Derail Your Refinancing

Current rates are quite low, so now would be an excellent time to refinance your home. However, there are a few ways a property appraisal can delay or even disqualify you from getting your refinance. Here are a few things you should know before you decide to get your appraisal.

 LOAN OFFICERS CANNOT TALK TO YOUR APPRAISER

                Until 2009 your loan officer was able to communicate market value trends in your neighborhood with your appraiser. From this information they were able to set target loan amounts and rates. Now new federal laws prohibit the two parties from communicating. This was designed to safeguard appraiser independence, which changes the way a homeowner can pre-screen their property before a refinance.

YOU CAN AND SHOULD ESTIMATE VALUES BEFORE ORDERING APPRAISALS

                Appraisals are not free and can range from $300 to $1,200 depending on the property type occupancy status and location. So it is still in your best interest to find the estimated value of your property before you order an appraisal, especially if the outcome could render your refinance unqualified.

                The first thing you can do is to find out the estimated value of your home on your local real estate website. The next thing you can do is look at the estimated value of similar homes in your neighborhood. Once you have an estimate of where your home stands versus similar homes, then take into consideration the proximity of that home to yours, date of sale, location, quality of construction, number of rooms, lot and room sizes, parking, and condition.

                Then ask your real estate agent to gather the comparable sales and analyze it. Give your appraiser this data, but keep in mind they aren’t obligated to take it, but it would be helpful.

HEALTH AND SAFETY ISSUES CAN BE A PROBLEM

                Does your home have any “health and safety” issues? This is what to look for:

  • Do you have any unpermitted additions to your property?
  • Are any walls not fully restored from a remodel?
  • Mold or mildew anywhere?
  • Does the home have carbon monoxide detectors?
  • Do your windows have any bars? If so, do they have safety latches?

Here’s a fine example: if you remodeled your garage into an apartment and didn’t get a permit to do so, the kitchen stove would have to be removed before your loan was accepted. If the stove is unmovable then your loan would be denied.

Issues such as these can delay your loan application or deem in ineligible, al depending on the severity of the problems and the time it takes to remedy them. Make sure you take care of these problems before you get an appraisal.

KNOW THE DIFFERENCE BETWEEN “SUBJECT TO” AND “AS IS” APPRAISALS

                An appraiser will tell the lender about any issues your property may have labeling them as either, “Subject to”, or “as is”.

A “subject to” appraisal is not complete because the home’s value is being determined by a factor that is in the process of being fixed. For example, the stove in the kitchen is “subject to” being removed. Once it is removed the appraiser has to re-inspect the problem (which will cost extra) which will cause delays, in turn could jeopardize your rate lock. So let your lender know of any possible problems before you pay for an appraisal.

“As is” means everything is complete and looking good. There will only be one inspection.

YOU CAN APPEAL A LOW REFINANCE APPRAISAL

                Appraisals are subjective and can value at much lower then you expected. If this happens, the first thing you can do is do some homework and look at the standard U.S. appraisal industry methodology, and consider two factors.

  • If the actual comparable sales include all the comparable sales your real estate agent gave you. If you failed to do the analysis with your agent beforehand, then ask them now for comparable sales that were not in the appraisal.
  • Whether the adjustments used for comparable sales are appropriate. Let’s say you just remodeled your home, and you know that a comparable sales home is still in original condition. Make sure the condition section makes favorable adjustments for your property begin superior to the comparable sales.

Always ask your lender to help evaluate all these factors and make suggestions where necessary. They will then use their results to appeal the low appraisal to their bank, which will require comments by the appraiser. If your appeal does not have a strong case, the appraiser will hold their ground, so it is in your best interested to have hard data to present your case. Appeals can take three days to a week. So please take that into consideration in your lock rate.

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