In the parlance of the real estate industry, lenders often talk about whether or not an appraisal "supports the transaction." For example, an applicant who wants to refinance a mortgage without paying fees out of pocket needs an appraisal that is high enough for the closing costs to be taken out of equity.
Who hires appraiser
In most cases, mortgage companies hire the appraisers. But many homeowners - in the process of putting their houses on the market - hire appraisers, too. Prices average about $400 in the greater Seattle area, but depending on the home's size can vary from about $225 to $500 or far more for a very large, expensive home.
Most residential appraisers go by a method called the "direct sales comparison approach." It means they look for similar houses that have sold recently in your neighborhood, and they use prices in those cases to help determine your house's value.
When appraisers get an assignment for a particular house, the first thing most do is check with the local multiple listing service to obtain a list of closed sales in your neighborhood.
The next step is to visit your property. Appraisers measure the dimensions of the exterior walls, which helps them calculate the size of the living area. They note whether or not your house has a pool, a fence or any other exterior improvements. They take photographs of the front, rear and sides of the house.
Then they look inside to check on the general condition of the appliances, the flooring and the walls. They also look at the floor plan and judge whether traffic patterns in the house are smooth or awkward.
Certain intangibles also come into play. For example, how clean a house is and how sharp the landscaping looks is not supposed to have an effect, but it probably has an unconscious effect.
"Then, once you know what the subject property is like, you can go back to your office and pick out the `comparables' that most closely resemble the house you're appraising," said Ben Cole, an Orlando, Fla., appraiser. "You have to have at least three. The best-case scenario is to have three similarly sized houses in the same neighborhood that have all sold in the last six months. But if that's not the case, then you start looking for the next-best examples."
Adjustments are subjective
The next step is determining the house's value. Here's where the process gets subjective. Appraisers establish a value for the house based on how it compares with the other "comparables" and at what price they sold. The fact that every house is slightly different is what forces an appraiser to make a judgment.
"What we're looking for is the market to tell us how much people are paying for houses in that neighborhood," Cole said. "But we're not always comparing apples to apples, and therefore we have to make adjustments."
To challenge an appraisal, you need to obtain a copy of the appraiser's report. If the lender ordered the appraisal, you can get a copy from your loan officer. If the lender balks at giving you a copy, make the request in writing.
Lenders are required by the federal Equal Credit Opportunity Act to provide you with a copy of the appraisal within 15 days of a written request. Of course, if you ordered the appraisal, you will get a copy directly from the appraiser.
The most important thing to do is check what the appraiser uses for comparable sales. Make sure the prices and features are as closely comparable to your house as possible.
"You may have knowledge of one of the comparables that the appraiser wouldn't have. For example, the house may have been sold in a pre-foreclosure situation, and the owner may have accepted a lower price than he would have in a normal situation. It may be a divorce situation," Baldwin said. "That's knowledge that an appraiser wouldn't have that could cause him to change his mind about the value."
Another good piece of ammunition to have when challenging an appraisal is additional comparable sales, Baldwin said. That information can be obtained from local real estate agents, who have access to the multiple listing service or from the property records office at the county courthouse. Some appraisers might be willing to consider new information from sales under contract but which haven't closed, he said.
If you believe you have enough evidence to support a new value, call or write the appraiser, or ask your loan officer to intervene. Simple cases can be cleared up over the telephone, but more complex cases may require you to visit the appraiser's office, Baldwin said. It's reasonable to expect an answer within 10 working days, he said.
Asking the lender to hire another appraiser usually is not a good idea, said Ross Bennett, vice president of Market Street Mortgage.
"There's no guarantee that another lender is going to come up with a different value," Bennett said. "And another appraiser is going to want a new fee."
----------------------- ANATOMY OF AN APPRAISAL -----------------------
The direct-sales comparison approach is the most common method of appraising a home. Here's how it's done.
The appraiser:
-- Selects houses similar in size, price and features that have sold recently in the neighborhood, preferably in the last six months.
-- Measures the dimensions of your house's exterior walls to calculate the size of the living area.
-- Notes exterior improvements, such as a pool or a fence.
-- Takes photographs of the front, rear and sides of the house.
-- Checks the general condition of the interior, including appliances, flooring and walls, and notes how the rooms are laid out to judge the flow of traffic.
-- Asks the homeowner to point out any features that may have been overlooked.
-- Establishes a value based on how the house compares with the prices and features of the comparable sales.
----------------------------- HOW TO CHALLENGE AN APPRAISAL -----------------------------
If you're unhappy with the appraisal of your house, here's how to challenge it:
-- Get a copy of the appraisal from your lender. By federal law, the lender must respond to a written request for an appraisal within 15 days.
-- Check the features and sales prices of the houses the appraiser chose for comparison, and make sure they are truly comparable.
-- Check with real estate agents or the property-records office at the county courthouse to get information on additional houses that may have sold in your neighborhood.
-- Ask to meet with the appraiser and present your evidence. To get a higher appraisal, you must show that your house compares closely with others that have sold for more than the appraisal. Or you must show that the appraiser overlooked something significant.
- Orlando Sentinel |
