Have you ever wondered why you must get your home appraised when financing? It is required to tell the lender several things. The most important are the value and condition of the property. So many factors determine if the property is eligible for financing. Here are the key things possible outcomes you need to understand about your pending property for purchase.
The property value tells you how much the home is worth. Values are determined by several factors, and fluctuate. The values are a snapshot in time based on comparable sales. It is an opinion of one person’s research based on market sales performance. A certified real estate appraiser creates an appraiser. Lenders use this value to determine your equity and Their risk position as a percentage. Lenders call it loan to value. (LTV) An acceptable appraisal value is one that is at or above purchase price. If refinancing, it is at or above projected value you stated for your required loan approval.at the initial credit application.
As Is Value
When you receive an “As Is“ appraisal, this means your home is priced at the indicated value the exact condition the property currently is in. No improvements need to be made, and there are no notable issues with the property. This is the ideal status for an appraisal required for most final approvals on financing.
When a property is “Subject To” the appraiser is noting that the property is one of the following
- Structure is incomplete in the example of new construction with a home builder. A final “as is” inspection must be obtained prior to final approval for financing.
- Not compliant with required living conditions per federal lending regulations. Repairs are required, and a final “as is” inspection is required prior to final approval for financing.
- The current value is based on future repairs as with renovation or repair financing or construction permanent financing. This loan can close in this condition because the financing makes provision for the final inspection for completion.
Underwriter Red Flags in the Fine Print Comments & Photos
Every now and then, an appraiser brings back a covert notation to the lending underwriter (decision maker) that says RED FLAG! These messages are suttle, but a trained lending professional looks for them daily. They show up in fine print comments and photographs. They say a picture is worth some 1000 words and that is true when looking at appraisal photos. Some common things reported are damages to the property, wear and tear, mold “black spots”, cracked chipped, peeling paint, cluttered and blocked spaces, safety hazard, and weird floor plans (functional obsolescence). Another really big thing are mentions and photos showing the proximity to undesirable locations or hazardous objects. (examples are landfills, nuclear plants, gas stations, sanitation facilities)
If you are working with a great realtor, they can always justify the value of the offer price you are submitting so that you can be confident. There are always those unforeseen surprises, but for the most part, getting the value right starts with a great real estate agent.
If you need assistance pricing, selling your current home, or making an offer on a property, we are the RIGHT agents for you! Contact us today at 888-362-1706 or email us at firstname.lastname@example.org