Posts About Appraisal and Appraisers written by the staff of The Robinson Real Estate Appraiser Group, Maryland.

Appraised Value

What is involved in appraisal?

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What is involved in appraisal?

Wondering what an appraiser does when it comes to your home appraisal? What do they look for? How do they determine the value of your home?

Bottom line….it all depends on homes that have SETTLED in your area. With so many internet searches available about home sales, the one most important thing to note is the settled price. The predominant amount of websites reflect the price the property is being offered for, not the actual settled price upon closing. Assuming it will go for full list may inflate your assumption of your own home’s worth.

After the appraiser gathers data from your tax record, aerial view of the property and possible prior listing(s) the appraiser will contact you for an appointment. At this time they will retrieve the unknown information regarding updates, rooms, bathrooms, finished basement, exterior amenities/outbuildings and any unusual or special things regarding the property. With this information appropriate comparable properties that have sold in the market area can be chosen on the basis of similarities. Some of the similarities that are most relevant when determining market value value are the location, gross living area (amount of square feet above ground), acreage, age, condition, updating and amenities.

Upon inspection of the property the appraiser will measure the exterior dwelling and any possible additional structures (deck,barn,shed,patio…) deemed necessary for valuation. When inside the appraiser will compile a floor plan, types of flooring, overall condition and quality of construction. The information from the subject property (property being appraised) is compared to the pool of settled sales to determine the closest matches: the most similar properties will then be chosen upon likeness to determine market value.

The major phase of the valuation involves the application of the three approaches to value which include the Sales Comparison Approach, the Cost Approach and Income Approach. The three approaches are reconciled and the value (via most applicable approach)is selected as the final estimate of value.

The most relevant approach to determine the market value of a property in residential real estate is typically the “sales comparison approach”. This approach uses the characteristics of each settled property verses the subject property in a form where the characteristics are broken down line by line to give each item value. For instance, if your home has a fireplace and one of the settled comparables do not a +$3000 amount would be added to the settled comparable price to adjust for the absence of this amenity. The amount of fireplace value varies depending on price range of properties. Other line items include acreage, bathrooms, age, finished areas in basements, location/view,updates, amount of garages, outbuildings, decks, patios, exterior materials, quality of construction and (but not limited too) condition are all items valued in the report to determine the fair market value. There are typically 3 to 4 settled comparables used to determine the market value and possibly 2 more pending or active properties to reflect the current market and support the market value. Pending properties(due to the fact there is an offer) are preferred. Once all the settled sales have been adjusted for their differences (compared to the subject property) the 3 to 4 settled sales provide a range of value in which the appraiser then determines the market value from this range. The pending/active properties in the report then typically provide support for that choice.

It is the appraiser’s responsibility to adequately research the local real estate market and determine which comparable sales best represent the value characteristics of the subject property.

Current guidelines require a report to be in UAD form. To improve the quality and consistency of appraisal data for loans delivered to the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, at the direction of
the Federal Housing Finance Agency (FHFA), developed the Uniform Appraisal Dataset(UAD), which defines all fields required for an appraisal submission for specific appraisal forms and standardizes definitions and responses for fields within the report. An appraisal report in UAD causes some confusion to the reader of the report because of areas on the report that are coded for a computer to extract information. If any questions arise feel free to call your appraiser for clarification. Our office does a multitude of reports for the Baltimore County, Baltimore City, Harford County, Cecil County, Carroll County, Anne Arundel County and Howard County areas. Robinson Appraisal Group will be more than willing to answer any questions or provide explanation for any report performed by one of out staff appraisers.

The main responsibility of an appraiser is to provide an unbiased, comprehensive and expert opinion about a specific market value for real property. Regardless of whether you decide to sell, refinance, settle an estate or you are just curious about your home’s current value let us help to inform you on the most important transactions in your life!

Appraiser in Maryland

Become an Appraiser in Maryland

How does someone become an Appraiser in Maryland? To become a real property appraiser, you will need to obtain education and experience, then pass a state-administered licensing or certification exam. One of the best ways to gain experience is to … read more

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FHA Appraisals

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FHA Appraisals

FHA appraisers perform many of the same functions as appraisers for conventional loans, but with a few extras.

Since FHA loans are government-insured and designed to provide safe housing, there are specific things that FHA appraisals must examine for the home to meet loan program guidelines.

fha-appraisalsWhen inspecting a property with FHA financing, either as a purchase or a refinance, there are areas that may need correction prior to the loan closing. According to HUD, to meet the FHA criteria, a property must be free of hazards that could affect the health or safety of the home’s occupants. A home may still be accepted if identified hazards are properly corrected. A lack of general maintenance or a run-down appearance is acceptable and won’t need to be repaired as long as it does not jeopardize the safety or structural integrity of the home. For example, damaged drywall, worn counter-tops, missing bathroom tiles, poor workmanship, and damaged or missing interior doors are all cosmetic issues. Structural defects that are not acceptable include cracks in the foundation, a sagging roof or floors, wood deteriorated to the point that it needs professional repair, or grading that is not adequate enough to drain water away from the house. A leaking or worn-out roof must be repaired or replaced. An appraiser must examine the condition of the roof from the attic to spot any holes in the roof or water staining.

Typically the most common repair for FHA appraiser inspections is the correction of chipping and peeling paint in homes built prior to 1978. Approximately three-quarters of the nation’s housing stock built before 1978 (approximately 64 million dwellings) contains some lead-based paint. When properly maintained and managed, this paint poses little risk. However, 1.7 million children have blood lead levels above safe limits, mostly due to exposure to lead-based paint hazards.  Every Purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning.  Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women.  So chipping/peeling paint is a major issue when the appraiser performs the inspection of a property. In an effort to correct all areas prior to inspections check interior and exterior painted surfaces: window trim, sills, frame, doors, thresh holds, walls and railings are some of the most common areas that have chipping and peeling paint due to the amount of usage and exposure to the elements. The typical verbiage in paint correction is “scrape,sand and paint any chipping and peeling paint”: all paint chips must be removed from corrected areas.

Let it be noted that on vacant homes some lenders may require evidence that the chipping paint was corrected per EPA guidelines.

An area on the outside of the home an appraiser would check is the roof. A check for missing and/or worn shingles would be visually noted. If the roof has a life expectancy of two years or less, the FHA appraiser will recommend that it be repaired or replaced. The FHA allows only three layers of roofing material. After there are more, the roof must be replaced when further repair is necessary.

Walk around the exterior of your home to look for conditions that might be deemed unsafe. Walkways should be in good repair and free of tripping hazards.

There are also FHA requirements for well and septic systems. Some homes have their own water supply, usually in the form of a well. But the FHA guidelines for wells is quite specific. For an FHA appraiser to pass your well, it must be at least 50 feet from your septic tank and at least 100 feet from the septic tank’s drain field. In addition, the well cannot be within 10 feet of your property line.

The bulk of FHA repairs are typically on the interior. Some suggested areas (in addition to the chipping/peeling paint if built prior to 1978) to pay particular attention for correction are water stains (indicating leak in need of repair), holes and large cracks. Look for evidence of rodents and termites. Turn on your heat and A/C systems to make sure they work, and that they don’t emit strong odors or smoke. Try all the light switches and power outlets to make sure they’re functioning. Remedy frayed or exposed wiring. Check your plumbing fixtures to make sure they all work and are free of leaks. Verify that your home has adequate water pressure–when more than one plumbing fixture is turned on, water should flow normally from each. Repair miscellaneous items the FHA considers health and safety deficiencies. These include missing handrails along stairways, broken windows and missing or unsafe stairways. Have a working smoke detector on every level. Make sure all windows open, remain open on their own and close. Verify that your garage door reverses or stops when it meets resistance.

All repairs noted from the appraiser are areas that are “readily observable”. The appraiser does not move furniture and notes only areas that can be seen upon inspection.

See the attached worksheet as an additional tool to help eliminate FHA repairs and further understand additional elements that need to be addressed in FHA appraisals.

Valuations Conditions 07 2003