Tag: fha appraisaer

Listing Shortage!!!

Already this year we have seen a shortage in the supply of homes on the market. With the beginning of the spring season upon us buyers are waiting with bated breath ready to pounce on the purchase of their new home. Comparing active listings from last March (2016) to this March (2017) in the Baltimore Metro Area housing market (which includes the City of Baltimore, Anne Arundel County, Baltimore County, Carroll County, Harford County and Howard County) the results are undeniable. The number of active listings declined by 15.8% to 9,453, the 19th consecutive month of declining year-over-year inventory levels and the lowest March levels in a decade.

Although this listing shortage seems to be problematic for buyers, there is an upside for the sellers. The basics of supply and demand states that when the demand for real estate is high, prices rise. When the number of available properties increases, prices usually drop. With anxious buyers waiting in the winds, a beneficial opportunity presents itself for the sellers.

With a shortage of homes in the market the homes typically spend less time on the open market with sellers receiving quick  offers close to the list price and some even higher to ensure the offer is accepted. The average percentage of original list price received at sale in March was 95.1%, the highest March level in a decade, exceeding the previous high set in March 2014 and 2013 of 93.2%. The median days-on-market was 42 days, down from 63 days last year, and at the lowest level in a decade.

Due to listing shortage, the homes that are available on the market are getting scooped up. Sales across the Baltimore Metro area was up 21.7% from last year to $923.8 million. March closed sales of 3,288 were up 16.8% compared to last year and set a record high for the decade.

This data was compiled by the Multiple Listing Service (MLS) data in MarketStats by ShowingTime’s database based on listing activity from MRIS (Metropolitan Regional Information Systems, Inc.).The Baltimore Metro Area housing market includes the City of Baltimore, Anne Arundel County, Baltimore County, Carroll County, Harford County and Howard County in Maryland.

Low inventory, a strong demand for homes and springtime are a wonderful combination for a seller’s market. This is coupled with the fact the homes are typically on the market for less time than past years and the increase in sales makes this one of the best times to sell…in almost a decade! Listing inventory has not been this low in the peak spring season in quite a long time, if you are a seller or thinking about selling, this may be the best time to put your home on the market.

Interest rates, global events, inflation and tax reform are just a few economic variables that could help or hinder the future of the real estate market. The real estate market is constantly changing but the current storm of circumstances puts the seller in an advantageous position, one that may not last very long.

Appraising Real Estate in Baltimore City

Appraising properties in real estate is tricky business for real estate appraisers. The vast value range, emerging markets, government housing and rehabilitation projects are just a few things a Baltimore City appraiser encounters when navigating the proper choice of comparable sales when determining the appraised value of a Baltimore City property. With more Millennials and empty-nesters moving downtown, there’s a renewed interest in the urban living experience causing an increase in appraisal work.

Lending institutions are quite cautious when reviewing a Baltimore City appraisal. Often values differ block to block depending on location of the water, monuments, parks, etc. The distance between the comparable properties and the subject property within an appraisal are highly scrutinized. Part of this scrutiny stemmed from the Baltimore City flipping scandal. With such diversity in value within a small radius due to the density of homes allow a large pool of settled sales to choose from. It is unethical, criminal and against appraisal practices to inflate the values of properties.

HB 521, a bill passed by the state legislature in the wake of the so-called “flipping scandal” of the 1990s, created a database of property appraisals in Baltimore City. Since 2003, every home appraisal done in the city was supposed to be given to the Department of Housing and Community Development, to be kept in files in case investigators ever needed to track down and investigate suspicious appraisers and/or lending practices.

Charm City is a city that bounces back regardless of setbacks. There are more than 40 homebuyer incentives that people could potentially qualify for when buying a home in the Baltimore City. They range from $1,000 to $30,000. These are for primary residents, not investors and you can stack them if you quality for more than one. You can go to http://livebaltimore.com/financial-incentives to learn more.

It is not only traditional buyers that are getting into Baltimore City real estate, even developers are turning a number of historic buildings in downtown Baltimore into amenity filled apartments. 26 S Calvert Street features a rooftop deck and mini basketball court, and 10 Light Street is a building that Metropolitan Partnership is turning into 400 luxury apartments.

With the growing demand of real estate in Baltimore City this leads the appraisal community with a responsibility for quality appraisal reports within lender guidelines that follow uniform standard appraisal practices.

Charm City is becoming more charming each year with expansion, renovation and opportunity. Robinson Appraisal Group can help you with all of your appraisal needs. Our services include estate appraisals, conventional appraisals and FHA appraisals to name only a few. 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. We look forward to helping you in the future with an appraisal for your Baltimore City property. As our Baltimorean counterparts would say, Thanks, Hon!

Conventional Renovation/Rehab Loan

A prior article noted the characteristics of the FHA 203K but there is also a renovation loan with conventional financing known as Fannie Mae Homestyle Renovation. This is a conventional or non-FHA insured loan for both home buyers and home owners needing funds to rehab or remodel a property. A Homestyle renovation loan can be used to both purchase a property or refinance a property already owned.

The HomeStyle® Renovation Mortgage allows you to buy a home and repair or improve it with just one loan. You can also use it as a refinancing tool to refinance an existing mortgage and borrow funds for the improvement or repairs to the home you currently own. Funds used for renovation under this program are capped at 50% of the completed value of the home. The loan
amount is based on the “as-completed” value of the home rather than the present value.

The HomeStyle Renovation (HSR) mortgage provides a convenient and economical way for borrowers considering moderate home improvements to make repairs and renovations with a single-close first mortgage, rather than a second mortgage,home equity line of credit, or other, more costly methods of financing.

Renovations must be completed by an approved, third-party contractor. You cannot use a renovation loan to do your own remodeling. You will make full, principal+interest payments both during and after the renovation. Renovation must be completed within 6 months of the closing date, and you cannot use the program for renovations already in progress. These are standard underwriting guidelines for conventional renovation mortgages. They are valid only for primary residences and 2nd homes.

Fannie Mae sets the maximum loan amount for conventional loans each year. The minimum loan size is $50,000. Funds for the renovation cannot exceed 50% of the estimated completed value of the home. Renovation cost must be documented by a fully executed third-party builder contract.

As noted in the prior article the standard FHA 203(k) program, the borrower hires a consultant to assess the construction plan and to perform an inspection before each draw is made. A “draw” happens when a portion of the money is disbursed to the contractor. Borrowers have up to six months to finish the project and are allowed up to five draws. The HomeStyle program does not require a consultant to monitor the work, only an initial and final inspection.

Borrowers must choose his or her own contractor to perform the renovation. Lenders must review the contractor hired by the borrower to determine if they are adequately qualified and experienced for the work being performed. Plans and specifications must be prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect. The plans and specifications should fully describe all work to be done and provide an indication of when various jobs or stages of completion will be scheduled (including both the start and job completion dates).

Those who don’t have great credit should probably opt for an FHA 203(k). Most Fannie Mae HomeStyle lenders require a credit score above 660. To get the best rate on a HomeStyle mortgage, borrowers need to have a minimum 740 credit score.

When looking to update that “fixer-upper” purchase or update your existing home be aware of all the programs available to you, it could expand your options when it comes to achieving your real estate goals or updating your existing home!

FHA Appraisals

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

 

Appraisal Terminology

Appraisal Terminology Abatement – Abatement is an official reduction or invalidation of an assessed valuation after the initial assessment for ad valorem taxation has been completed; the termination of a nuisance; a reduction in rent levels that a landlord charges … Read More..