What Negatively Affects Home Appraisal?

What Negatively Affects Home Appraisal

In the case of home sales the mortgage lender who is buying the property typically employs a third party appraisal management company to carry out an appraisal. The objective estimation of the house’s fair market value will help the lender decide whether that property’s worth is the amount the buyer wants to obtain to buy it.

The lender should warrant that they don’t loan buyers more money than their property’s worth in the event that the buyer fails to pay their mortgage, and the lender seizes the property.

If the appraisal is lower than the sale price the buyer will have to pay for the difference in cash, or collaborate with the seller in order to reduce the cost to be able to close the deal.

FHA loans require a special appraisal

If the buyer finances the property through the aid of an FHA mortgage, then an authorized FHA appraiser is required to perform the appraisal in conformity with HUD’s guidelines. The FHA appraiser makes sure that the property is in compliance with HUD’s minimum requirements for property.

In the majority of cases the negative impact on the value of a property in a traditional appraisal is the same the case with the case of an FHA appraisal. However, there are a few specific issues with regard to FHA which we’ll discuss in the listing below.

Common problems that can affect the appraisal

An appraiser reviews the state of your house. According to March the appraiser “looks at everything” that could affect the value of your property for sale, including:

  • The home’s location, the land state (peeling paint, door handles, etc.)
  • “Obsolescences” (such as a Jack and Jill bathroom with access only through one bedroom)”Obsolescences” (such as a bathroom with only one bedroom)
  • The proximity to external elements such as railways and airports

If an appraiser observes something that hinder the value of the house the appraiser will subtract value from the house.

Appraisers look at the following items from the list below, Michael Ford, general certified real estate appraiser says the following “Only a few are separately quantifiable in terms of recognized market impact (deductions or additions).”

“It’s incorrect to say that any appraiser deducts or adds value for something like triple-glazed or double-glazed windows. Their presence is a contributing factor to the overall impression of condition, quality, and age.”

He does mention, however that “damage is certainly negative in impact. It’s a matter of how severe the damage.”

Here’s a rundown of typical issues that affect an appraisal. These include:

Bones from the home

Neglected updates and maintenance

“In our market, age is not as important as condition,” says Mason Spurgeon, certified general appraiser and proprietor of the company Spurgeon Appraisals. Appraisers take deductions for naughty maintenance and updates, but not just for age of the home.

Ford Fuller: “A 120-year-old oak-floored and -walled house with no termite damage, that is well-maintained and recently updated could compete energetically against 50-year-old or even older homes of 10-20 years old. The design and aesthetics can outweigh the actual age.”

To assure your appraiser can detect changes, Ford advises providing a detailed list of the most significant improvements and the dates when they were completed for example, the replacement of built-in appliances ten years ago. However, he advises that the majority of upgrades only enhance the aesthetics of the home and have no worth.

Construction of poor quality

Ford states that the majority of modern housing is in compliance with stricter standards than older homes and even lower-cost housing. “Fit and finish” is always crucial, he adds. visible staples or finishing nails instead of being joined with no seams wood versus particleboard cabinets; tile countertops made of builder grade and fixtures versus custom-designed fixtures and counters.

Ford adds there could be generational, regional, and comparative variations in construction quality that could affect appraisals. Ford gives an example:

“In California, pre-1978 and the housing prior to 1992 were of lesser quality. The housing built prior to 1978 did not need corners sheers. Following after the Northridge earthquake, the majority of California houses are required to be fitted with all-round sheer panels for additional protection against earthquakes.”

Roof damaged

Ryan Lundquist, a certified appraiser for residential properties, says that buyers “tend to take a look at the whole view of a home. It’s not like they stroll through the house and begin deducting the value of every single thing. If the roof needs replacement, then they’ll probably reduce the cost of replacing the roof.”

He also says that lenders aren’t likely to loan on a house that doesn’t have functioning roof. “Buyers expect things like the roof and HVAC to be in working condition.”

Spurgeon goes on to say, “If a roof shows significant wear, or if there are signs of leaking on the interior of the home, that can certainly deduct from a home’s value.”

Appraisers aren’t allowed to climb on the roofing, Miller explains, but “If we see chipped shingles or they look old and curled from the ground, then we may call for an inspector to determine the age left on the roof.”

To be eligible for an FHA appraisal the roof must be able to provide “a remaining physical life of at least two years.” If it doesn’t then the appraiser has to request the repair or replacement.

An appraiser performs an inspection using the ground. “An appraiser can’t get on the roof,” Marguleas is in agreement. From this vantage point an appraiser will look at the following aspects:

  • Broken, curled, missing or gaps in shingles
  • Termite infestation
  • Mold
  • Moss buildup
  • Staining
  • Hail damage
  • Leaks
  • Water damage
  • Sagging or uneven slope (a sign of structural problem)
  • Flashings that fail (the sealing of chimneys, ventilation and plumbing)
  • Attic beams, rafters, and decking
  • Ventilation damage
  • Missing or barren grains (on asphalt roof shingles)

Foundation issues

Slab floors, although common nowadays, are of lower quality than foundations made of concrete, adequate to Ford. “Local submarkets may or might not know this. If I’m purchasing an 1947 home with a concrete foundation that has been poured, versus the one built in 1951, post-WWII FHA affordable tract home with flat foundation and a roof that is slanted and windows up to five feet above the eye level, I’m going for the one built in 1947.”

East coast basements in 100200 to 200-year-old homes might not have grouted blocks or concrete slabs for foundations. Ford continues. A loose brick or an old river rock in which grout is missing could indicate a need for a significant repair.

Structural damage, like termite and wood rot damage

Miller mentions Miller explains that VA and FHA as well as certain conventional loans, call for attention to this particular aspect. “If your home has wood rot or exposed wood, just take care of it before it is listed.”

Disturbed lead paint (for FHA appraisals)

Paint that has chipped must be removed and painted again to be used for FHA as well as VA loan, Miller states.

Facilities and features

Garage not available

As we’ve mentioned before the value that garages are appraised for is contingent on what the standard is in the marketplace. For example, Ford shares that in California the 1950s were the most popular and older houses were constructed with just one car or a garage. Today, however the absence of a two-car garage can be unaffordable. “One is better than none, but two is the market expectation for housing built in the 1960s and later.”

While garages are generally sought-after, Miller says converted garages are more common in smaller houses in some areas.

Bedrooms do not meet the minimum standards

Ford states that there’s no longer a need that a bedroom have a closet, so the closet is enough in size to house the armoire, or other similar storage. It’s still an excellent idea to look over the building codes in your area to find the minimum dimensions of closet, window requirements, heating sources, Septic System restrictions or egress points to basement bedroom.

Miller says that the ideal size for a bedroom is 70-80 square feet. Also, it must include a window and door. The rooms that walk through aren’t considered.

“It’s subjective. In Los Angeles bedrooms that go beyond three do not typically yield a better value,” Ford says. “A seven-room house with living room, kitchen, two baths, dining room, and three bedrooms plus a ‘den’ (with or without closet) and 1,650 SF has the same utility as a four-bedroom house of the same size that has no den.” However the distinction between a two-bedroom and three-bedroom house is more noticeable.

No outdoor living space

Outdoor living spaces are getting more and more popular. Miller claims that homeowners of condos are beginning to build small patios. It all comes down to the need in the area.

Pool in disrepair

The pool that is damaged or badly aged can reduce the value of your house. Appraisers are required to disclose any visible defects that could create a non-usable pool. Swimming pools need to be operational.

Neighborhood

A busy street

Based on Lundquist, “There isn’t a one-size-fits-all adjustment for a busy street location, so an appraiser has to find some comps with busy locations and compare those to ones without a busy location to understand what sort of price difference there might be.”

Miller says appraisers strive to locate a competitor with the same street in order to benefit appraisers determine the impact on the value.

Poor curb appeal

Curb appeal is a highly subjective quality that’s difficult to measure, Ford says.

Miller says it typically does not impact an appraisal. However, he says that the appraiser should locate a home within the same neighborhood that has similar curb appeal as a reference for worth.

Jamie Owen, a certified appraiser of residential real estate with Aspen Appraisal Services, explains that “qualitative differences are usually measured by looking at generally comparable homes that are similar in terms of curb appeal and condition in comparison with those that are either superior or inferior to the property being appraised.” If there is a disparity of value says, “it should be evident in the sales price.”

If curb appeal issues influence the value of the property, Owen says it’s often due to the fact that “homes with poor curb appeal often also lack market appeal on the inside.” If the exterior is badly maintained, she’s observed that the inside is too.

Proximity to features that are undesirable

According to Spurgeon the presence of the presence of busy streets, close proximity to airports and train tracks, or any other outside problem can definitely affect the value of a home. The process of determining the impact is a difficult task which involves scouring through an enormous number of sales records to locate similar cases. This is among the reasons why it is crucial to hire a skilled appraiser who can interpret the information.

The excellent method to measure the effect of these surveys is through paired sales analysis. Ford is in agreement. Agent surveys are also utilized, but they are more subjective.

Other features outside the property that can affect appraisals negatively include the proximity close to an sewage treatment facility as well as a rendering plant, hog farm as well as schools.

If the appraisal comes in low, your sale is at stake

If you are a buyer who truly would like to purchase your house, There are options available. You can raise the down payment, or you can ask for an appraisal counter-argument. This is a formality initiated by the lender for the buyer and asking the appraiser to review his findings. If the appraisal doesn’t meet the criteria, the buyer is free to walk away, leaving you to start the selling process in a new way.

Read More: Home Appraisal Ideas

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