LendEd: A Mortgage Lender Education Seminar
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This document contains information about the appraisal process including questions and answers about determining property values, comparable properties, adjustments, market reactions, appraiser site visits, disputes and reevaluations, different appraisal forms, upgrade costs and returns on investment, and sources appraisers use for research like county assessment sites, MLS, and MetroScan. It provides guidance for homeowners on understanding the appraisal process and explains key factors appraisers consider like market appeal when evaluating upgrade costs.
LendEd: A Mortgage Lender Education Seminar
- 3. Subject & ContractStandard 1004
- 10. Sales Comparison SummaryStandard 10041. How are the rates determined when making adjustments for SF & why do they differ?Answer: The SF adjustments are based on market reaction, and vary report to report often due to home quality differences. Adjustments can also be made under quality of construction. This is considered part of the art of the appraisal process. The end value is an opinion of value not a mathematical result.2. How do adjustments on the comparable sections help get the appraiser to a value, from a mathematical aspect?Answer: Appraisers adjust for differences in comparison to the subject. Math does occur to arrive at the indicated value at the bottom. The adjustments are supposed to reflect the market reaction to features.
- 11. Sales Comparison SummaryStandard 10043. How does an appraiser determine the market reaction?Answer: Market reaction is determined traditionally by a paired sales analysis.
- 13. Cost & Income ApproachStandard 1004
- 15. Condominium 1073
- 16. Difference w/ Condo ReportsCondo 1073Please Note: Cost Approach is typically NOT included in condos because they include partial interests in often substantial common structures/areas.
- 18. Market Research & AnalysisMC Form
- 19. Condo / Coop ProjectsMC Form
- 20. The Appraisal ProcessFrequently Asked Questions
- 21. The ProcessFAQ1. Does the appraiser have a good idea of what the property will appraise for prior to physically seeing it?Answer: No, thats what the appraisal process is for. An appraiser can research the property, but may not know what it entails until the physical inspection. Properties can change so its poor practice to go off tax assessors descriptions & other online databases.
- 22. The ProcessFAQ2. When values are low, homeowners complain that the appraiser wasnt there long enough to know the value, can you explain?Answer: Most of our appraisers have been around long enough to recognize styles & updates fairly quickly upon viewing the home. Different appraisers have different methods of appraising, they may inspect the home for a short amount of time and come in with higher values as well, but you just wont hear complaints about those.
- 23. The ProcessFAQ3. How are appraisers assigned?Answer:1. WCCI reviews the report type.2. We look at the current load of our trusted panel of appraisers to see who is available to meet the deadline as well as who is most qualified to complete that specific type of report.3. WCCI will send the report out to the three most qualified appraisers who are also closest to the subject to ensure timely acceptance. In cases where we are sure deadlines can be met, the assignment will be sent directly to one staff appraiser.
- 24. The ProcessFAQ4. How often do appraisal disputes result in re-visiting the value? If there is a re-evaluation what is the average adjustment?Answer: This depends on the significance of the error made in the report. Sometimes disputes occur as a result of a homeowners lack of knowledge about the appraisal process. However, if actual errors are made or new information is available, an appraiser is more likely to re-visit the value on the report. For example, if there was a potentially comparable property that did not come up on an MLS or other search, but is known by a homeowner, an appraiser would be likely to consider the new sale, which could result in a change in value.
- 25. The ProcessFAQ5. Whats the difference between a 1007 form and a 216 form?Answer: A 1007 is a Rent Schedule, it determines market rent, what the rent COULD be.A 216 is an operating income statement. The 1007 helps feed info needed for the 216, however the 216 is based off the actual income (math) that a property brings in.
- 26. Upgrade Costs &Return on Investment
- 27. Upgrade Costs & ROIFAQ1. Which upgrades can add value to a property? Answer: The ones the market responds to. The homeowner needs to evaluate the neighborhood to make sure that any potential improvements are desired by buyers in the market. Kitchen remodels (granite, updated appliances, etc.) seem to bring the most bang for the buck. Bathrooms are usually a good place to upgrade as well.
- 28. Upgrade Costs & ROIFAQ2. Why dont all upgrades translate equally into equity? For example if I spend $50,000 on granite why isnt my home worth $50,000 more? Answer: Improvements that are to a special or personal liking (that are not necessarily appealing to the mass market) are considered over-improvements or a super adequacy and wont bring a dollar for dollar return on a sale.Example: Swarovski Crystal Sinks that are $25,000 are not going to make the home worth $25,000 more.
- 30. Appraisal SourcesFAQ1. LA County Assessor: Verifying property details, taxes, etc.http://assessor.lacounty.gov/extranet/default.aspx
- 31. Appraisal SourcesFAQ2. Zillow: Finding potential comps (MUST VERIFY ON COUNTY SITE!)http://www.zillow.comWarning: Zillow is a STARTING POINT, all information gathered here needs to be verified with alternate resources. Most appraisers dont use Zillow, but it can be an alternate resource for lenders.
- 32. Appraisal SourcesFAQ3. MLS (Multiple Listing Service): Property/Comparable Researchhttp://www.socalmls.com
- 33. Appraisal SourcesFAQ4. MetroScan: Data Verification (comps, history, trends, etc.) http://www.facorelogic.com/literature/metroscan.jspRESTRICTED TO APPRAISERS
- 34. Open Q & A