How Does the Appraisal Process Work in 2021?! | The Home Appraisal Process Explained!

if you are buying or selling a house a lot of times there is financing involved and with that comes an appraisal now what the heck is an appraisal well in this week's video i'm gonna go through exactly what it is what the appraisers look for and what they don't look for and i'm also going to share with you the number one contributing factor in a home's value but that's towards the very end so stick around [Applause] hey everyone my name is janae hewitt and i'm your go-to dfw realtor with brico realty services on my channel i talk to you about all the things real estate i'm a local agent here in dfw and i've been helping people buy and sell houses for over three years and i absolutely love what i do if you are in the market here in dfw or if you know someone who is comment below and i'd love to help you out to get you into a home here in this area let's get into this week's topic all the things appraisals a little caveat to this video i am not a licensed appraiser but as a real estate professional i have to understand the appraisal process and i have to understand what an appraiser is going through i take as much education as i can in order to understand that process because when i go to list a home and put a value on that home i need to make sure that it is going to appraise for that list price or whatever the contract price is of a home so i do have to know some information about the appraisal process i am really fascinated about what an appraiser does in order to put a value on the home i've even looked into becoming an appraiser on top of a real estate agent but they go through a lot of education in order to become a certified appraiser they have to have over 300 hours of qualifying education and they also have to have 000 hours of appraisal experience in order to be a certified appraiser that's a lot of work in order to do this job and i'll tell you right now in our industry appraisers are short staffed and we hear it all the time where there isn't an appraiser picking up this job or the appraiser came out two weeks ago and we still don't have the report back well they're short staffed they have a lot of homes that they need to put a value on and there just aren't a lot of them to go around to do all of that work so with this video i also want to make sure that we give grace to appraisers i am not going to bad-mouth any of them because i know what they do is so important to our industry what is an appraisal it is one person's opinion of the value of what that home is appraisers have a really tough job when they put value on a home they look at a lot of data which i'll get into in just a minute and then they also look at homes that sold in the past so think about it they have to put the current dollar amount that your home is worth today based on information from the past not an easy job a common misconception is that the appraiser may work for the buyer or that the appraiser may work for the seller because they're putting the value on the seller's house right well that's not the case the appraiser is actually working for the lender because the lender is allowing the borrowers to borrow the money in order to pay for this house they work for that lender to make sure that that home is actually worth the amount of money that they're lending to that buyer when the appraiser is putting a value on that house they want to make sure that they are minimizing any risk that the mortgage lender may lose any money when they are letting these buyers borrow the money on top of the mortgage company double checking the buyer's credit history financial stability their income their debt to income ratio they are also making sure that what they want to purchase is worth the amount that is being borrowed when an appraiser is putting a value on a property there's a lot that goes into it they go about it using a sales comparison approach they will find similar properties to the subject property in terms of proximity in terms of when it was sold and the updates and the upkeep that this home has in comparison to the other homes that's why it's called the sales comparison approach so your appraisers are going to put together a lot of data information they will access tax records they will also have access to the mls so they can see all of the documentation that the listing agent has put online and they will also see any notes that are about the property in the mls as well so a lot of times they do a lot of the background research before they do an on-site visit to the property the on-site visit to the property there's a lot that the appraiser is going to do they do need access inside of the home let's go through a couple of things that they are looking for they're looking for the condition of the home if the home is 30 years old and it really hasn't been maintained or it hasn't been updated then that's going to be a decrease in the home's value compared to a home that the same age and same size if that's got an updated kitchen and bathroom the home that is a lot more taken care of and well maintained is going to get a higher value than a home that doesn't have those things so they'll look at the condition of the walls of the floors of the appliances and they also want to look for any appliances that may be energy efficient because again all of those things can add or decrease value to a home when it comes to the outside of the home they're going to be looking at the foundation are there any cracks along the brick on the outside of the walls they're going to be looking at the roof and the shape and the condition of the roof they're going to see if there's a pool on the property if there's an extended patio if there's a fireplace in the backyard if those things are in great condition or if they are there then there is going to be an increase of value based on any other homes that might be in the area because of course it would make sense that a more updated home with a lot more amenities would get more value for it versus a home that hasn't been updated and doesn't have a pool for example if the borrower is using an fha or va loan there are other things that the appraiser is going to look at from a safety standpoint because these loans are both government-funded loans and they want to make sure that the home is safe for the borrowers so they're going to double check that the appliances that come with the house are operational they're going to make sure that there's no signs of termites or any wood destroying insects that also means that there can't be any wood rot around the property because that is a condition that would destroy insects like the paint in and around the house it can't be chipping and it can't be scaling if it is then before you list the house i recommend sanding that off and repainting otherwise that appraiser is gonna flag that we're going to double check that the homes foundation is solid they're going to make sure that the heating and the cooling systems are operational they're going to make sure that the plumbing is also operational as well they're also going to look at the roof to make sure that its life expectancy will be at least two years so all of these things are safety concerns for the house that if for some reason an appraiser has to flag these issues and say hey these things need to get taken care of before i'm going to say that this mortgage company should lend on this home so then what happens is the seller is going to have to fix those things and then the appraiser has to schedule another appointment come back out take pictures and make sure that whatever was flagged is now taken care of and unfortunately sometimes when that happens that might delay closing because like i said in the beginning of this video that appraisers are short staffed there is too much work and not enough of them so having them come back out can take time and delay the closing process not in every situation but it has happened one thing i forgot to mention is when the appraisers come to do that on-site visit they are not looking at the furniture in the house they're not looking at the decorations because they know that all of that stuff is going to be taken with the sellers if for some reason that buyer is purchasing the couch let's say well that needs to be done on a separate addendum or a separate bill of sale and money can be transferred at the closing table but the price of that thousand dollar couch cannot be put into the price of the home because again the mortgage company wants a value for the home and not the contents of the inside as a listing agent one thing i like to do is prepare an appraisal packet for the appraiser before they come out to the home and usually it's something that i can hand deliver to them or it's something that i can email to them if they will accept it i've had some appraisers tell me no thank you i can't accept that and i've had others take it and thanking me for giving them this information what i put in there are the comparable homes that i have used in order to price this house when i listed it i give them a list of any updates that the house has had and i also put some information about the area and where the home is in this report as well i like to put all of the great things about this home in this report just to help make this appraiser's job easier and maybe it's something that they didn't see that i was able to provide them once they do the sales comparison approach and pull their data online and also do an on-site visit then they are going to prepare a report that'll give them detailed information of what this home is valued compared to other homes in the area appraisers have to give value to the home compared to at least three to five other homes that are similar in size and location in order to put a value on the subject property so in this report you will see the addresses you'll see some pictures of these other homes and they'll also go through the characteristics of this home with a side-by-side comparison of if this home is worth a little bit more then why is that home worth more is there more square footage is there a pool things like that then this report believe it or not is actually sent to the lender and to the buyer the seller does not get access to this report even though it's their house if for some reason the appraiser values the house under the contract price and we'll get to that in just a minute then the sellers can request a copy of that appraisal and that agent and that seller can review it and see if there's things in there that they agree with or disagree with and maybe that listing agent may want to challenge that appraisal to see if they can get that number bumped up just a little bit if the appraisal comes in under contract price then a whole new round of negotiations have to happen because the lender is only going to give the borrower let's say five hundred thousand dollars because that's what the home is under contract for but if the home appraises for 475 then that borrower is only going to get a loan for 4.75 they're not going to get the loan for 500 000 so what happens from here the sellers can't agree to reduce the price down to 475 based on this appraisal the buyers can choose if they've got the funds to pay that extra 25 000 out of their pocket in order to purchase the house or maybe the buyer and seller can meet in the middle somewhere but if none of those options work then the buyers do have the right to terminate the contract because they could not get lending approval because of the appraisal and then the home goes back on the market something for sellers to consider is that if these borrowers were getting an fha loan then that appraisal actually stays with the property for 120 days so if you go back on the market you may want to think about accepting an fha offer or not because the next appraiser that comes in will see that fha appraisal and on another note if the buyers are getting conventional financing or va financing then that appraisal does not stick with the property let's talk about challenging an appraisal and i'll be honest this can be an uphill battle these reports that the appraisers provide they're kind of difficult to look at there's a lot of information on one page and it's usually a couple of pages on this report the listing agent and the seller will really have to look at these other comparables that the appraiser used and look at the numbers and make sure that one that math was done correctly because the appraiser is also human they can make data entry mistakes i always like to make sure that you check the math and then look at the comparables do you agree with them and why or why not if there are some other homes that you use to give value to this house when you listed it but those aren't used in the appraiser's report then you may want to challenge that report you can say what about the comps over here can these be used to help give the value of this house up just a little bit more in the mortgage company there is the appraisal division you know somewhere sitting in some offices somewhere and if any challenges on the appraisal are done they're usually going to go to a team of people to look at and a lot of the times it doesn't necessarily go directly to the appraiser in no way shape or form should the listing agent ever be in direct contact with an appraiser unless that appraiser reaches out to them first it can really be looked at as a conflict of interest so if i am challenging an appraisal then that's going to go to that department and then that department will bring my challenges will bring any of new information that i am talking about in regards to this appraisal to the appraiser themselves and then from there they have their discussions and that appraisal will look at it again and decide whether he or she agrees with these challenges and will increase the price or disagree and leave the appraisal as is if you challenge the appraisal and the number sticks with it then you could also talk to the buyer's agent and the buyer and see if they will pay for and have another appraisal done by a different mortgage company and that can be a huge process because they're already pre-approved with one lender that means you have to go to another lender and hopefully a different appraiser will pick up that job to appraise this house that's a longer process than just challenging the appraisal and maybe putting the house back on the market if the buyers and sellers can't meet all right the moment you've been waiting for since i talked about it at the top of this video is what is the number one contributing factor to give a home its value and that is location location location and this is what i tell my buyers you have to love the location of your home because you can't change that you can change the inside of the house all you want but you can't move the house so you've got to make sure that it's in a great location and that's exactly what an appraiser looks for as well so if you're in a flight zone if there's a bunch of billboards and signs on a closed street nearby things like that can bring the value of a house down a little bit but then there's also things like if the home backs up to a creek then that is going to add value to a home so location is the number one contributing factor when an appraiser is pricing out the home well there you have it folks all the things appraisals if you learn something new i would love to know that in the comments below and this next video right here is talking about what i do in order to comp a home so definitely check that one out have a great day everyone we'll see you next week

Channel: Danae Hewitt | Your Go To DFW Realtor

Views: 70

Keywords: danae hewitt, DFW realtor, Briko realty, danae hewitt real estate, real estate, selling your home, home appraisal, what do real estate appraisers do, what does an appraiser look for in a house, appraisal process, real estate appraiser, how to prepare for a home appraisal, How Does A Home Appraisal Work?, What do they look for in a home appraisal?, What happens if the appraisal comes in low?, How does the appraisal work?, Do appraisers know the selling price?, home value

Id: q6Vzi6moDGI

Length: 17min 0sec (1020 seconds)

Published: Wed Dec 08 2021