Finding your way around an appraisal- Is your value there

Appraisals are an opinion of value often based off of similar sold homes in your market area required by lenders when you obtain a loan or refinance your home. Since an appraisal is an opinion you could have 5 different appraisers appraise the same home and come up with completely different values, they could be several thousands of dollars different. An appraisal is more of value based on one of three approaches to value, however the market approach is the most common. Most lenders restrict appraiser’s comparable selection by requiring sold homes within 1 mile of the subject, one sold in the last 60 days and the rest of the comparables have to be sold within the last 90 days. Even though lenders put these restrictions on appraisers, they can’t always be met. If there are no homes that have sold in your immediate market area that meet these guidelines, the appraiser will have to go outside the lenders restrictions to find the next best home.    When appraisers are looking for comparables they are looking for homes with similar features to your home such as: total square footage above and below grade, lot size, bedroom count, bathroom count, number of garages, condition of your home, location, number of fireplaces, quality of construction, the list goes on and on. An appraiser will start by researching the subject property on their local county websites/MLS/tax records to obtain information regarding the subject. They will then visit the subject property requested to be appraised. The appraiser will start by measuring the property to determine/confirm square footage and room sizes for a sketch they will create when typing up the report, these measurements will be used above other information listed on the tax records and mls. They will also take photos of all rooms/bathrooms, the exterior of the subject , any out buildings, major mechanicals and any deferred maintenance items or safety issues they come across. The appraiser will go back to their office to start searching for similar comparables on the local MLS. Once comparables have been selected, the appraiser will visit each property selected and view the subject from the street to make sure the home is similar in size and condition as stated on MLS and take a photo. If the appraiser has any questions or discrepancies in property information, the appraiser can contact the previous listing agent to confirm the information. Once the appraiser has all the photos and information the appraiser needs, they will go back to the office and start writing up the full appraisal.  They will likely start with a cover page with a photo of the subject property, property address, and lender name and address. The next few pages of the appraisal are property information specific to the subject and the comparables and income if necessary. The appraiser brakes down the comparables differences against the subject by placing adjustments on the grid. The appraiser has to bracket the subject by showing at least one property that is "superior" to the subject and one that is "inferior" to the subject. By showing a sold property better and worse than the subject the viewer of the appraisal can see a breakdown of the differences or amenities value on a line by line comparison. Example: If your 1,200 square foot property has three bedrooms and one bathroom, an appraiser might select a home that has two bedrooms one bathroom with 1,000 square foot (inferior) and a home that has three/four bedrooms with 1,400 square foot (superior). Once the adjustments have been determined the appraiser will come up with the value of the subject. The appraiser will add a market conditions report showing market information for the subject. They will include the subject photos, comparable photos, location map, property sketch, the appraisers’ license, addendums if needed to add any additional information not required on the form or to further explain the subjects market and the breakdown of the cost to replace the house if it was destroyed. (These are the basics; depending on the type of report ordered there could be additional forms included or additional inclusions an appraiser might add) In today’s market it seems that homeowners are surprised by the value when they get their appraisal back. They are upset because their home is not coming in as high as they purchased their home for years ago, or they updated their home and aren’t a getting dollar for dollar return on their investment. There is hardly ever a dollar for dollar return on an investment when updating a home. You have to figure if you don’t update your home it could be less desirable for a future purchaser and could affect your value. Just because you painted your home doesn’t mean you get more value. You have to up keep your home and minimize the deferred maintenance items, not all upgrades give you additional value but they may up your condition rating on an appraisal making your home better than average and more desirable. This is hard for most home owners to swallow. They purchased their home as an investment and only want appreciation, in this economy that is not always possible.  Also with todays internet savy owners they are trying to look their home up on Zillow or Truila, however if you read the sites disclosures they are GUESSING on the value. They dont always have accurate information as most MLS systems do not provide property information to these sites.  It is a shot in the dark when you look at your home online to determine a value, by getting an appraisal you will find a more accurate indication of where your homes value is based off of the current market.  Appraisals are a snap shot of that time, they are usually only accurate for 3-6 months depending on your market area.  Your value could change at any time if there have been similar homes that have sold near you. Disclosure: there are a lot more items/details that go into an appraisal. The above information is just the basics.  Rural properties are typically more difficult for appraisers and the appraisers have to go way beyond lenders restrictions.  Appraisers have to go through extensive training to become a licensed appraiser- they have to have a bachelor’s education at minimum, complete extensive educational appraisal courses and continuing education, work as a trainee under a certified appraiser, pass background checks and pass national licensing certification examinations.

Putting a Stop to Potentiall​y Costly Home Repairs

With owning a home comes additional responsibilities of maintenance and upkeep. There are list upon lists of things you need to check and look after to insure any problems in your home get resolved before they become potentially costly repairs. I have compiled a short list of items that don't always come to mind with your busy lives but are important to help maintain your home and save you money in the long run:

Inside your home

-have your furnace serviced once a year

-change furnace filters monthly

-check smoke detector and carbon monoxide batteries monthly

-drain hot water tanks once a year

-grind ice cubes and sliced lemon in your garbage disposal monthly to clean and deodorize

-clean grease from your range fan with hot soapy water bi-monthly

-check caulking around showers and tubs every six months, remove and replace if deteriorated

-vacuum refrigerator coils once a year

-reverse your ceiling fans direction for better air flow- clock wise direction is best for air movement

-if you have a crawl space, check yearly and after major storms to make sure no standing water

Outside your home

-inspect your home’s exterior once a year for wood rot, look for peeling paint, cracked windows, peeled up or missing shingles

-remove storm windows and install screens or vise versa depending on the season

-before winter starts drain your sprinkler systems and yard hoses

-check gutters monthly or install gutter guards, check weekly during fall

-water your foundation in the summer- especially in dry weather, the dirt needs watering so your foundation doesn’t start to move

-inspect for leaks and cracks in your foundation every 4-6 months

-check dirt level around your foundation once a year, if you see a difference in color variation of where the dirt used to be you would need to add dirt around your foundation

Home Inspections- Protecting your Investment

Home inspections are a must in my book on every type of home, no matter what the purchase price is or what the seller’s disclosure reveals about the home. You want to make sure your investment in a home purchase is not a costly mistake. Inspections range from 300-400+ dollars depending on the size of the home and location. You can save a ton of money if the house has issues you might not have noticed and get out of the contract without losing very much money or use the inspection as a negotiating tool to lower the price or get the items fixed before closing. With today’s market and all the bank owned properties for sale, buyers are not given a sellers disclosure to view to show the history of the home while the sellers have owned the property, they state "as is". In this situation an inspection can help fill the gaps and give the buyer more details on some of the unknowns. Home inspections are also a good tool for sellers who have an inspection performed before their house goes on the market. This could help insure buyers the home they are viewing is "sound" or a good buy. This also could save a buyer some money if they choose not to perform their own inspection, another plus or reason to consider your home over others on the market.

A home inspection performed by a qualified inspector shows the buyer a detailed analysis about the condition of the home both benefits and detriments. When a home inspector performs an inspection they are looking at major mechanicals, plumbing, electrical, roofing, decks, foundation, overall condition, safety issues, potential/future problems, code violations, mold, radon(additional cost to check), termites (additional cost) and much more. After the inspection takes place the inspector will write up a detailed report with photos that entails everything the inspector saw, deficiencies with possible ways to fix or re-mediate the problem, possible contractors or companies the inspector recommends to complete the work and possible estimations on costs to fix, and provide typical life expectancies on appliances, roofs, furnace, and a/c. Although inspections are a good tool to get an idea on the condition of the home, inspections do not reveal everything. If you are unsure on some of the issues found during the inspection or feel you need further information on specifics, you can have a specialist perform inspections to give you a second opinion.

Home Warranty- Protect Yourself

Purchasing or selling a home is one of the largest, most important financial decisions in your lifetime and nothing should be left to chance. Having a home warranty can help both the buyer and seller in the process of purchasing of a home. Most home warranties cover the seller, providing them a competitive advantage, until the transfer of the property to the buyer. This helps if there are any issues after inspection before possession and then for any future issues within the warranty plan term the buyer might come across. Home warranties are extremely convenient when a home system or appliance stops working. You call the home warranty company (available 24/7), they send out a representative at a mutually convenient time and you pay the technician the trade call fee set up with the original plan on all covered items. If the items are not covered you pay either the trade service call or the actual cost of the service, whichever is less. They fix the items and those items then have a 30 day guarantee. There are lots of limitations depending on the plans you choose, you will want to read the specific warranty inclusions and exclusions before deciding on your plan. Home warranties take the guess work out of finding reputable contractors you can trust. Warranties are typically purchased for a one year period and can be renewed annually by the new owner. Typical items covered: Air conditioning & heat pump, heating system and duct work, plumbing systems, plumbing pipe leaks, toilet assembly parts, drain line stoppages including roots, water heaters, garage door openers, range/oven/cook top, garbage disposal, refrigerator, trash compactor, built in microwave, dishwasher, electrical wiring, electrical switches and receptacles, fir and burglar alarms, central vacuum, doorbell, attic ceiling fans, roof leaks, washer/dryer and many more depending on your plan and the warranty company.

Below are estimates of retail costs on typical items that have issues (what people pay that don’t have home warranties):

Heating system: $130-$3,500

Water Heater: $115-$1,500

Dishwasher- $98-$1,250

Air Conditioning- $130-$4,000

Oven/Range- $110-$2,700

Kitchen Refrigerator- $110-$3,800

Plumbing- $95-$7,500

Electrical System- $85-$2,500

*Amounts shown on First American warranty brochure

Typical Home Warranty companies/fees:

AB May- $389 Seller/Buyer coverage *$60 per Buyer Trade Call $95 per Sellers Trade Call Fee

Old Republic- $375 Seller/Buyer coverage *$75 per Trade Call Fee

                    $410 Seller/Buyer coverage *$60 per Trade Call Fee

                    There are Ultimate and Platinum upgrades available as well

First American- $415 Seller/Buyer coverage *$60 per Trade Call Fee/Covers Seller for only 180 days

                        First Class upgrades additional $99

2-10 Home Buyers Warranty-  $345 Seller/Buyer coverage *$100 per Trade Call Fee

                                            $370 Seller/Buyer coverage *$75 per Trade Call Fee

                                            $395 Seller/Buyer coverage *$50 per Trade Call Fee

*Fees are as of 2012/2013 company brochures- subject to change when companies change fees