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This is a short synopsis of how an
appraisal is prepared.
- The appraisal process is the process of collecting,
analyzing and reconciling data that relates to the property being appraised. This data is
formatted in a logical order to lead the reader of the report to the same conclusion as
the appraiser. There are several types of appraisal reports. The "Self
Contained Appraisal" report, the
"Summary Appraisal" report, and the
"Restricted Appraisal" report. (These
differences can be found by accessing the underlined text links above). The
differences in the three types of reports is the level of detail presented to the
reader/client. The "Self Contained Appraisal" is the most detailed of the three
types of reports. This report type is generally prepared in a narrative format and for
commercial properties. The "Restricted Appraisal" is the least descriptive of
the three report types, and is restricted in its use to the client, and considers anyone
else using the report as an unintended user. This report is primarily intended for the 2nd
mortgage market under certain lender guidelines. The Summary Appraisal is the most popular
type of report used for residential lending. This report is also used for a wide array of
valuation assignments. (i.e.: Estates, Divorce, Setting Listing Prices, Insurance Claims,
Liquidation, Court Testimony, Assessment Appeals, PMI Removal, Foreclosures and others.)
Both the summary appraisal and Restricted Appraisals are generally prepared on a
standardized form with the narrative in book form.
- The preparation of the appraisal generally begins with an
interior and exterior inspection of the building and property. The appraiser looks for
assets and detriments that the real estate offers by viewing the property with an
objective/non bias eye.
- Some of the more important features of the property are
gross living area, condition, quality of construction, location, layout, number of
bedrooms and bathrooms and lot size to name a few. The appraiser also notes amenities such
as central a/c, fireplaces, decks, recent renovations, pool, fencing etc. It is
important for the homeowner to point out amenities, or recent improvements that may not be
obvious to the appraiser in a normal walk through of the subject property.
- The appraiser also makes an assessment of the
neighborhood and surrounding area, noting the location of amenities which may be important
to the average home owner and/or buyer. In some cases these same items may be a detriment
to the property based on there proximity to the subject. Residential properties that are
too close to non residential properties may be viewed as less desirable by the typical
purchaser, and reflected as such in the appraisal report.
- The appraiser needs to confirm tax data, zoning
classification, and to confirm sales in the area. This can be done through various
different sources such as: public records, Multiple Listing Service (MLS), professional
associations, publications, physical inspections and experts (builders,
attorneys,
lenders and others). When all the data has been gathered it is used to make a Highest
& Best Use Analysis of the subject property. Never the less it is part of the
appraisal process. The data collection, focuses on the three approaches to value. These
approaches to value are the Cost Approach,
the Income Approach,
and the Market Data Approach.
Not all three approaches to value are relevant in each appraisal assignment. Depending
upon the assignment, the appraiser may choose not to use one or more of these approaches. (To
find out more about these approaches please click on the underlined corresponding text
links above).
- In the final stages of the appraisal process, the
appraiser analyzes and adjusts the data collected. The appraiser reconciles the three
approaches to value, giving greatest weight to the approach considered most appropriate
for the property being appraised. If more than one approach to value is used in the
appraisal report, each approach generally indicates a value that is reasonably close to
the other approaches. After the report is finished a review of all appraisal reports are
reviewed by a senior appraiser to check for consistency, accuracy, clarity and conformity
to appraisal guidelines/regulations. Occasionally other experts will be hired to review
our appraisals for better quality control. Once the review is complete the final changes
are made and the appraisal report is published and bound. All clients receive two
originals, except by prior arrangement.
- The homeowner/lender should have certain items available to the appraiser either
when the property is inspected or prior to inspection. This will speed the process along
smoothly. The appraiser needs a copy of the deed, or sales contract, a survey, and a copy
of a recent tax bill. Please be sure to point out any recent improvements to the
property. If you are aware of any recent sales in the area, that may be of
help and be sure to point this out as well. The appraiser may or may not use all of the data that you
supply, but you can be sure that the appraiser will appreciate your efforts and will
consider them in the appraisal process.
Prior to your appointment with
an appraiser, you may want to spruce up your home. You can find some helpful
tips located on our home improvement page.
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Under the Equal Credit Opportunity Act, your lender must provide you with a copy of the appraisal report upon your written request. If you are dissatisfied with any information contained in your appraisal report, you should contact your lender immediately.
Below is an excerpt from the U.S.
Department of Justice
CODE OF FEDERAL REGULATIONS
TITLE 12--BANKS AND BANKING
CHAPTER II--FEDERAL RESERVE SYSTEM
SUBCHAPTER A--BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM
PART 202--EQUAL CREDIT OPPORTUNITY (REGULATION B)
REGULATION B (EQUAL CREDIT OPPORTUNITY)
Current through October 1, 1999; 64 FR 53565
§ 202.5a Rules on providing appraisal
reports.
- Providing appraisals. A creditor shall
provide a copy of the appraisal report used in
connection with an application for credit that is to
be secured by a lien on a dwelling. A creditor shall
comply with either paragraph (a)(1) or (a)(2) of
this section.
- Routine delivery. A creditor may
routinely provide a copy of the appraisal report
to an applicant (whether credit is granted or
denied or the application is withdrawn).
- Upon request. A creditor that does not
routinely provide appraisal reports shall
provide a copy upon an applicant's written
request.
- Notice. A creditor that provides
appraisal reports only upon request shall
notify an applicant in writing of the right
to receive a copy of an appraisal report.
The notice may be given at any time during
the application process but no later than
when the creditor provides notice of action
taken under § 202.9 of this part. The
notice shall specify that the applicant's
request must be in writing, give the
creditor's mailing address, and state the
time for making the request as provided in
paragraph (a)(2)(ii) of this section.
- Delivery. A creditor shall mail or deliver
a copy of the appraisal report promptly
(generally within 30 days) after the
creditor receives an applicant's request,
receives the report, or receives
reimbursement from the applicant for the
report, whichever is last to occur. A
creditor need not provide a copy when the
applicant's request is received more than 90
days after the creditor has provided notice
of action taken on the application under §
202.9 of this part or 90 days after the
application is withdrawn.
- Credit unions. A creditor that is subject to the
regulations of the National Credit Union
Administration on making copies of appraisals
available is not subject to this section.
- Definitions. For purposes of paragraph (a) of this
section, the term dwelling means a residential
structure that contains one to four units whether or
not that structure is attached to real property. The
term includes, but is not limited to, an individual
condominium or cooperative unit, and a mobile or
other manufactured home. The term appraisal report
means the document(s) relied upon by a creditor in
evaluating the value of the dwelling.
[58 FR 65661, Dec. 16, 1993]
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WARNING! |
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(ARM) Adjustable Rate
Mortgage Holders!
New credit reporting
criteria!
A new credit-scoring system that rates
borrowers based on the type of mortgage they have could
cause people with adjustable mortgages to pay higher
interest rates on everything from credit cards to car
loans.
Some financial experts, however, say this system bears a
close resemblance to so-called universal default, which
allows a credit card company to raise a customer's
interest rate if he makes a late payment with another
creditor.
"This is pretty much going to be all that credit card
companies, student loan companies, auto lenders and
other banks need to charge customers higher rates solely
based on the kind of mortgages they have," said Lynnette
Khalfani, a former reporter for t e Wall Street Journal
and CNBC, and author of "Zero Debt." "Folks who were
teased and seduced to sign up for ARMs just two years
ago are paying for that decision in ways they never
imagined," Mrs. Khalfani said. "You could never fathom
it would cause higher rates on credit cards and higher
payments too. That smacks of unfairness to the
consumer." Not everyone with ARMs is struggling to make
ends meet.
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