Understanding the Basics of Appraisals


A home appraisal is a step of the mortgage process when an unbiased state-licensed professional determines a home’s value based on size, condition, function, and the quality of the home. To do this the appraiser must first inspect the property. Then, by researching similar homes within the area and comparing recent residential sales, the appraiser will present their “opinion of value” with all supporting data and research used to come to their conclusion.

The appraisal process is important because mortgage lenders require an appraisal before they’ll provide a home buyer a loan. This is because the value of the property will likely determine how much a lender will lend. Lenders want to make sure that homeowners aren’t over borrowing because the home serves as collateral for the mortgage. So, if the borrower were to default on the mortgage and go into foreclosure, the lender would be able to get back the money they lent by selling the house.

If you’re a buyer, a home appraisal also can function as protection for the client too. If an appraisal comes in higher than the price being paid for the residence, than the borrower will have more home equity than initially expected. Also, an appraisal can help protect a client in keeping them from overpaying for a home, if the appraisal comes in lower than the asking price.

If you’re a seller, you want your home to be appraised for the amount you’ve listed it for.  In order for that to happen there are a few things you can do to impact that number. Clean, updated, well-maintained houses tend to receive higher appraisals. Make sure things like the home’s exterior and curb appeal is one that is eye catching, holes in the drywall are patched, and rug stains are cleaned can help. It’s also a good idea to provide your appraiser with a list of recent list of improvement you’ve made to the home as well as a list of attractive aspects about your neighborhood. Be sure to mention items like grocery stores, parks, and neighboring schools.

If you are unhappy with the appraisal, sometimes there is an option to appeal called “Reconsiderations of Value.” So, if there were enhancements made your home or recent comparable residential sales that happened the neighborhood to which wasn’t considered in the initial appraisal, it’s important to provide this information to your lender. Also, getting a second appraisal is always available to the buyer as well. Lastly, it’s important to add that an appraisal that was conducted beyond six month prior will likely be considered out of date by a lender.

Seattle Home Prices Up 6 Percent Over The Year

housing statsThe local housing market continues to grow on a yearly basis, with prices for single-family homes in November 2014 having risen by 6 percent over November 2013, but the market also saw slowing monthly growth for the third month in a row, according to the S&P/Case-Shiller home price index released Tuesday. Despite the slowdown, Zillow’s Chief Economist Stan Humphries told The Seattle Times that the Seattle area’s housing prospects for 2015 are still strong, and the slowdown represents merely the market settling back in to normal levels. The Seattle market continues to outperform both the 20-city index and the national market, which saw annual growth rates of 4.3 percent and 4.7 percent respectively. Rates for 30-year fixed mortgages have held steady over the past week at 3.58 percent.

US 30-Year Mortgage Rate Slips To 4.28%

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After three weeks of increases, the average rate on fixed 30-year mortgages fell from 4.37 percent to 4.28 percent this week. The rates for 15-year mortgages fell from 3.39 percent to 3.32 percent. Still, rates are roughly a percentage point higher than they were a year ago. That increase was driven by speculation that in response to an improving economy the Federal Reserve would decrease its $85-million-per-month bond purchases, which it did in December and January.

For more information about Seattle real estate, contact your local real estate agent today.

Sales Of New Homes On The Rise Nationally

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In some surprising and encouraging news for the national residential housing market, sales of new homes in January rose by 9.6 percent, the highest rate since July 2008, and it is predicted that the rate for both new and existing home sales will continue to rise in 2014.

Economists had predicted a drop in the rate for January, mostly due to winter storms across much of the country, but only the Midwestern market posted a decline in new-home sales for January, dropping 17 percent. Sales in the northeast rose by 74 percent, followed by the west at 11 percent, and the south by 10 percent. The median new-home price also rose 3.4 percent from a year ago to $260,100.

Despite the 30-year mortgage rate having just risen to 4.33 percent, signs are pointing to a healthy residential market in 2014 as a result of growing household incomes, and double-digit growth in residential construction over the past two years, which contributed to the nation’s overall economic growth.

30 Year Mortgage Rate Dips

The average rate on a 30 year mortgage has taken a dip this week, making a fixed mortgage one heck of a bargain this spring. According to the Seattle Times, the 30 year loan dropped to 3.88% from 3.90%  last week, and the average on the 15 year fixed mortgage fell to 3.13% from 3.17%. If you’re in the market for home buying, spring is looking like a pretty attractive time to buy. Low rates are helping the market slowly recover, and home sales have been rising, building confidence in Builder and Construction workers to request future projects. For an in depth article, please visit the Seattle Times.

Consumer Protection Financial Bureau Simplifies your Mortgage Statement

Last week, the Consumer Protection Financial Bureau sent out a prototype designed to help consumers wrap their heads around the monthly mortgage bill. The prototype clearly states the breakdown of how much money is dedicated to the principal, interest, escrow, as well as the outstanding principal, maturity date, and for adjustable-rate mortgages, the ETA on when the interest rate could change. 

There are other agencies that provide similar services to their clientele, but there are currently no industry wide standards in place. With this information, home owners should be able to keep better track of their mortgage payments, and be able to hold their mortgage service company accountable for any errors.

Mortgage Rates Continue To Fall

Jumbo Loan LimitsThis week, Freddie Mac reported some not-so-surprising news; mortgage rates have fallen again.  This time however, all previous records were broken when rates fell to below 4 percent for the first time in history.  Yesterday, the Seattle Times published the article revealing rates on a 30-year fixed mortgage fell to 3.94 percent, which means now is the time to buy.  But rates aren’t the only thing dropping.  The amount of mortgage applications fell 4 percent, and refinancing applications by 5 percent.  The market is still bleak, say experts, as buyers simply think purchasing a home is a risky move in the current economy.  Rates are expected to fall even further before they start picking up again.  For more information, please see the full Seattle Times article.

Business-and-Occupation Tax Will Lead to Mortgage Tax

A new issue has arisen in Olympia concerning the taxation of mortgage loans.  Activists are lobbying to apply the business-and-occupation tax on interest earned by income lenders on mortgage loans.  There was a good editorial in the Seattle Times about this home mortgage tax.  Basically, if this tax is imposed, it’s a near certainty mortgage rates will climb to cover the costs.  (Not like the banks are just going to eat the cost to do mortgages in Washington State).  While there are signs that the home market is recovering in Seattle, this tax seems to be a very dangerous proposal.  Loans are harder for home buyers to get as it is – now these activists want to make it even harder?  If you are thinking of buying or selling a home in Seattle this year, next year, or in your lifetime – you should tell your legislature that this is not a good idea.