The role of an appraiser is more important than ever in the loan approval process when purchasing a home or refinancing a mortgage. Surfside Appraisal has many certified, FHA real estate appraisersall whoom share insight on why appraisals are needed and the changes in the industry.   Q.  What should a home buyer or owner know about what an appraisal is used for? A.  There are many different reasons to get an appraisal.  Every year, countless people in the United States buy, sell or refinance their own slice of the American Dream.  Most, if not all, of these transactions include a simple line item for an appraisal.  It has become an understood and accepted part of a real estate transaction.  "Let's bring in the expert and make sure we're not spending too much on this property." But is this the only reason to get an appraisal? Are there other times when the services of a certified, licensed, independent real estate professional might come in handy?  You bet. PURCHASE OF A HOMEOne of the most important issues involved in purchasing a property is developing an opinion of what it's worth so that you can make an informed offer to purchase. A professional appraisal report performed by a qualified, state-licensed appraiser can provide you with an objective, third party opinion of a property's current market value.  And for the small price of this service, you can give yourself "peace of mind" prior to making an offer to purchase that you're offering a fair price for the property.    REFINANCE OR GET A HOME EQUITY LOANIf you need to consolidate bills, have a college tuition to pay, or just want to tap into the equity of your home, you'll need a new loan, which often times requires a new appraisal of the property.   PMI REMOVALPrivate Mortgage Insurance or PMI is the supplemental insurance that many lenders ask home buyers to purchase when the amount being loaned is more than 80 percent of the value of the home. Very often, this additional payment is folded into the monthly mortgage payment and is quickly forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan - whether through market appreciation or principal pay down - dips below this 80 percent level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met.  Many appraisers offer a specific service for home owners that believe they have met the 80 percent loan-to-value metric. For a nominal fee, the appraiser can provide you with a statement regarding the home value. Some will even take the next step and help you file a challenge with your mortgage company. The costs of these services are very often recovered in just a few months of not paying the PMI. DIVORCE SETTLEMENTA divorce can be a particularly traumatic experience for both parties and is often further complicated by the difficult decision of "Who gets the house?"  In most divorce cases, the Court won't usually force the parties involved to "buyout" the other party's interest but it may however order the sale of the home so each party gets an equal share of the equity.  Regardless of the situation, it's a good idea to order an appraisal so both parties are fully aware of what the true market value is.  If the parties want to sell the home, they'll have a better idea of what price to set.  And on the flip side, if a "buyout" is the chosen option, both parties will feel like they've gotten a fair assessment.  ESTATE LIQUIDATIONThe loss of a loved one is a difficult time in life and settling an estate from a death, or probate, often requires an appraisal to establish Fair Market Value for the residential property involved.  The ethics provision within the Uniform Standards of Professional Appraisal Practice (USPAP) binds us with confidentiality, ensuring the fullest degree of discretion.   Unlike many wealthy individuals, the majority of Americans do not have dedicated estate planners or executors to handle these issues.  Also, in most cases, a home or other real property makes up a disproportionate share of the total estate value. Here too, an appraiser can help.  Often the first step in fairly disposing of an estate is to understand its true value.  Where property is involved, the appraiser can help determine the true value.  At this point, equitable arrangements can more easily be arrived at among disputing parties. Everyone walks away knowing they've received a fair deal. HOME IMPROVEMENTS TO ADD VALUE Before you decide to sell your home, there are several decisions to be made. First and foremost: "How much should it sell for?"  But don't forget there may be other equally important questions to ask yourself such as "Would it be better to paint the entire house before we sell it?", "Should I put in that third bathroom?", "Should I complete my kitchen remodel?"  Many things which we do to our houses have an effect on their value. Unfortunately, not all of them have an equal effect. While a kitchen remodel may improve the appeal of a home, it may not add nearly enough to the value to justify the expense. SELLING A HOME A professional appraisal can help you make a better educated decision when determining your selling price. Unlike a real estate agent, an appraiser has no vested interest in what amount the house sells for.  It's easy for them to step in and give you the information to help you make your decision. Appraiser fees are based on efforts to complete the report and not a percentage of the sales price. So seeking a professional appraisal can often help homeowners make the best decisions on investing in their homes and setting a fair sales price.Q.  What can a home owner do to help their homes appraise for the highest value?A.  This question depends primarily on the neighborhood. Most typically bathroom and kitchen improvements draw the best return on investment but they are both the most expensive to do. Smaller improvements that can help raise the value are paint&lighting fixtures.  Be very careful not over improve the property.If 95 percent of the homes in the area have laminate flooring, installing marble flooring will be an over improvement for the neighborhood and the return on investment will go down. Q.  What changes in your industry will have the greatest impact on home sellers and buyers?A.  The greatest change in the appraisal industry is HVCC (Home Valuation Code of Conduct) which will be passing on May 1st 2009.  It is difficult to say what impact (if any) it  will have on home sellers and buyers but it is sure to have an impact on the appraisal, mortgage broker and lending industry as a whole.  The basic idea is to isolate the appraisal process from the loan production and sales process for home purchases, refinances or other transactions where loans are made and appraisals are required. The appraisal industry is highly regulated and reviewed and with the addition of the HVCC, I would think (and this is just my opinion) that the home sellers and buyers might feel more confidence in knowing that they are receiving credible appraisals. They should have some comfort knowing that the appraisal was completed independently without any outside pressures to “hit values.” Q.  How do you determine if a market the home is located in is declining?A.  Throughout the appraisal process, we are researching and analyzing market data that is relevant to the specific appraisal assignment.  Freddie and Fannie will require a new appraisal form on April 1st 2009 called the 1004MC.  This form will help clarify the market conditions within the subject’s neighborhood.  This is not a new appraisal process but will help the reader of the appraisal report understand how the appraiser is analyzing the market conditions within the neighborhood.  Declining, stable and increasing market condition trends will stand out when analyzing the data.  There are different ways to research market trends and one way is for appraisers to research the sales history of a group of comparables within a neighborhood.  If the majority of these sales sold for a higher price a few years back and sold again for a lower price, this might indicate a declining market.  Some of the factors that need to be considered when analyzing this data include listings to foreclosure ratios, sales price to list price ratios and neighborhood supply and demand trends.    Q.  How is an FHA appraisal different than a conforming or jumbo loan appraisal? A.  The big difference is that the appraiser has to know the FHA requirements which means reading, understanding and referencing the 130 plus page FHA hand book.  The analysis of physical improvements is in greater detail and more specific.  Take basements for example.   “The following requirements apply to the valuation of below grade rooms.  1. The window sill may not be higher than 44 inches from the floor.  2. The window sill must have a net clear opening (Width x Height) of at least 24 x 36 inches.  3. The window should be at least at ground level; however compensation factors may allow less. In all cases, use reasonable care and judgment.  If these standards are not substantially met, the basement area cannot be counted as habitable space.” So the standards overall are more specific and require more research throughout the appraisal process. FHA does not fund mortgages, it insures them. When you do FHA appraisals you are working for FHA not the borrower or mortgage broker and there is a comprehensive set of procedures and standards required for these type of appraisals.     Q.  What kind of education or licensing is required for an appraiser?There are 4 different levels of certification within the appraisal industry.  Each level has different education and experience requirements.  The requirements are constantly changing to improve the appraisal industry, but as of today the requirements are listed below.    Registered Appraiser:A minimum of 75 hours of appraisal education acceptable to the Board with at least 15 hours of the National Uniform Standards of Professional Appraisal Practice (USPAP) course. There is no experience requirement, however, trainee’s wishing to obtain experience will be subject to direct supervision by a supervising appraiser in good standing, who shall be state certified.   Licensed Appraiser:A minimum of 150 hours of specified appraisal core curriculum including the 15 hour National USPAP course; a minimum of 2,000 hours of appraisal experience in no fewer than 12 months; experience must be directed by a supervising appraiser in good standing, who shall be state certified; successfully pass the AQB uniform Licensed Residential Real Property Appraiser exam. Certified Residential Appraiser:A minimum of 200 hours of specified appraisal core curriculum including the 15 hour USPAP course; a minimum of 2,500 hours of experience in no fewer than 24 months; successfully pass the AQB uniform Certified Residential Real Property Appraiser exam. Must hold an Associate’s degree or higher from an accredited college, junior college, community college, or university. In lieu of the Associates degree, an applicant may have 21 semester credit hour or it equivalent in the following collegiate subject matter courses: English Composition, Principles of Economics (Macro or Micro), Finance, Algebra, Geometry, or higher mathematics, Statistics, Introduction to Computers— Word processing/spreadsheets and Business or Real Estate Law. Certified General Appraiser: A minimum of 300 hours of specified appraisal core curriculum including the 15 hour USPAP course; a minimum of 3,000 hours of experience in no fewer than 30 months; successfully pass the AQB uniform Certified General Real Property Appraiser exam. Must hold a Bachelors degree or higher from an accredited college, junior college, community college, or university. In lieu of the Bachelors degree, an applicant may have 30 semester credit hour or it equivalent in the following collegiate subject matter courses: English Composition, Macro Economics, Micro Economics, Finance, Algebra, Geometry, or higher mathematics, Statistics, Introduction to Computers— Word processing/spreadsheets, Business or Real Estate Law and two elective courses in accounting, geography ag-economics, business management or real estate.  ...read more