This blog is for all of the Realtors who lost a deal because the appraisal came in below the contract price. You may have had multiple offers with most of them above the appraised value. If this happened to you, I understand your frustration. I know you are thinking to yourself, “ If I have 4 different buyers willing to pay $400,000, how could the appraiser say this it is only worth $390,000?” Keep in mind that as appraisers we are reporting our “opinion of value” and that MUST be supported by facts and market data. We can’t just say that we THINK it is worth $400,000. We have to support our appraisal with facts and market data (aka comparables sales, listings, and market trends). If you have multiple offers you should make the appraiser aware of this.
Homeowners do not always understand how valuable a pre-listing appraisal can be and do not want to spend the money. One of the most common reasons that properties don’t sell or are on the market for an excessive amount of time is because they are overpriced. If you have a pre-listing appraisal completed you will quickly know what the value of your home is based on the current market and area. The sooner you are able to sell your property the less money that will be wasted on a mortgage payment.
PMI stands for Private Mortgage Insurance. PMI is generally only required when a home buyer puts less than 20% down on a property they are purchasing. It is an insurance to offset losses in case the purchaser is unable to pay their mortgage.
PMI removal is when the home buyer has paid off enough of the property to remove the insurance. In order to have the PMI removed the loan principal must be reduced to 80% of the market value. In order for the principal to be reduced the loan can be paid down, the home value can appreciate, or both. You will need to contact your lender to determine if you qualify for a PMI removal.
What is Discounting Fractional Interest?
Discounting Fractional Interest is when a property is owned by two or more people or entities. This is often done so that the cost of maintenance, taxes, and many other costs associated with owning real estate. Because these types of properties are shared between 2 or more owners the fractional value is valued less than the actual value. This is because each fractional part of the property is worth less than the sum of the property as a whole. The lack of marketability and lack of control of the property makes the value of the homeless.
Do appraisers use the cost per square footage to appraise a property?
A comparative market analysis is performed by a real estate agent to determine what a property should sell for. The agent will evaluate properties near the subject property that have recently been listed as sold, pending, active, contingent, cancelled, & expired; these are also known as comparables. The agent evaluates the list price, sales price, days on market or DOM, and square footage of the property to determine what the property should be listed for. The technique is to take the individual sales price of individual sales and divide the total square footage into the sales price to come up with a cost per square foot per individual sale, they will do this with multiple sales then calculate an average cost per square foot. This approach is not weighted because it only considers the square footage to determine the value.
Discounting Fractional Interest is when a property is owned by two or more people or entities. This is often done so that the cost of maintenance, taxes, and many other costs associated with owning real estate. Because these types of properties are shared between 2 or more owners the fractional value is valued less than the actual value. This is because each fractional part of the property is worth less than the sum of the property as a whole. The lack of marketability and lack of control of the property makes the value of the home less.
According to the Appraisal Institute, “Single-family home construction is expected to increase 26 percent in 2015, the National Association of Home Builders reported Oct. 31. NAHB expects single-family production to total 802,000 units next year and reach 1.1 million by 2016.
People often assume that because I am a San Diego Real Estate appraiser that I can just quickly tell them how much their properties are worth. This happens more often than not especially with family members and friends and I have to tell them that it takes research to determine how much their property is worth. San Diego Real Estate appraisers are required to provide a detailed work file for any opinion of value given for a property. Read More
The room count of an San Diego appraisal can often confuse property owners, especially if they are not familiar with the guidelines for what is considered a room versus a bedroom. In a typical San Diego appraisal report the room count, bedroom count, and bathroom count are listed. People often are unsure as to what defines a room versus a bedroom and we would like to define what each of these are considered in a San Diego County appraisal. Read More
Many homeowners in San Diego want to update their home by adding square footage because it is believed that if the property has more square footage it will be worth more. Something that many homeowners in this situation do not consider is the homes in their neighborhood. If your property is overbuild with more square footage than homes in your neighborhood it can make it difficult to appraise.