Appraisals can seem like a very daunting document when you look at it. Fortunately, it’s not as intimidating as it seems. In the process of purchasing a home, an appraiser is sent out to the property being purchased to appraise the home. This appraiser’s job is to get a value of the entire property, including land, and notify of any recommended inspections or repairs.
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As mentioned previously, the appraiser’s main job is to place a value of the property being purchased. This value can be higher or lower than the contract price, but it should be close. However, there are reasons as to why the Appraised value can be higher or lower than the contract price amount, especially if the home has additions that are not common for the area. For example, having a pool, an extra room added to the house, or even remodeling can make a home’s value increase in a neighborhood with older homes that do not have pools
To be clear, Home Appraisals are not Home Inspections. While the Appraisal Report will include things that need to be fixed in order for a home to be purchased under certain Loan programs (such as USDA and FHA), these inspections from the Appraisal Report are only visual. In other words, Appraisers are not liable to move furniture or items inside a home, and any issues that they find, they will note it on the appraiser, and recommend an inspection from a professional to determine whether or not the item needs any further repairs.
Appraisal Reports can be labeled as one of three options: As-Is, Subject To Repair, or Subject to Inspection. For USDA and FHA programs, an appraisal labeled as Subject to Repair, or Subject to Inspection, must have the mentioned repairs or inspections done before the lender will approve the mortgage loan.
For USDA and FHA Loan Programs, there are certain repairs that the appraiser can point out that need to be repaired or rectified before a home can be purchased. Some examples are peeling paint, decks and stairs without railings, and other safety concerns. If there is evidence of a leaking roof or a cracked foundation, a roof inspection or foundation inspection, respectively, effectively labeling the appraisal report “subject to.”
In part 2 of this series, we will go more into depth of an actual Appraisal Report. Until next time!
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