Q: What do appraisers look for during the appraisal inspection? Is it the same for an FHA loan as it is for a conventional loan?
A. In most basic terms, a house is made of a foundation, walls, and a roof. And appraiser will pay attention to all of these. When appraising a property for FHA loan, in addition to determining the market value, the appraiser also has to make certain the property meets HUD minimum standards for health and safety.
A few of the many items appraisers look for when doing an inspection for an FHA loan include peeling paint in properties built before 1979 interior and exterior semi colon exposed wood on the exterior of properties semicolon exterior grade level to the negative grade needs to be corrected semicolon and heating and cooling systems. And Appraisal is not a home inspection a home inspection by a qualified professional is recommended for every sale.
Conventional appraisals are concerned with the condition of the property and how it affects market value. If an appraiser sees a defect or an issue that raises concern, they will note it in the report and make a client aware of the problem.
Q: Why don’t appraisers include the finished basement in their report?
A: This comment is what we hear repeatedly. FNMA, garages and basements, including those partially above grade, must not be included in the above grade room count. Fannie Mae considers a level to be below grade if any portion of it is below grade a walkout basement with finished living space is not included in the above grade room count.
That doesn’t mean that the finished walkout basement with bedrooms, full bath, media room and wet bar doesn’t get any credit or have value. It is just addressed on a different part of the appraisal form.
There are also exceptions to this rule. If a property has a kitchen on the lower level sometime seeing as a bi-level or split-level houses, this area is included in the above grade gross living area, as a kitchen is necessary for house to be functional. Another local exception is a popular 5 level split. The finished area partially below-grade typically a family room or half bath is included in the room count in the gross living area, as this area is typically finished like the above grade living area and is perceived by buyers as part of the above grade living.
Q: What happens if the appraisal value comes in lower than the contract price?
A: Despite what many Realtors feel about appraisals, it does not make us happy when appraised value is less than the contract price. It is our job to provide an opinion of the market value and in this high demand low inventory Central Ohio market, this can be quite a challenge.
Appraisers do their best to find the comparable sales that are most similar to the subject property with respect to size, quality, condition and utility. Due to the limited sales available in the same neighborhoods, it may be necessary to use older sales or find sales outside the immediate neighborhood.
If the listing agent has provided the appraiser with the comps when used when listing a property, he/she has let the appraiser know about the number of contracts presented on the property, and the other factors about listing that the appraiser might not be aware of, then there is little to provide for reconsideration of value.
In these cases, there may be an adjustment of the sales price, or the buyer may have to bring more money to make up the difference.