How Property Appaisals effect getting Tampa Mortgages
Clearwater Florida – Property Appraisals are a necessary and important step in the home buying process. When we are working with people planning to buy Clearwater Real Estate we find there is a lot of confusion out there regarding the truth about appraisals. Some home buyers are confused about their purpose and often think of them as home inspections and others worry that a low appraisal for their property is the kiss of death.
We believe home buyers should take the time to learn the facts about real estate appraisals. The more you learn beforehand, the better prepared you are to tackle this crucial step in the home buying – home selling process. If you’re buying a home – your home loan approval is contingent upon the results of the real estate appraisal. It is as simple as no appraisal…no Tampa Mortgage or home loan.
Since very few buyers pay for a house with cash, the appraisal is going to be necessary. We recommend that even home buyers paying cash get an appraisal in this dynamic Clearwater real estate market (it’s another opportunity to negotiate to ensure you’re not overpaying for a property). If you are getting a Tampa mortgage or loan – is is never going to go through without an acceptable appraisal.
The Appraisals Role in the Home Buying Process
The purpose of the appraisal is to establish the homes market value at this point in time. The homes sales price will need to be equal or less than the market value as determined my the appraisal to be able to qualify for a Tampa mortgage and home loan. Obviously banks don’t want to lend more than a property is worth.
The main goal of the appraiser is to protect the Tampa mortgage lender. Lenders don’t want to be stuck with any Clearwater property that is not worth its price tag, so the real estate appraisal must be completed before the lender will approve the loan. The information contained in appraisal is invaluable to the lender. The lender will study the details of the appraisal before reaching a final decision.
Can I choose my own Appraisal when buying a home in Clearwater?
Buyers, especially first time home buyers, often think they get to choose the appraiser. This is not typical and it makes perfect sense because if the banks are going to be funding the majority of the transaction in loans like FHA (where 97% of the purchase price is funded by the mortgage lender), they should be aware of the property’s value.
Our experience is the lender will usually dictate the choice of appraiser. It might have one in house or through a contract with an independent appraiser. After the recent sub-prime mortgage crisis we’ve seen banks even dictating who the local Tampa mortgage broker which appraisers they’ll use to ensure they get as accurate an appraisal as possible. Banks can fear appraisers with close relationships to a mortgage lender might be tempted to be “too optimistic” to get a deal done. If you go with your own choice for appraiser, they may be subject to final approval from the lender – be aware that this can result in your paying for two appraisals.
How do Appraisers determine the Clearwater property market value for a home I want to buy?
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an appraiser compares the property to similar properties that have sold in the area and bases the market value on the comparables or comps. The cost approach is based on the costs to build, which means it is more appropriate for new properties. All the appraisals our buyers have received to get their Tampa mortgage in the last 3 years have used the sales comparison approach.
This is where we are seeing recent Tampa Bay short sales, foreclosures and distressed sales causing big swings in property values in even the best neighborhoods month to month. In today’s Clearwater real estate market appraisals actually help protect the home buyer from over paying as well.
What is included in a Clearwater homes property appraisal?
The actual appraisal reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The appraiser will then list any issues that he or she feels might diminish the property’s value. The next component is a list of any serious problems like bad roofs or weak foundations.
The appraiser then gives an estimate of the sales time for the house. Finally, the report will indicate the type of property. It is important to note that the real estate appraisal is not the same thing as an inspection. The appraiser might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not.
They are only responsible for assessing the property and determining the market value for the lender. A home inspection is a different process altogether. Real estate appraisals only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
What all goes into an appraisal? Appraisers are looking at the condition and size of the house, its proximity to good schools, and the size of the lot. Appraisers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don’t work.
What happens if the Clearwater home I want to buy doesn’t Appraise?
Everyone fears the possibility of a low appraisal in the home buying – home selling process. It happens all of the time, usually during closing.
Here are 4 things you can do to remedy this common but stressful situation.
- Have your Clearwater Realtor do a detailed Comparable Market Analysis and research to evaluate “current market value” before making an offer to buy a home;
- The property appraisal can always be disputed and you can pay to have another appraisal done and hope for a different result (this will cost you another $350-400 and is usually a strategy used when you’re dealing with a unique property where comparables are difficult)
- Your real estate agent can negotiate with the seller to ensure the price you are offering to buy a property for is within the banks appraised “current market value” – with so many Clearwater homes for sale today – serious home sellers understand a buyer can’t pay more than a bank will lend so this is usually how we see discrepancies resolved when there’s a motivated home buyer and home seller.
- The buyer can make a larger down payment – however this strategy is usally used in a market where property values are rising – I can’t imagine why someone would do that in a declining market.
In today’s market we help our home buyers avoid this situation by always doing extensive research and analysis before they make an offer (so the buyer doesn’t pay for an appraisal and waste their time and money on a Clearwater home that won’t appraise for the price the buyer is thinking of offering. ) This educates the buyer as well as protecting them from wasting @$300-$400 for an appraisal on a home that they won’t get a loan on…at that asking price.
Do you have questions about buying a home or Clearwater property appraisals? Just ask – we know an educated home buyer or home seller is our best client!
Call us Today at (727) 710-8036 to hear more about how we can help you!
Copyright © 2008 Jack and Cyndee Haydon, Clearwater REALTORS and your Clearwater Beach Real Estate Consultants specializing in Tampa Bay Real Estate and may not be copied, reproduced, distributed, transmitted, displayed or published