Categories
Taxes

How is an Appraisal Different From a Home Inspection?

Douglas Tucker, Broker-Associate of RE / MAX Properties Unlimited in Morristown, NJ helps Randolph sellers and buyers understand the difference between an appraisal and a home inspection.

NJ Home Appraisals

A property appraisal in New Jersey is ordered by the lender to guarantee that the selling price of the property is in line with the amount of the buyer's mortgage. A home appraisal is included in the buyer's lender costs. If a buyer does not require a mortgage, he or she does not necessarily need a home appraisal. However, it would be prudent for the buyer to know the appraised value of the home so the price he or she pays is fair.

The US Department of Housing and Urban Development has information regarding appraisals. In essence, an appraisal is required to:

• Evaluate the market value of a home according to the properties that have sold within a three to six month period that are similar in size, style, and condition as the subject property; and

• Ensure that the house meets FHA standards and, if not, follow-up with the buyer, seller, and lender to make sure that the standards are met.

What part does a realtor play in an appraisal?

A NJ realtor can provide the appraiser comparables that may not be obvious to an appraiser out of the area. Appraisers extract their information from the multiple listing service and the tax records so oftentimes the realtor need not do anything other than open the door to let the appraiser inside.

Home Inspections in NJ

A home inspection, on the other hand, is ordered by the buyer and paid for by the buyer at the time of the home inspection. Home inspections have a few components – termite and wood destroying insect inspection, radon inspection, oil tank sweep, etc. Home inspections can range anywhere from $ 350- $ 700 or more depending on the areas being inspected and the property size.

The purpose of a home inspection is not so the buyer can demand repairs or improvements to the property. It should be for informational purposes and to help determine life expectancy of items like the furnace, hot water heater, central air, roof, etc. A home inspector can also provide valuable suggestions for the buyer regarding ways to increase home efficiency and save energy.

Does a realtor do anything in a home inspection?

A realtor in New Jersey should observe the inspection but not actively participate unless it is his or her house. It's the realtor's job to report to the attorney anything of concern to the buyer so this could be addressed during negotiations.

Categories
Taxes

Montgomery Central Appraisal District (MCAD) – Texas – Property Tax Protest

The TEXAS Montgomery Central Appraisal District [MCAD] appraises homes and other real estate; this value determines your property tax amount. Reducing your property taxes involves some knowledge and a modest commitment of time, although you do have the option to hire a professional property tax consultant. Basic steps to reducing the taxable value set by the appraisal district include annually protesting market value and / or unequal appraisal annually, reviewing the appraisal district evidence, preparing your case for presentation, attending the informal conference with a staff appraiser, and appearing at a formal appraisal review board (ARB) hearing if necessary.

Note: Most people are not aware that the Texas property tax code makes provision for the property owner to obtain the appraisal district evidence. This information, sometimes called the House Bill 201 package, can be very useful in preparing the case for your reduction.

The administrative appeal process at the appraisal district office usually involves two steps: 1) an informal conference and 2) a formal ARB hearing. Although the property owner is not required to attend an informal hearing, most property tax protests are resolved by agreement between the property owner (or property tax consultant) and a county appraiser at these meetings. County appraisers are supposed to make changes if there is evidence to support the change, but they are typically reluctant to reduce the taxable value for home by significant amounts. The next level of meeting, which can occur if you are not able to reach an agreement one-on-one with the county appraiser, is a formal ARB hearing. Property owners who were not able to settle through an informal conference have a second opportunity to present their case, and are sometimes able to receive resolution at a formal ARB hearing.

It is important to arrive early for your appraisal district meetings and make an effort to have a polite, pleasant, and calm disposition, even if you are feeling anxious. After you check-in with the clerk at the front desk, be ready to wait 30 to 60 minutes. Maybe bring a book or some work to pass the time. Greet the appraisal staff kindly and graciously. At this level, their goal is like yours, to reach a settlement expediently. After you discuss evidence with a county appraiser, they will sometimes make an offer to settle your property tax protest. You can either accept the offer or continue your appeal with the ARB hearing. In most cases, the value offered informally will also be recommended by the county appraiser at the ARB hearing. The appraisal district knows that most property owners are often reluctant to attend the ARB hearing because of the additional time involved and the process of a formal presentation can feel intimidating for some people.

Formal hearings typically consist panels of three or more ARB representatives, the property owner (or property tax consultant ), and the county appraiser. After introductions and a short explanation of the process, the county appraiser will describe the subject property. The property owner presents opening evidence and responds to any questions from ARB representatives. Next, the staff appraiser presents evidence on behalf of the appraisal district and responds to any questions from the ARB panel. The property owner has an opportunity for rebuttal and to respond to any further questions from the ARB panel for clarification of the facts presented. Finally, the ARB panel deliberates and announces a decision. The decision is not subject to further negotiation at the hearing. You should politely thank the ARB members for their consideration. If you are not satisfied with their decision, you may be able to pursue binding arbitration or a judicial appeal.

Categories
Mortgage

The Key to a Successful Refinance: The House Appraisal

When you are refinancing your mortgage the appraisal is the most important part of the process. You want the value of your home to come back as high as possible in order to make the loan to value ratio as low as possible. If your appraisal value puts your home equity at less than 20%, the higher the amount of equity in your property (the difference between the home's value and your mortgage balance) the more competitive the interest rate you are likely to get since lenders consider borrowers with more equity to be less risky. If you are refinancing your mortgage you need to understand the home appraisal's essential role in the process.

What Is a Home Appraisal?

An appraisal is an opinion of a home's value provided by a third party who is qualified to provide this opinion. The appraiser gets paid for providing the service of valuing your home. In a refinance transaction, the appraisal protects the mortgage lender by ensuring that it doesn't provide a loan of more than the property is worth. If the property later goes into foreclosure or power of sale for any reason, the lender wants to be able to resell the property and get its money back.

The appraiser will contact you to schedule the appointment and often their visit to your home will be between 30 and 45 minutes to tour through the whole house and take pictures and notes on the finishes and condition, measure its dimensions, and evaluate its overall condition both inside and out. The appraiser will then go back to his or her office and conduct research on your property, the legal description, the lot dimensions, sales history, etc. and then he will search for adequate comparables. Ideally the appraiser will be able to find comparable sales that took place in your immediate neighborhood in the past 3 months. Based on the home visit and these records, the appraiser arrives at a professional opinion of how much your property would sell for if you put it on the market. The mortgage lender then uses this value, along with your income, assets and credit history – to determine how much it will lend you and at what rate.

How Home Appraisals Work in Today's Market

The lender or mortgage broker often will order the appraisal through a third party called an appraisal management company (AMC) or contact the appraisal company directly. Many lenders have direct referral relationships with a small panel of appraisers and don't use an AMC. Or the lender may have an in-house independent appraisal department. The appraiser should have local knowledge of the area (called market competence). Appraisers are expected to follow the Uniform Standards of Professional Appraisal Practice issued by their Appraisal Foundation.

Home Appraisal Fees

Residential home appraisal fees vary based on the size of the home and other factors, but typically you should expect to pay $ 250 to $ 400 for an appraisal of a standard single-family home. More complex properties are more expensive because the inspection takes more time.

You may be required to pay the fee up front at the time of the appraisal or in other cases it will be paid for from the proceeds of the mortgage refinance, regardless of whether your loan closes, the appraiser still did the work and needs to be paid. While the fee may seem worthwhile if it enables you to get the refinance terms you want, it can seem like a waste of money if a low appraisal means you can't refinance.

An option is to ask a real estate agent to do a comparative market analysis and provide you with printouts of recent comparable sales from the Multiple Listing Service, taking this step could potentially save you hundreds of dollars by saving you from wasting your money paying for an appraisal if the value is too low to refinance.

Improving Your Chances of a High Appraisal

The value the appraiser gives your home largely depends on the recent sales prices of comparable properties, but there are definitely steps you can take to help secure a higher value.

The biggest thing is making sure your property is neat and clean, uncluttered and easy to inspect. Any pets should be contained and smells masked. Ensure your appraiser feels comfortable in the home and can focus on taking in all the features of your home. Having a dirty or unkempt home definitely will give the appraiser a bad first impression and will make the home appear in poorer condition than it actually is.

The biggest thing an appraiser takes into account is:

  • exterior and interior condition
  • total room count
  • functionality, including interior room design and layout, and functional obsolescence
  • improvements to kitchens and baths, windows, the roof and the home's systems (heating, electrical and plumbing) over the previous 15 years that make the home more up-to-date, functional and livable by today's standards
  • condition and age of the home's systems
  • exterior amenities such as garages, decks and porches
  • location
  • unappealing features, such as an exterior appearance that's inconsistent with the rest of the neighborhood

It's a good idea to create a list of your property's features to provide to the appraiser when he or she arrives.

Getting a Second Opinion on a Low Appraisal

A lot of homeowners are not realistic about their home's value, there is definitely an emotional factor that can lead to the homeowner thinking their home is worth more than reality, however there are definitely cases where the appraiser may have determined a final value that is on the conservative side and this may sink your refinance.

Keep in mind an appraisal is just one person's opinion, the appraiser should be well trained and educated, however as with all professions, there are good and bad practitioners.

If the homeowner does not like the value of the appraisal, they can write a letter of appeal to the lender or AMC, but the chance of an appraiser changing his or her opinion is very slim, unless the homeowner has overwhelming evidence that the value is off.

You may be able to make a case by pointing out that the comparables used were in an inferior school district or an inferior subdivision, or that they have other adverse influences affecting value, such as being on a busy street.

The Bottom Line

Understanding how the appraisal process works will give you the best chance of getting an appraiser to assign the highest possible value to your property. Appraisals don't always come in at the values ​​borrowers hope for, and they are a human process with room for subjectivity and mistakes. You can appeal a low appraisal, but you'll only succeed with strong data to back you up.