Appraisal Breakdown, Webinars, COVID-19 Response and How To Appeal.
WHAT IS AN APPRAISAL?
An appraisal is an estimated value of real property (a house, land or commercial property) provided by an independent licensed/ certified appraiser. The appraiser calculates the value based on a combination of three approaches to value: the sales comparison approach; the cost approach and/ or the income approach. The appraisal involves the comprehensive research and analysis of market data as applicable to include: a property inspection; macro-economic data; micro-market data; property inventory levels; recent sales and listings; cost data; depreciation factors; income and expense data. The final value estimate is made as of an “effective date” and may be made “as is” or “subject to completion” (of construction per plans and specification, repairs).
WHO IS THE APPRAISER?
An appraiser is a highly qualified and experienced professional with expertise in real estate values. Appraisers undergo lengthy education and training before they can qualify as a state licensed/ certified appraiser. Qualifications depend upon the level of licensing but include a combination of the following: 4-year degree; appraisal-specific education to include Uniform Standards of Professional Appraisal Practice, and experienced-based training. The levels of state real estate appraisers are: State Licensed (qualified to appraiser non-complex residential assignments below $1 million; State Certified Residential Appraisers (qualified to appraise all residential properties), and State Certified General Appraisers (qualified to appraise both residential and commercial properties).
WHY DO YOU NEED AN APPRAISAL?
An appraisal may be required under multiple circumstances such as: mortgage lending; tax purposes; probate and estate; divorce; foreclosure and many more. An appraisal assignment is always completed for a single purpose for a specified client and intended users. For mortgage lending an appraisal may be required for a sale; refinance; home equity loan; portfolio review or pre-foreclosure. For a mortgage lender the appraisal provides a value of the collateral that guarantees the mortgage and mitigates the risk for the lender. For mortgage appraisals, the lender is the client (and not the borrower), although the borrower often pays for the appraisal and has a legal right to a copy of the appraisal. An appraiser works under ethical guidelines that protect the confidentiality of the assignment results once the appraisal is complete. The ethical guidelines prohibit the appraiser from discussing the value with anyone (including the borrower) other than the client.
HOW DO APPRAISERS MEASURE HOMES AND CALCULATE THE SIZE?
For mortgage appraisals, an appraiser calculates the size of a home based on specific appraisal guidelines. These guidelines state that the Gross Living Area (GLA) must be based upon a calculation of exterior measurements ABOVE Grade. The appraiser is also required to measure the area below grade and provide the area finished. The below grade area is separate but does have value dependent upon finish and utility.
An appraiser MUST physically measure the home to include above and below areas, porches, decks, patios etc. The physical measurement may be completed with an accurate measuring devise such as a tape measure, wheel or laser measuring devise. As stated, the GLA includes areas above grade and these must be adequately finished, heated/ cooled and provide sufficient head room. Covered and uncovered porches and patios are not included in the GLA. The GLA only includes areas where there is a floor and so, two-story areas are only counted once. The appraiser calculated GLA, used for mortgage lending, may or may not match the living area calculated by the county for tax purposes.
The GLA will encompass all rooms, closets, bathrooms and staircases. It does not include the garage. In new construction, the measurements are based on builders plans and specifications. The appraiser will catalogue the number of bedrooms and bathrooms. A bedroom may or may not have a closet but MUST have sufficient ingress and egress. An appraiser will differentiate an accessory unit if it contains a kitchen, bath and living area, and is separate from the main house.
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The COVID-19 pandemic, also known as the Coronavirus Pandemic, is an ongoing pandemic first declared by the World Health Organization in March 2020. COVID-19 mainly spreads through the air when people are near each other long enough, primarily via small droplets or aerosols, as an infected person breathes, coughs, sneezes, sings or speaks.
At the onset of the COVID-19 Pandemic, to ensure social distancing objectives, TrUnion implemented disaster recovery operations that facilitated remote workstations. The company complied with federal, state, and local “shelter in place” orders and continues to communicate updates to clients and appraiser partners. TrUnion is working with clients and appraisers to ensure business continuity while preventing face to face operations. The company continues to monitor the quality and compliance of all appraisal reports.
TrUnion works will all independent appraisal partners to ensure safe appraisal practice. Appraisers are encouraged to wear masks during appraisal inspections, maintain social distance recommendations and practice sanitary procedures including regular hand washing. Appraisers are asked to communicate with homeowners and/ or realtors prior to an inspection to ensure all parties are without symptoms or been in contact with a COVID positive individual. Appraisers who have contact with COVID positive individual are encouraged to self-quarantine in line with CDC recommendations. Appraisers with underlying medical conditions identified as co-morbidity factors may request exterior and/ or desktop assignments only.
TrUnion encourages the use of Fannie Mae and Freddie Mac temporary appraisal guidelines with the increased use of exterior and desktop appraisals. TrUnion has in place QC procedures to ensure the temporary guidelines are followed and appraisal reports are fully compliant.
HOW TO APPEAL YOUR APPRAISAL
It is not uncommon for a party of interest in a real estate transaction to disagree with the estimated value. Most lenders will facilitate a value appeal through the reconsideration process.
An appeal or reconsideration of value must be submitted to the lender.
An appeal may be based on:
A disagreement with the appraisal analysis or data. Items may include; potential errors or omissions in the appraisal report; incorrect calculations; additional information or data not provided to/ or accessed by the appraiser.
Alternate sales and listing data. Sales should be similar, recent and proximate. Listings alone will not suffice to alter value.
An appeal form may be accessed below. The form provides comprehensive guidance for users. However, some important areas to ensure when completing the form are:
Avoid direct insults to the appraiser. These are never well received and may impact the potential success of an appeal. If you have specific concerns with an appraiser, please communicate these to your lender.
Provide as much supporting data as possible including MLS data sheets; concise narrative; plans; worksheets and improvement costs.
Read carefully the Definition of Terms included in the appraisal report to determine coding and abbreviations. There are considerable factors that go into condition and quality ratings.
Please remember the appraiser is bound by a code of ethics that prevents him or her from discussing assignment results with anyone other than the client lender.
Ensure the appeal is legible, concise and clear. If it contains insufficient data to support the appeal it will be returned to the lender.
Finally, it is important to consider that appraisers have a high level of expertise and knowledge of their markets. Many appeals are not successful, but the value conclusion still remains important as an accurate assessment of the worth of collateral. Under these circumstances, they may prevent a buyer from paying too much for a property or a lender from over-extending credit to a borrower.
For more information, please access the appeal form below.
Please fill this PDF form out if you would like to appeal your appraisal.