Bank Appraisals are something that don't get much discussion time and with this new market environment, I figured it is time to do just that.
What is a bank appraisal first of all. It is a requirement by the lending institution that is FINANCING the loan to assign as Certified Appraiser to perform an evaluation to determine the market value of the property you are buying.
It is a comprehensive report and done according to strict appraisal guidelines. Once a value is determined, then this number is compared to the proposed purchase price. If it does not come in high enough, well there is an issue that needs to be dealt with. If the seller does not want to lower their price, they may move on to the next buyer and hope that a different bank will appraise the property higher.
Another factor when discussing appraisals is the Condition issue. Most loans today are FHA and will require an appraisal by a certified HUD/FHA Inspector/Appraiser. If there are unaddressed condiiton issues such as peeling lead paint or deferred maintenance issues namely old roofs, damage to interior wals, termite damage, uderground oil tanks of a certian size, then the appraiser will Note these items in the report. There will not be a closing if these items are not addressed as the appraiser is invited back out to the property prior to closing to see that they were addressed.
USDA loans are the same. They will also require that a FHA appraisal be done and the property needs to conform to HUD/FHA standards. Most of the time, properties that fall within the USDA approved addresses will have a private septic system. In these locales, public sewerage generally is not available. As long as the system has not failed during inspection and there is no public system available, then the bank will allow cush a system.
The key is to know as much about the property prior to paying for an inspection and an appraisal to be sure that it will meet the necessary guidelines. Then to be sure you are not paying too much. If you have done all of these things, you may make it to the closing table. As the Tax Credit deadline looms nearer, it is essential to avoid as many delays as possible to be sure to close on time. A good agent and a good mortgage broker will be able to help navigate these issues. Now more than ever, experience is key to a smooth transaction, or as smooth as is possible.
Elise Vetri is a specialist in first time buyer representation servicing buyers in Northern RI