09/28/2023

When purchasing or refinancing, it is crucial to determine the accurate market value of your property. Unless the client can obtain a Property Inspection Waiver (PIW), the appraisal report will be a key tool in confirming the market value of the property. Many people are confused about the process and criteria for home appraisals. Below, we will answer these questions.

Ⅰ. What is an evaluation report?
The appraisal report is issued by a professional real estate appraiser after completing an on-site survey and reflects the actual market value or valuation of the house. The report includes specific numerical details such as square footage, number of bedrooms and bathrooms, a comparative market analysis (CMA), valuation results, and photos of the home.

The appraisal report is entrusted by the lender. It is important to make sure the property is clean and well-maintained before it can be appraised. If you have recently made upgrades or remodels, provide relevant materials and invoices so the lender can better understand the condition of the home.

In compliance with Appraisal Independence Requirements (AIR), lenders will randomly select appraisers based on the property’s geographic location to ensure objectivity and fairness in the appraisal process. To avoid conflicts of interest, appraisers must avoid having a personal or financial interest in the property being appraised or the client requesting the appraisal.

Furthermore, no party with a vested interest in the loan can influence the appraisal results in any way or participate in the appraiser selection process.

Appraisal fees vary by region and property type. When you apply for a mortgage, we will provide you with an estimate of the cost of the appraisal. Actual costs may fluctuate, but the difference is usually not significant.

Ⅱ. Common Questions in Appraisal

1. Q: Suppose a house closed escrow & recorded yesterday. How many days approximately will it take for the value of this house to be adopted by the appraiser as a comparable?
A: If it was recorded yesterday and the recording information is available, it can actually be used today. But most of the services we use usually require about 7 days to see it. In this case, you can provide the recording information to the appraiser, including the recording document number.

2. Q: The client has undertaken a permitted expansion project that has been completed but has not yet passed the city’s final inspection. In this case, can the increased area be used for valuation?
A: Yes, the increased area can be used for appraisal, but the appraisal report will be subject to the city’s final inspection, just as if the house is brand new, and the loan may need to wait until the final inspection is completed. Therefore, it’s best to order an appraisal after the city’s final inspection is completed.

3. Q: The pool’s condition is poor, with green algae. What impact will this issue have?
A: It’s generally acceptable if the green algae problem is not severe. However, if there’s so much algae that you can hardly see the bottom of the pool, then it’s not acceptable.

4. Q: What kind of ADU is acceptable and can be included in the appraisal value?
A: The acceptability of an ADU usually relates to whether it has a permit. Investors or underwriters will ask if there’s a permit. If there is one, it will positively affect the value.

5. Q: How to correctly and more effectively dispute an appraisal value?
A: If there are other comparables that the appraiser didn’t consider, those can be considered. However, if you just say that your house is beautiful, valuable, it’s no use. Because the appraisal value needs to be approved by the Lender, you need to provide evidence to support your claim.

6. Q: If the added room does not have a permit, the appraisal value will not increase correspondingly, right?
A: People often argue that even if a house doesn’t have a permit, but it has been added on, it still has value. But for the Lender, if there is no permit, then there’s no value. If you have expanded the house without a permit, you can still use the expanded space as long as there are no problems. However, when you need a permit, i.e., when you need to legally expand your house, the city government may require you to make up for the permit you didn’t get previously. This will increase many costs, and some cities may even require you to dismantle the part that didn’t get a permit. Therefore, if you are a buyer, and the house you are buying now has an added room, but you don’t know if there’s a legal permit, then later when you need to do any expansion on this house, you may need to spend extra money to get the necessary permit, which will affect the actual value of the house you bought.

7. Q: In the same postal code, will a good school district increase the appraisal value? Will the appraiser pay close attention to the school’s scores?
A: Yes, in fact, the difference in the quality of school districts is quite significant. In the Chinese community, everyone knows the importance of school districts. But sometimes the appraiser may not understand the situation of a certain area, he may only look at the school district within a 0.5-mile radius, but he doesn’t know that the next street is a completely different school district. That’s why for factors like school districts, if the appraiser doesn’t take the time to understand, real estate agents need to provide them with comparable information about the relevant school district.

8. Q: Is it okay if the kitchen does not have a stove?
A: For banks, a house without a stove is considered non-functional.

9. Q: For an added room without a permit, like converting a garage into a full bathroom, as long as a gas-supplying kitchen is not installed, can it be considered safe?
A: If the whole house is well maintained or in average condition, or there are no obvious external defects, the underwriter won’t be concerned about safety issues.

10. Q: Can form 1007 for a rental property use short-term rental income?
A: No, it may not be possible to find suitable comparables to support this rental income.

11. Q: How to increase the appraisal value without renovation?
A: It’s hard to increase the appraisal value in this situation.

12. Q: How to avoid re-inspection?
A: Ensure that all the information you provide is accurate and up-to-date, which can reduce the possibility of re-inspection. When handling related procedures, be sure to provide accurate documents, proofs, and materials. Also, ensure to complete the necessary repairs according to requirements, and perform proper inspections and maintenance to ensure the house meets the requirements.

13. Q: How long is the validity period of the appraisal report?
A: Typically, the effective date of the appraisal report needs to be within 120 days of the note date. If it exceeds 120 days but not 180 days, a re-certification (Form 1004D) needs to be done to confirm that the value of the subject property has not fallen since the original appraisal report’s effective date.

14. Q: Will a specially constructed house have a higher appraisal value?
A: No, the appraisal value depends on the transaction prices of houses in the vicinity. If the house construction is too special and no suitable comparables can be found, the house value may not be accurately estimated, thereby leading the Lender to reject the loan application.

An appraisal report is more than just a number; It includes the expertise and experience to ensure that real estate transactions are fair and just. Choosing an experienced and trustworthy appraiser and lender ensures that your rights and interests are protected to the maximum extent possible.  AAA always adheres to the principle of customer first and provides you with the most professional and considerate services. Whether you are buying a home for the first time, want to know more about home appraisal, or want to make a reference before buying a house or applying for a loan, we welcome you to contact us at any time.

Statement: This article was edited by AAA LENDINGS; some of the footage was taken from the Internet, the position of the site is not represented and may not be reprinted without permission. There are risks in the market and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, opinions or conclusions contained herein are appropriate to their particular situation. Invest accordingly at your own risk.