The details of every mortgage news story mentions that banks are going under and home loan credit lines are tightening. Nowadays it has become more difficult for homeowners to refinance than it was a few years ago. First of all, now they are required to meet a set of stringent new requirements; then they risk a low house appraisal.
Low House Appraisal – Huge problem for Homeowners across USA
Unluckily, the problem of low house appraisals is happening all over the country. Usually homeowners who have purchased their homes several years ago are being told that their homes have depreciated in value and that their home appraisal are insufficient for the lender to make a new loan.
Even those people are facing this problem who already have a loan with the mortgage lender they are trying to refinance with.
Role of Appraiser in Home Appraisal
Here I have described that what does an appraiser do when he determines a value for your home. Moreover I have also explained one of the major reasons why currently appraised values for homes are much lower than only a few years ago. The actual reasons for a low appraisal could possibly be much more complex, but here I have given usually the primary culprit.
Estimation of Probable Selling Price
It is the job of appraiser to estimate the probable selling price of your home on the date that he views the property. The real estate market in the area where the house is located is the main factor that determines the probable selling price of your house.
If there are many repossessed homes that are actively for sale in the area then it may drive down the probable selling price of your home.
How does an appraiser determines the Probable Selling Price?
Simple economics is involved in it. The appraiser would see that how he would price the house so that it may compete with all of the homes that are “for sale” in your neighborhood. There are a huge number of buyers who want to buy in any individual neighborhood, and when same feature is offered by two homes, buyers would usually opt the lower priced homes.
Banks sell repossessed homes at below market value
The problem for house appraisals is mainly due to the reason that in order to liquidate the repossessed homes faster and raise capital to make new, hopefully more stable loans, banks usually sell their repossessed homes at below market value.
Too much “for sale” home in an area brings your home’s value down
If there are a lot of repossessed homes being sold in your neighborhood then they may pull down the market value of your own home when the appraisal is done for the mortgage refinance company.
This happens due to the reason that private homeowners are forced to reduce the prices they ask for their own homes in order to compete with these lower priced homes. As a result of this a pool of low priced privately owned homes is created with which your house would have to compete in order to sell.
Appraisal must be based on current Sales prices of homes
While it is necessary for the appraiser to know what you paid for the house. The current appraisal must be based on the sales prices of homes that have sold in the last 90 days to 6 months. So, if you have purchased your home 3 years ago, then the price you paid at that time may have very little do with the price you could get out of it now.
Appraiser’s job is to decide how much a home need to be priced
You can tell the appraiser what you think your home might be worth, but never expect him to necessarily agree with you. For the mortgage refinance company the appraiser is not trying to find out that how much your home is worth, or what you think you would like to sell it for, or even how much you have invested.
Rather than he is trying to find the answer to the question that “What would this home need to be priced at for selling it in a reasonable time, all things being equal?”
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