MoneyWisdom Blog

What Does an Underwriter Look for When Reviewing a Home Appraisal?

Posted by Bill Burpeau on May 24, 2019 4:30:00 PM

home appraiser in front of houseA home appraisal not only verifies that a home's value supports a loan request, it also verifies that the property is as marketable as comparable properties in the area. A lender wants to be confident that if the home has to be sold, it will be easy to market and sell to the next buyer.

A lender certainly doesn't expect that a borrower will default under the terms of the loan and that a forced sale will be necessary, but lenders need to make sure that if a sale is necessary, the property can be priced appropriately.

How do they do this? An appraiser will look at the features of the home and compare them to the features of other homes in the neighborhood. For example, if the home is on a 20-acre lot or has a large accessory building, the appraiser will look for other homes in the area on similar sized lots or with similar outbuildings. It's difficult to place a value on such unique features without comparable properties in the neighborhood. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it's more challenging to find homes that have similar features.

A home appraisal will ensure that the value of the home is in the same range as other homes in the area. If the value of the home you want to purchase is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell.

The appraisal also includes market statistics about the neighborhood. The appraiser will look at the time on the market for homes that have sold recently to verify if home values are steady or increasing.

Will I get a copy of the appraisal?

As soon as the lender receives the appraisal, the loan will be updated with the estimated value of the property. As a standard practice, lenders will provide a copy of the appraisal with the Commitment Letter once a loan is approved.

Are there any special requirements for condominiums?

Since the value and marketability of condominium properties is dependent on items that don't apply to single-family homes, there are some additional steps that must be taken to determine if condominiums meet Hanscom FCU's  guidelines.

One of the most important factors is determining if the condominium project is complete. In many cases, it will be necessary for the project, or at least the building that the unit is located in, to be complete before we can provide financing. The main reason for this is quality: we can't be certain that unfinished or incomplete units will be of the same quality as the one our member wants to purchase. This could affect the marketability of the home in the future.

If you're busy looking for a house, you know that it can be overwhelming to remember what you've seen where.  Download our free Home Search Checklist now to help you keep track of the condition and features of every house you look at.

Download your Home Search Checklist   

Topics: mortgage

Add a Comment

Subscribe to MoneyWisdom Blog Updates

    
Is Investment Property Ownership Right for You?

Posts by Topic

Recent Posts