Residential Appraisal Components and Misconceptions

One of the requirements that mortgage lenders will request during the home buying process is a real estate appraisal. For many first time buyers, there may be some misconceptions as to exactly what this is.  A real estate appraisal is a detailed report that is created by a licensed appraiser in your state and establishes the market value of a residential property. This is a very important aspect and several different considerations go into an official appraisal, and it forms the basis of the bank’s determination of the loan value. While appraisals do consider market comparisons, the actual appraisal value comes from much more than a market analysis.

Here are the components of a residential appraisal:

  • Property details
  • Comparisons  to at least three similar properties
  • Evaluation of the market conditions in the area
  • Environmental conditions that could decrease the property’s value
  • Structural issues that could decrease the property’s value
  • Estimate of time on the market
  • Status of the home site – new development, established neighborhood, acreage

Common misconceptions

  1. Appraisals aren’t the same as home inspections
  2. Appraisals are owned by the lender and not the buyer
  3. Assessed values don’t necessarily match market value
  4. Realtors do not provide appraisals
  5. Consumers do have the right to question appraisal facts and contest them

Understanding the neighborhood and ‘comps’ are an important part of your buying experience, but you are also bound to the official appraisal given to the lender. Work with your realtor, lender AND appraiser to make sure you understand all the details in the appraisal report of your new home.

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Home Loan Denials

The current real estate market is one that favors buyers. Record low interest rates, low home prices and a large inventory are all favorable for potential homebuyers looking for a new home. The problem facing thse homebuyers is that is obtaining financing for a new home can be a challenge in this difficult economy. Many mortgage lenders have tightened their requirements. However, it is important for homebuyers to realize that it isn’t always the lenders fault. Of course they would like potential customers to assume that they will be approved but the loan industry is a very risky one right now and they have to protect their assets.

Many potential homebuyers are finding that their application has been denied, so if you have been denied recently or in the past for a loan, it’s time to take control of the situation. Educate yourself, ask questions and do your research to help change that NO answer to a YES answer! Here, to help you out are some suggestions.

  • Consider a co-signer if your income simply is not high enough to qualify for the actual loan. The co-signer’s income can possibly be considered as an amount towards your loan regardless if the person is living with you or helping you pay the actual bill. In many cases, the cosigner might also be able to compensate for your low credit. It is important however to understand that there are risks for your cosigner and if you default on your mortgage, the lender can actually in turn go after your cosigner for the full amount!
  • Wait it out.  Sometimes the best advice you can get, especially if the conditions in the housing market is slow or the economy is bad, is to simply wait. Oftentimes when conditions improve in the economy, the lenders will be more willing to let you “borrow” the money for your loan. While you are waiting, you can take this time to work on your credit score. While you are waiting, home prices could also drop!
  • Consider a less expensive property. We all want what we want, but you might have a better chance of being approved if you switch to a less expensive option. For example, if you wanted a house, but you cannot wait and you cannot qualify for the loan, you might consider switching to a smaller home or to a town home instead. Later on down the line when your financial situation improves, then you can trade up the property and move to the location and home you really want to.
  • Apply with a different lender. The world is full of lenders, if you don’t like what one says or you get denied – try someone else! However, if every single lender you go to denies you, you should become aware that it is for a reason – in fact, if they all list the same reason then you will know what you need to fix.  Use common sense and stay away from predatory lenders. We have heard some pretty scary stories about these places – so just don’t do it. You could literally be signing your life away.

If you are denied, it is important to not give give up and keep trying! Work on your credit and then in a few months try again! With a little time, patience and understanding, you could be able to turn the situation around to your favor!

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1609 Madison St, Madison

1609MadisonStLive in Madison History! This bright and airy bungalow has been lovingly maintained since 1915! Enjoy living within walking distance to many locally-owned specialty shops on Monroe Street. Edgewood, UW and Vilas Zoo or the Farmer’s Market are just a quick bike ride away. Inside, you will find original trim, banister and wood floors throughout and updated mechanicals. Badger Fans: park 4 cars per game at $20 per slot and walk to Camp Randall. Sq. Ftge. Approx.

*Update*: Price drop to $329,000!
*Update 2*: SOLD

3734 Busse St, Madison

3734BusseSt_Front1Amazing Location! Step back into an era of cottage charm with this near-East Bungalow. You will find loads of updates and unexpected storage. The location speaks for itself; walk to the lake, cafes, library, shops or enjoy a lemonade on the screened porch overlooking the amazing back yard.

Madison LOVES Bikes

Madison has just won SILVER!

The League of American Bicyclists has just named Madison as a Bicycle Friendly Businesses City.  We’ve all seen the dedicated winter bikers, with their full face gear.

I’ve already taken my bike in for a tune up at Madison’s Westside Trek Store. New tires, alignment and tune-up, a pump with CO2 cartridge and the lights have fresh batteries. I’m ready to hit the roads – once it warms up a little. As a fair weather biker, I am looking forward to new errands that can be carried out on my bike – picking up mail, groceries, meeting friends for lunch. Where will you be headed on your bike this season?