Mortgage Finance Transaction

Every day there are people buying and selling and refinancing properties. Most of these transactions are financed by a mortgage. An appraisal is a required part of a mortgage finance transaction as the lender needs to know that the property is sufficient collateral for the amount of the loan. A qualified licensed or certified real estate appraiser is required to perform this service.

PMI Removal

When a property is mortgaged for more than 80% of its value, Lenders typically require Private Mortgage Insurance, or PMI. This insurance premium is normally added to the monthly mortgage payment and many homeowners forget about having it. The lender is required to remove the PMI from the mortgage when the loan to value ratio drops below the 80% level. This level can change due to two reasons, mortgage paydown over time and appreciation. A homeowner can hire an appraiser to see if the appreciation of the property has put them below the 80% mark before the paydown point is reached. The appraisal can then be forwarded to the lender for PMI Removal. The appraisal will typically pay for itself within a few months of not paying PMI.

Tax Assessment

An Assessment is an estimate of the value of a property for the purpose of taxation. This is known as Ad Valorem Taxation (As To The Value). An Assessment is basically a special purpose appraisal performed by the Assessor. Since an appraisal is an opinion of value, an opinion can be challenged by looking at the facts and getting a second opinion. If someone feels that their assessment is not what their property is really worth, hiring an appraiser may be a good idea to have credible evidence and a professional opinion to present to the Assessor, Grievance Board or a Court.

Estate

A date of death or estate liquidation appraisal is used to establish the value of assets at the time of a persons passing for reasons of disbursement of assets to heirs and for estate tax.

Pre Purchase Pricing

A sellers real estate agent has a vested interest in getting the highest price possible for the seller as the agent receives a percentage commission of the transaction. An appraiser provides an unbiased opinion of value as the appraisers fee is based solely on the work involved in producing the appraisal report. An appraiser may not receive compensation based on the value estimate in any way. Therefore a seller may wish to have an appraisal done to establish a realistic value for listing and a potential buyer may wish to have an appraisal done on the property prior to placing a bid so they may have the knowledge that they are placing a fair market bid on the property.

Foreclosure

Upon the foreclosure of a property the lender will order an appraisal to ascertain the value of the property in its current condition and market within set marketing times and, since most foreclosed on properties have not been properly maintained an estimated cost for repairs and the effect on value before and after these repairs.

Relocation

When an employee relocates the relocation company may purchase the employees property for its fair market value to expedite the move of the employee. The price paid by the relocation company is based on appraisals. The appraiser must estimate the value of the property and analyze the market trends and marketing times to establish what the property will sell for within the marketing period. For example if the property is in an area that is experiencing an increase in values and the typical marketing period for a home is three months the appraiser must not only estimate the current value of the property as of the date of the appraisal, but also forecast how much more the property should sell for at the end of those three months.

Divorce

During a divorce, assets are typically divided among the parties. Real Estate is most often the the largest asset owned by a couple and to split the equity fairly, an appraisal is ordered.