If you have procured an FHA-insured loan, then found the home that you want to purchase and started a sales arrangement, then you’re ready for another stage of this FHA approval process, that is the assessment. While FHA appraisers place an emphasis on safety throughout their process, the objectives are two-fold–to be certain the home does not have any major safety problems and to determine the home’s actual market value for the purposes available.
Ordering the Appraisal
As of February 2010, FHA-approved creditors aren’t in control of purchasing home appraisals. The FHA now uses appraisal management companies to randomly assign home assessments to FHA-approved appraisers. It follows that creditors will have less contact with appraisers throughout the home evaluation process, which eliminates some level of bias or favoritism on the part of lenders selecting appraisers. It’s possible to determine whether the appraiser assigned to evaluate your home is in fact FHA-approved by assessing the FHA’s site, which includes a clearinghouse of approved appraisers nationwide.
Touring the Home
The appraiser’s first task is to see the property. FHA appraisers put a focus on safety when they walk through the property, but it should not be mistaken with a home inspection, that provides a deeper look at what may be wrong with the home. A FHA appraiser seeks to locate big problems that can affect value, including leaky roofs, poisonous chemicals, insufficient heating and cooling , and poor water and sewage drainage. These problems may result in the appraiser advocating they be fixed before a loan is accepted, in addition to reducing the value of the home.
The appraiser can also be required to assemble documentation of his trip. That documentation includes photos of the exterior of the home from the front, the back and the road. The appraiser must produce a sketch of the interior floor plan along with a location map of interior appliances and other major products. The appraiser’s results must be included on FHA form 1004 and must possess the FHA number of the home. The appraisal must document the estimated life of the home.
One of the appraiser’s key functions is discovering your home’s worth, which can be done after the walk-through. The appraiser has three choices to figure worth. The price strategy determines how it would take to build a property similar to the subject home. The sales comparison is when the appraiser compares the subject home into three similar homes in the area, all recently sold, and then corrects or deducts predicated on corresponding items and closeness to local amenities. The appraiser may additionally use the income approach, which is typically only used if you are working to finance rental property. In cases like this, the appraiser values the house’s monthly rent based on the local marketplace, and worth accordingly.
The appraisal process is complete when the company sets the home’s market value, based on information gathered in the walk-through, documentation and valuation stages. The sum will not automatically be the purchase price the buyer and seller are negotiating. Rather, the appraiser figure is likely what the lender will use to put financing limits to the buyer of the home and reflects an educated guess of the home’s real value.