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How To Read A Property Appraisal Report - [How Does Home Appraisal Affect Mortgage?] - YouTube
Channel: Planet Cheapskate
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what's up this is ryan with planet
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cheapskate in this video we're going to
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be walking through how to read an
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appraisal report i'm going to show you a
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couple sample reports as well as
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covering what is an appraisal the
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appraisal process and how it can affect
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your home loan also be sure to stick
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around for three brazil based loan hacks
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at the end of this video that will help
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you get your appraisal back fast and
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hopefully without any subject-to items
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but first i'd just like to take a very
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brief moment to personally invite you to
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subscribe and join our community i do a
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home loan rate update every friday going
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into the weekend along with a new video
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every thursday helping you manage
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through the world of real estate and
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home loans also when you do subscribe be
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sure to hit the little bell and it'll
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alert you whenever i release fresh
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content now with all that out of the way
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let's get right to it so what is an
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appraisal an appraisal is an inspection
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that is done by an independent third
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party that determines the fair market
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value of the home you will be purchasing
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it assures you and the lender that the
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price you agreed to pay for the home is
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fair the appraisal process begins with a
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lender making a request with an amc
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which stands for appraisal management
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company appraisals are typically around
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500 or 600
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but they have been increasing in price
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with the industry volume and limited
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appraisers available it's not uncommon
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now to pay 700 or 800 for an appraisal
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to get it rushed so it'll be completed
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by your projected closing date it's
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important to know that when it comes to
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your appraisal your realtor your lender
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and others involved in the transaction
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can only do so much to speed up the
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process these things include paying for
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a rush on the order or the realtor
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speaking with the appraiser on your
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behalf to try to convince them to
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process your order quicker so after the
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appraisal is ordered the amc will assign
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it to an appraiser and they will reach
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out to
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the sellers or their agent to schedule
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the inspection the appraiser will use
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two of the three methods to determine
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the value of your home the methods used
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are comparable sales approach and the
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cost approach the third method is the
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income capitalization approach which is
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only typically used for investment
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properties or multi-unit properties so
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simply put the comparable sales approach
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just looks at other homes in the area
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that are similar to yours and what they
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sold for
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the cost approach is a bit different it
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takes the value of the land the
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materials used to
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build your home and other features of
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your home and then it depreciates the
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value based on several other factors
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the resulting figure is then used for
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the value on the cost approach now it's
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important to note that appraisals can be
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challenged and your realtor if savvy can
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find better comparable cells that will
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prove the value you are needing for the
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purchase if it doesn't come in that
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value
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once the inspection is completed the
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appraiser will complete the report which
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typically takes about
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three days sometimes longer once the
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report is uploaded to the amc the amc
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and the lender will review it to make
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sure no revisions are needed and after
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that it'll be released to your loan
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officer and you to review the appraisal
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report
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there are three results that can come
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back on your appraisal report that will
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affect your mortgage
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first and what we want to see is it come
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back at or above value and as is this
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just means that no repairs are needed
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and the home purchase has the
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appraiser's stamp of approval that it
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supports the fair market value for your
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home the second result which we could
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get is subject to which just means
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repairs will be needed to be made to the
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home to for it to be worth the stated
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value
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[Music]
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after the repairs are made there will
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have to be a final inspection made
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and this normally will slow down the
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transaction a little bit until the
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repairs and the inspection are completed
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but once the repairs in the inspection
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are completed the home will be worth the
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value stated the third option which we
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never want to see
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on the inspection is that it could come
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back under value which just means the
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homes agreed purchase price is too high
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and it will either need to be
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renegotiated or the buyer will need to
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come with additional funds to close to
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make up for the value gap
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so now i'm going to switch to screen
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share so i can show you a couple sample
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appraisal reports one is an fha
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appraisal that came back subject to and
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the other is for a conventional
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appraisal that came back as is above
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value
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once i go over them both
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and a few of the differences i'll take
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you through how to read an appraisal
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report and then come back and we will
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wrap things up with our loan hacks
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hey guys ryan here i have a screen share
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going so we're going to walk through a
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couple of these appraisal reports i'm
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going to show you a little bit of
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differences between an fha and a
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conventional report and we'll just kind
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of compare and contrast so
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uh fha they're a little bit more strict
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and this is what the typical report
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typically at the beginning you're gonna
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have a little message from the
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appraiser
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and it's just gonna say you know that
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they're
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doing this you know without any um
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[Music]
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anyone coercing them or feeling any
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pressure or anything
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and a lot of this is just kind of just
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stuff that kind of covers their butt at
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the beginning so
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this is the actual report and the first
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part of this is going to have
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information about the property itself
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the second here is going to have
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information about your contract and some
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details of the contract
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this third part here is going to have
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information about the neighborhood
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you're going to be living in
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and then this part here down here is
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going to have information about the
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actual
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land that the property sits on and you
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know the utilities that it's zoned for
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um that it hasn't evolved and and
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everything like that the um
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the
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square footage and stuff like that okay
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so that stuff is at the beginning there
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right here the appraiser is going to
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note any improvements that have been
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made on the house and what condition
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that those
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um features on the house are in
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and um
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they will kind of take there's a little
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area they can put notes here for just
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anything that's kind of out you know a
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little bit different
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and then
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here you're going to get into the
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different comparable cells and this is
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from the comparable sales approach i
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believe they have to do at least three
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on the comparable sales approach
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and so
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this is going to be details that they
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gather about the comparable cells here
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and they
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have some questions i have to answer
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about that so a lot of times on fha
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you're going to see comparable sales and
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the cost approach being used and if you
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have a property that's out in the
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country a lot of times it's going to be
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the cost approach just because they
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can't find comparable sales in the area
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but
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they're just this is just details about
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the comparable sales
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and then
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the
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uh
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really the most important thing is on
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this page right here so i guess it's the
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second page in when you actually get to
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the report this is going to be the most
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important
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section right here and this is going to
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be the reconciliation area
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so this reconciliation area
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you're going to see the
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value by cost approach right here
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but right here
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if you see subject to that just means
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that there's going to be repairs that
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are needed to be made and then sometimes
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they'll put the repairs if they're
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really brief or they'll say you know see
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and attach addendum and that'll be now
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what you want this to say is as is and
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then whatever value or above the value
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you want this one to be checked and i'm
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going to show you that on a conventional
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one that we have a little bit here a
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little bit later but i wanted to show
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you that area and sorry my mouse is
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jumping around a little bit but that
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kind of shows you um what it looks like
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if it comes back subject to
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not the end of the world
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just means that there's going to have to
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be repairs made there's going to be a
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final inspection done which
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unfortunately is at the buyer's expense
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they're usually about 175 to 200
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and once that's completed then you can
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be back on track as long as the home
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came in at value so in this particular
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one
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this was an investment property that i
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purchased and
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it came back above value but subject to
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which just means once the subject to
[468]
items are cleared it's going to be above
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the appraised value so
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most important section you're always
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going to want to check out is on the
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second page here and it's going to
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reconciliation it's going to be a little
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hack a little cheat that's going to tell
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you exactly what needs to go on all this
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other stuff is just extra stuff it
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demonstrates that the appraiser did his
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job
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so we'll move on to the next page
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and
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this is just gonna have some notes on
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the appraiser certification
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um just different things that he did for
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compliance and different methods that he
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used
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um and then this right here is gonna be
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the cost approach okay so sometimes if
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they can get the comparable sales
[508]
approach and it fits the appraisal they
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won't even do the cost approach but
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they do have that option and a lot of
[513]
times they'll use it if they can't find
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comparable sales if you're living out in
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the boonies somewhere a lot of times
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they're going to use this cost approach
[519]
but a lot of times it's left off because
[520]
they can determine the value by the
[523]
sales approach but so it looks like on
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this one
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he did give the value for the land but
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in the lot but he did not go through and
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fill out the rest of the cost approach
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it just seems like maybe he was able to
[535]
determine the value by
[537]
using the sales approach they only got
[539]
to use one if they can you know prove it
[542]
they can they only need to use one
[543]
sometimes they use two if there's a
[545]
little bit of a question but they only
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have to use one
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this next page here page 4 is going to
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have some
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notes on the appraisal
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it's going to tell you a little bit
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about the definitions of some of the
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things that are referred to by the
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appraiser
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this page is going to have the
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certification that
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what they basically swear by that that
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when they conduct the appraisal
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and then it's a continuation this is
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going to have the appraisal's contact
[575]
information in case you want to reach
[576]
out for some clarification this will be
[578]
here i went through and deleted any
[580]
identifying information from these for
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the most part so
[583]
um
[584]
it's not here but it will be filled out
[586]
on your appraisal
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this is uh another copy of the um the
[591]
sales approach information and they just
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list it again here
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um and this will be filled in again like
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i said like with the items i've deleted
[600]
some of the personal items that identify
[602]
it sales history this again will also be
[604]
filled in
[606]
with the sales price for the comparable
[608]
sales
[610]
um and looks like in this case he found
[614]
additional comparable cells so this is
[615]
four five six seven
[618]
so that may be why he didn't do the cost
[620]
approach i don't know the specifics on
[621]
that but that may be why he did not do
[623]
the cost approach
[625]
um because he
[626]
did a ton of sales comparisons here
[630]
okay so
[631]
that's really the gist of it this is
[633]
going to cover some more definitions on
[635]
it
[636]
but um most of this other stuff is just
[638]
going to be
[640]
kind of mumbo jumbo this is kind of cool
[641]
it has market research here
[644]
it's going to tell you how many
[645]
comparable cells he was able to find
[646]
when he was able to find those and again
[648]
i'm sorry this mouse is really super
[650]
sensitive and it's jumping around
[653]
but this is going to tell you a good
[654]
outlook on the market
[656]
if the market is increasing stabilized
[659]
or declining
[660]
whenever i purchased this it was a
[662]
really stable market now it's probably
[664]
an increasing market so that's going to
[666]
affect the appraisal
[668]
but a really good market research thing
[670]
here
[671]
okay and so this is going to be the
[673]
supplement addendum this is going to
[676]
have some things that you just need to
[677]
be aware of
[678]
it's going to have the conditions that
[679]
the appraiser was able to conduct the
[681]
appraisal under
[682]
the scope of the work that he conducted
[685]
it has a little bit of information about
[686]
the neighborhood
[688]
market conditions and this is just the
[690]
notes on each section that the appraiser
[693]
puts on here
[694]
um flood zone details the appraiser is
[696]
always the one that checks out to make
[697]
sure that your home is not in the flood
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zone if it is a flood zone flood
[700]
insurance is going to be required
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and there is an additional fee that's on
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your closing costs that covers the flood
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inspection
[708]
okay this is going to have a building
[709]
sketch of the layout of the home if it's
[712]
like three levels if it's two levels
[714]
you know it'll be shown here accordingly
[717]
it's gonna have the other features like
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a patio porch covered porch anything
[721]
like that
[723]
okay um it's gonna have the square
[724]
footage on the next page and then you're
[726]
gonna get into some pictures of the
[728]
homes just general pictures to get a
[730]
good
[731]
idea now a good note here is if there is
[734]
subject to
[735]
items
[737]
the appraiser is going to take pictures
[739]
of those so you have a good idea
[741]
of what is needed like in this one there
[743]
was some issues with the chip pane in
[744]
the windows window trim is huge make
[747]
sure there's no chip paint they'll ding
[748]
you on that every time
[750]
there was some foundation dirt issues on
[753]
this one and he took pictures of those
[756]
and um
[758]
yeah but i mean yeah they take pictures
[760]
they take pictures of the neighborhood
[762]
and so you have a really good idea and
[764]
then a o insurance this is like for
[766]
errors and omissions
[768]
the appraiser will be covered for that
[770]
if they happen to make an error if they
[772]
omitted anything they're covered by
[773]
insurance
[775]
they usually put a copy of their um
[777]
their license here i cut out the
[779]
identifying documents but just so you
[781]
can see where it usually is but really
[783]
yeah that's the
[784]
gist of reading the report guys i mean
[787]
it's it's pretty straightforward the
[789]
most important thing again like i said
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let me go back to the page is going to
[792]
be right here on the reconciliation
[795]
if you don't read anything else just go
[796]
to the second page on the actual report
[798]
and just see if it's subject to as is
[800]
and then there's going to be a value
[801]
down here and then and see if it comes
[804]
in at value if it's undervalue
[806]
that's a big a big bad bad thing you're
[808]
gonna have to renegotiate or come with a
[810]
little bit more funds
[812]
if it comes subject to but at value or
[815]
above not the end of the world just
[817]
repairs are going to need to be made
[818]
and if it comes as is and at or above
[821]
value you are good to go so real quick
[824]
i'm just going to switch over to a
[825]
conventional i'm not going to go through
[827]
this because it's going to be very very
[828]
similar i'm just going to compare some
[830]
of the differences that you'll see on
[831]
the conventional conventional appraisals
[833]
are a lot more looser
[835]
but you will notice
[837]
how they're kind of the same layout you
[838]
know the property here contract
[841]
information here
[842]
neighborhood information information
[844]
about the the property the the site the
[847]
land that the home is on
[851]
uh any improvements made to the property
[853]
are going to be listed here
[855]
and then this is going to be your
[856]
comparable sales
[858]
and i have cut out a lot of information
[860]
on these guys so a lot of the stuff is
[862]
filled in i know it looks maybe kind of
[864]
empty but i had to be really careful on
[866]
what information to
[868]
include on this just because you know
[869]
there's it's proprietary i did use
[873]
my information for my property and
[874]
information from a very close friend of
[876]
mine
[877]
with their permission so it should be
[879]
fine there but i just want to cover all
[881]
my bases here i don't want to you know
[883]
get any trouble i don't want to get
[884]
anybody in any trouble because there is
[885]
a lot of proprietary
[887]
um
[888]
laws that protect these appraisal
[890]
reports so
[892]
um
[894]
yeah but like so this came back you see
[896]
it as is is checked and 112 000 so in
[899]
this case it was it came back over value
[902]
and as is so that we're good to go on
[904]
this one that's what you always want to
[906]
see as is and at value that means you're
[908]
good to go you're going to close on time
[910]
there's not going to be any delays no
[911]
new negotiations anything like that
[914]
so this one i do want to point out um
[916]
you're not going to see as many notes or
[918]
anything because they are a little bit
[919]
more
[920]
lenient on conventional appraisals this
[923]
is why sometimes whenever you're only
[924]
approved for fha that you're kind of at
[927]
a disadvantage unless you have a savvy
[929]
loan officer and a savvy realtor that
[931]
can uh
[933]
you know maybe get your offer put in as
[934]
is to where if there's anything that
[935]
comes up on the fha appraisal you'll
[937]
take care of it so
[938]
it balances out i mean you know any of
[941]
the repairs are not going to be too
[942]
terribly much to where it's worth
[943]
missing out on the home that is made for
[945]
you so
[946]
um you know as you notice there's not as
[949]
many um
[950]
details here and on the
[954]
i want to go to one
[956]
down here
[958]
um
[959]
here's an
[960]
appraiser's information
[962]
um i want to go to the
[965]
cost approach yeah because here so if
[968]
you notice on this it will say
[971]
cost approach was not develo developed
[974]
due to
[975]
it not being applicable so
[977]
on a conventional
[979]
a lot more lenient they don't have to do
[981]
it um if if it's just not applicable if
[983]
they can find enough comparable cells
[985]
and usually if you're in a populist
[987]
neighborhood
[988]
it's not needed to be done so um that's
[991]
kind of it guys i want to get off here
[993]
because this is getting kind of long and
[994]
i don't want to make this video too long
[995]
so um that's it that's how to read it
[998]
and that's what you need to look out for
[999]
so if you have any questions just leave
[1001]
them in the comments below alright guys
[1002]
take care bye-bye
[1005]
so as promised three appraisal based
[1007]
loan hacks that will get your appraisal
[1009]
back in record time and hopefully no
[1011]
subject to request so the number one
[1013]
thing that will speed up your appraisal
[1014]
is if you give your loan officer or loan
[1016]
processor your payment information at
[1019]
the same time as you share your personal
[1021]
documents that are needed for the loan
[1023]
submission i've noticed sometimes the
[1024]
lender not having the appraisal payment
[1026]
information can tremendously slow down
[1028]
the process so be sure your loan officer
[1030]
has that from the get go
[1032]
the second thing is to double and triple
[1034]
check by calling your loan officer or
[1036]
your processor that they have ordered
[1039]
your appraisal as soon as the loan is
[1041]
submitted or as soon as they get the fha
[1043]
or va case number back in the event you
[1045]
are doing fha or va
[1047]
sometimes a lackadaisical processor or
[1049]
loan officer can forget to order the
[1050]
appraisal and that can put you way way
[1053]
behind on the whole process
[1055]
the third thing is going to help you
[1056]
prevent any subject 2 requests
[1058]
and the thing to do here is just to look
[1060]
over the home and make sure there are no
[1061]
there's no instances of peeling or
[1064]
cracked paint
[1065]
and that there's plenty of dirt around
[1066]
the exterior foundation a good rule of
[1068]
thumb is
[1070]
dirt up to about an inch from the
[1072]
exterior wall material and also make
[1074]
sure there are no broken or cracked
[1076]
windows these are things that can be
[1078]
easily fixed and that you can knock out
[1079]
before the appraisal that will greatly
[1081]
impact your chances of getting your
[1082]
appraisal back as is with no subject-to
[1085]
requests so there you have it everything
[1087]
you need to know about the appraisal
[1089]
reading the report along with three loan
[1091]
hacks that will get your appraisal done
[1092]
quick and hopefully without any subject
[1094]
to requests please leave a comment below
[1096]
if you feel like i missed anything or if
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you have a question i'd love to hear
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from you and listen if you gained
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a huge favor and smash that like button
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so more people just like you can see
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this information
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and if you like this video i'd like to
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invite you to watch one of my other
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videos over here i walk you through the
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complete home buying process step by
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step and over here youtube has
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determined that you may enjoy this video
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thank you for tuning in until next time
[1121]
best of luck
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