Utah Real Estate Survival Guide

Helping You Navigate Our Local Real Estate Market

Archive for the category “Appraisals”

Paying for the Homebuyer Tax Credits – The Cost Runs Deep

In November of 2009, I wrote a blog post entitled Was the Tax Credit Extension a Good Idea?

Here is an excerpt:

In my opinion, tax credits have become subsidies distorting the real estate market. I believe that any further extension or expansion of this program, with the exception of those benefits due our military, will be counterproductive. I say it’s time to help homeowners. Figure out how to give them $8,000 so that they don’t have to sell as a short sale. There are a lot of well loved homes in excellent condition that would make ideal homes for new buyers, creating move up buyers for other homes, that can’t be sold now because the sellers are upside down in their mortgages. A short sale may benefit a new buyer, but it eliminates another (for two years at least). Why not consider helping sellers with a monetized tax credit so that they can sell their home at market value, stop or minimize short sales and foreclosures eroding property values, get buyers into “non-distressed” homes and turn that seller into another buyer, thus propelling the market forward.

Here is what I am experiencing today:

I have received numerous requests through the holidays for market evaluations from homeowners who either bought, or refinanced, during the past 3 years. What I’m finding is that the value of these homes is almost as upside down as those of homeowners who bought in 2006-2007. Artificially inflated home sales prices, driven by subsidized demand, and used by appraisers to substantiate further inflated home sales prices, is setting the stage for Round 2 of the Great Housing Crisis. Not only will the various homebuyer tax credits burden the Federal budget deficit for years, we have now created a situation where the same homeowners who benefited from $7,500 – $8,000 in “cash back after closing”, are going to be in the distressed property boat along with everyone in the coming tide of foreclosures. Good luck getting THAT money back.

The solution is simple stated. It’s about jobs. Always has been and always will be. How to create those jobs should be the domestic policy focus of 2011. Ideas?

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Utilities are Not Required to be on for a VA Appraisal

VA Appraisals and Utilities Update:

According to VA Denver, the utilities, furnace, water heater, etc do not need to be on for a VA appraiser to complete the appraisal. Most lenders/underwriters, such as those at Wells Fargo and KeyBank, agree that they only require the property to meet VA guidelines, and do not have additional lending/underwriting layering. The appraiser is only required to note deficiencies if there is an obvious problem ie a red tagged furnace.

This is great news if you happen to be working with a VA buyer on the purchase of a foreclosed or short sale home, especially during the winter. Most banks and home owners of vacant properties can and will arrange for the utilities to be on for the purpose of a home inspection, for a brief period of time. Coordinating schedules between utility providers, de-winterization, and home inspectors is generally doable, but throwing an appraiser’s schedule in to the mix is generally not.

FHA appraisal guidelines are not as lenient. All utilities must be on and the furnace, water heater, etc must be demonstrably operational.

VA Appraiser’s Handbook

VA Appraisals and the “Reasonable Person” Theory

I have always been under the impression that the utilities must be on and the furnace, water heater, etc must be in operating condition when a VA appraiser appraises a home. Apparently, that isn’t the case. It is true for FHA appraisals, but not VA.

This morning, I received a telephone call from a VA appraiser to schedule an appointment to get in to one of my (approved) short sale listings. I told him that the home was vacant, but that the seller had made arrangements with the utility companies to have utilities all on the previous week, for the buyer’s home inspection and appraisal – with the lender’s coordination. As of now, except for the electricity, the utilities have been shut off again.

The appraiser informed me (much to my relief) that VA did not require that the utilities be on – only FHA appraisals have that condition. For VA, the appraisers operate under the “reasonable person” theory. The theory that a reasonable person, and prudent home buyer, would have a professional inspection to determine if the furnace, water heater, plumbing, etc were in proper working order.

I have tried, unsuccessfully, to find the VA documentation to confirm this. What is interesting is that I cannot locate anything that says that the utilities MUST be on, either. In search of a definitive answer, I’ve posted the question on the Appraisal Institute’s Facebook Page and also joined the Appraisers Forum.

Follow up to be posted. If you know the answer to this question, please post!

Research Documents:
VA Appraiser’s Handbook
VA Pamphlet 26-7 Revised: Lender’s Handbook
VA Pamphlet 26-7 Revised Chapter 12: Minimum Property Requirements (MPR)

Get a Realtor “Free Market Valuation” Before Investing $450 in a Refinance Appraisal

I am in the process of refinancing my personal home, so, being the consummate Realtor® that I am, I prudently prepared a market valuation for myself. I have to admit, I was scared. Yes, very scared. Intuitively I knew what the value should be (since I help my clients buy and sell homes in the same area every day), but I bought in May 2007, at the peak of the peak. I also knew that my neighborhood had suffered a recessionary decline in home values, along with everyone else.

So, you can imagine the weight that was lifted when my CMA (comparative market analysis) produced the results shown in the graph below. The appraisal came in at exactly the same value as my market valuation. And I’m able to proceed with my refinance.

If you’re considering refinancing, contact your Realtor® and ask him/her to prepare a “CMA” for you. It’s what we do, for free, for our past – present – future clients. And if you don’t have a Realtor® you rely on for Utah real estate market information, I’d be honored to help you. Click Here for your free market valuation.

Thanks for reading – hope you’ll share

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