Less underwater homes as values increase

banner_ad_appraisalUnderwater Mortgages Drop by 850,000

Minneapolis, MN:  Millions of homes went underwater at the beginning of the real estate and mortgage crash. Underwater homes, where the owners own more on the mortgage loan than the home is currently worth, have been a thorny issue, preventing many people from refinancing to today’s low mortgage rates, or from selling their homes.  If has also cause many people to throw in the towel and simply walk away from their home.

CoreLogic, a real estate data firm has reported that an estimated 850,000 homes are no longer underwater in the first quarter of 2013 due to rising home values.  They also reported that another 11.2 million homeowners are now in a “low equity” position, which means they are no longer underwater, but have only a little equity.

This means an estimated 9.7 million homes, about 1 in 5 are still underwater.

Another 11.2 million homeowners were in a low-equity situation, not underwater on their mortgage but with less than 20 percent equity in their homes, a situation that can make refinancing difficult or more expensive.

Rising values

The combination of low mortgage rates, and less foreclosures on the market has help boost values and increased sale prices the past year.  In the metro Twin Cities area of Minneapolis / St Paul, average home values have risen 15.1% in the past year alone.

Real Estate is local

Just a few states account for the almost 1/3rd of underwater homes. Florida, Michigan, Arizona, and Georgia. Many people in the Twin Cities are now able to sell and move up to a bigger home, or to easily take advantage of low mortgage rates again, especially with programs like HARP, the Home Affordable Refinance Program, which was specifically designed to assist underwater homeowners who got their current mortgage loan prior to June 1, 2009.


What is your home worth? Find out for free…

banner_ad_appraisalWhat’s the value of your home? (MN & WI Only)

Many homeowners are curious about the appraised value of their home. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, everyone has lost value.

But things are changing, average home values the past 12 months in the Minneapolis / St Paul, MN area have risen on average 14.1%.  So what your home is worth today?

There are many sites that claim to give you are idea, including Zillow, Trulia, and more. It is also a well known fact those sites have very questionable data, giving values that range from close, to crazy far off. The big problem is, where is the data they use coming from and how accurate is it?

We have a different tool to answer the estimated appraised value of your home question. Our system uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, this can be a much more useful too than Zillow to gauge fluctuations and trends in your market which affect your home’s value.

Want to check your homes value? Simple click the link below! (MN and WI homes only)

FREE HOME VALUE ESTIMATE

 


What clients and Real Estate Agents Don’t Understand about Appraiser Independence

What clients and Real Estate Agents Don’t Understand About Appraiser Independence

Minneapolis, MN:  Real Estate Agents constantly call our mortgage office to ask if an Appraisal was ordered, or if it is completed yet.

appThe first question is pretty silly…  Of course it was.  The second question is tougher to answer until the completed appraisal physically shows up on the lenders desk.

Recent lender rules require what is known as “Appraiser Independence”.  This is a double down on the old rules that no one is allowed to influence or pressure the appraiser to obtain any pre-determined value on the home. The rules also means that no one who will be compensated on the file can have anything to do with picking the appraiser.  It has to be totally blind and randomly assigned.  This is very different from years past where the client or the Loan Officer could pick any appraiser they wanted.

Once the appraisal has been ordered, there are varying degrees of what the Loan Officer may or may not know about the status of the appraisal.  Most mortgage companies use a middle company, known as an AMC, or Appraisal Management Company, to handle all aspects of the appraisal. This easily means the lender will meet the “independence” guidelines. Some AMC’s are better than others in letting the lender know the status, giving them the expected date the appraiser will visit the property, and the expected appraisal completion date. With many others, the lender is completely in the blind. In the vast majority of cases, I don’t even know who the appraiser is until the appraisal is completed.

To further complicate the issue, while it is technically possible for a Loan Officer to speak to an appraiser on a very limited number of questions, the vast majority of lenders completely forbid this contact to avoid even the remote likelihood of influence complicity.  It is much easier to respond to regulators that “our loan officers are forbidden”, then to claim they didn’t do anything wrong.

As a mortgage lender, it is very frustrating when real estate agents constantly bombard me with appraisal question.  If I know, I will tell you.  Do not yell at the Loan Officer if they don’t know the answer or say they can not talk to the appraiser.


Appraisals baffle consumers

St Paul, MN: The appraisal process often baffles consumers.  May people feel that their home is worth more than true fair market value, so the appraised value doesn’t always make sense to them.

AppraisalsThe bulk of your homes value is based on finished square footage.

It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae.

In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules. In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal. Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren’t uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity. The general rule is ‘same or similar, sold within the last six month, within a one mile radius’ of your home. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed.

Maintenance items don’t increase value. That new roof you just added doesn’t really add any value.  It was maintenance. If your home previously didn’t have a roof, and now you added a roof – that would add value!

Don’t confuse curb appeal with maintenance. Following the same roof theory. A brand new roof sure makes a potential buyer feel better about your home – but how much more would a buyer pay? Not much.

Mortgage lenders and Loan Officers must follow  the guidelines in the Home Valuation Code of Conduct, which among other things prohibits a lender picking the actual lender (must be randomly assigned),  from having any contact with, or influence on how the appraiser values a home.

Wondering what your home is worth? Thinking of selling your home, or refinancing to a lower interest rate? Only an actual appraisal from a licensed appraiser will give you a true number.

Finally, if you are wondering what is my home worth, don’t trust Zillow. Even on their own web site they attempt to make it sound better than it is, but ultimately explain their number is a guess. It can be high, low, or close.

If Real Estate Agents and lenders just laugh at Zillow, and you should too.


What is the value of my home?

What’s the value of your home? (MN & WI Only)

St Paul, MN: Many homeowners are curious about the appraised value of their home in today’s market. An actual appraisal is expensive, and county tax records do NOT always reflect true market value. As you may be aware, home values are constantly fluctuating, and with the decline in average values, it is important to have an accurate idea of what your home is worth.

There are many sites that claim to give you are idea, including Zillow, Trulia, and more.

The problem is, where is the data coming from and how accurate is it?

We have a different tool to answer the estimated appraised value of your home question. Our application uses the Freddie Mac Home Price Index ( FMHPI ). FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indexes measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages

While the estimate may not be the actual or appraised value of your property, it can be a useful tool to gauge fluctuations and trends in your market which affect your home’s value.

Check your homes value? (MN and WI homes only)

For best results, contact us. I can help with purchasing a new home, or refinancing your existing MN or WI home, get you pre-approved for a new home, or put you in touch with a GOOD Real Estate Agent to help determine the best asking price for your home. We know the particulars of your neighborhood, the value of homes, and can help you discover what your home may really be worth.


New Appraisal Rules starting in Sept 2011

Appraisals are changing again.

Fannie Mae and and Freddie Mae have decided to change the way appraisers describe the quality and condition of homes.

Appraisers have always described properties as being: Good, Average, Fair or Poor – sometimes adding “very good” or “excellent” or fudging with “low-average” or “average-” – knowing that a lower condition or quality review of the home as fair or poor – you probably killed the deal.

Going forward, appraisers will need to define condition on a C1 – to – C6 scale and quality on a Q1 to Q6 scale.  1 is considered the best – for condition a new or unlived in dwelling.  A C6 condition is a property with substantial damage or other major maintenance issues.

For views, appraisers will need to use the following codes: A, B or N — what do they mean: A = adverse (hurts value or marketability); B = Beneficial (that’s good) and N = Neutral.  and if it is a view lot – how about B;MTn;Wtr — what?  Are you confused yet?

Now if you have 2 and 1/2 baths the correct way to show the count will be 2.1 and if the house has 2 1/2 baths = 2.2

For Kitchens and baths we will need to report if they have been “updated” “not updated” or “remodeled” and if the work was done in less than 1-year; 1-5 years, 6-10 years, 11-15 years ago or unknown.  An updated bath might have a new toilet, and remodeled bath an all new shower.

The change is designed to give more specific information. By using numbers, and not wiggle words like “average”, will help in underwriting loans.

The worse news is, homes rated Q5 and Q6 will NOT be allowed to be sold on the secondary market.  So if an appraisal comes back as a Q5 or Q6 (something few of us will know in advance), the loan likely will be denied by your lender.

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