Dear Kelly Kellogg, The Appraisal Expert,
Is concrete flooring or exposed concrete acceptable to FHA?
Exposed concrete, concrete flooring or concrete floor that is acid stained or painted is no longer acceptable flooring. It is considered to be exposed foundation to FHA and must be covered with a finished, marketable flooring. This issue is not clear because at one time FHA deemed it as an acceptable floor. However, it is no longer allowed for FHA financing.
Kelly Kellogg, The Appraisal Expert
We are getting ready to put our home on the market and have a porch that was enclosed and want to know if the enclosed porch can be included in the main living area under AC. What qualifies the enclosed porch to be part of the main living area of the house?
In order to be considered living area, a finished enclosed porch must have air conditioning, be located under the main roof of dwelling or have a similar quality roof, and have finishes (floor, ceiling, walls, electrical) that are similar or better in quality compared to the main living area. To further clarify, an "AC" means an AC vent or an AC unit with a vent that blows cooled air and hot air into the finished enclosed porch or room must be located in the finished enclosed porch/room.
Appraisers define the porch as finished or unfinished. A finished enclosed porch can be counted or included in the main living area of the house. An unfinished enclosed porch is not considered in the main living area of dwelling. For example, an enclosed porch that has vinyl windows and an aluminum patio style roof is considered “unfinished”. Another example of an “unfinished enclosed porch” is a porch that has thin glass windows, aluminum patio style exterior wall siding and no finished flooring.
A finished enclosed porch has good air conditioning vents where the temperature stays the same on a very hot or cold day when you walk from the main living area into the finished enclosed porch area. The floor, walls and ceiling are finished with quality and workmanship that are similar to the main dwelling. The finished enclosed porch must have good flow and good functional utility.
If your porch is an unfinished enclosed porch, it will not be included in the main living area, however, an appraiser may give it value, assuming it is considered a usable feature or amenity and has positive market appeal.
When an appraiser has knowledge of a contract/offer price, does it influence their opinion of market value?
Did you know that when an appraisal is completed for lender loan purposes, the appraiser is required to review the sales contract? Complete impartiality is not out the window for a seasoned, well-trained appraiser. It is my professional opinion that we should be aware of and consider what prospective buyers are willing to pay for a home. An appraiser is to remain objective and utilize the most recent closed sales and active/pending comps in close proximity to the subject. A well-trained professional appraiser should keep in mind that a "Comparable" is what a typical prospective buyer of the subject would consider as an alternative purchase. As an appraiser, I must be able to substantiate and support my opinion of market value utilizing the most recent, similar comparable sales that are available in the subject's neighborhood while remaining impartial. It is rare that my estimate of market value is the same as an offer or contract price. My opinion of market value is typically above or below a contract price. Additionally, a good appraiser is aware that some buyers may submit offers above market to beat out other offers just to get their contract/offer accepted. Many of my cash buyer clients and Realtors have stated that they put in a contingency in the contract/offer that states that the contract is subject to the appraised value coming in at or above the contract price. They rely on the fact that an appraisal is an unbiased opinion of market value.
Why should seller get an appraisal for listing purposes?
Dear Kelly Kellogg, Appraisal Experts, Inc.,
QUESTION: I sometimes think it may be an advantage to get an appraisal done prior to the listing. How would you explain this to your seller, why I would recommend an appraisal prior to listing the house, since I'm supposed to be the expert?
Nikki, Prudential Realty
You are not alone. I often get asked this question! Here are the best reasons for your client to obtain an appraisal prior to listing:
1. Undoubtedly, the number one reason is to price their home strategically so it sells before the competition at the highest sales price the market will bear.
2. The current market and underwriter/lender requirements are constantly changing. An investment up front in an appraisal to learn about the appraisal process, how prooperties are valued, what an appraiser considers is most comparable, how the adjustments are calculated/applied will give you and your seller considerable knowledge about their market. This will assist you and your client in strategically pricing their home to sell and not sit on the market.
3. Recommending to your seller that he/she order an appraisal prior to listing lends credibility to your presentation. After presenting your CMA, recommend they get their home appraised to doublle check your analysis. You might suggest the seller pay for the appraisal fee up front and then offer a credit for the fee at closing. It ends up not costing the seller anything, but creates a commitment to you, helps you get the listing and more importantly helps you sell the house.
4. An accurate, current appraisal can give your client confidence and peace of mind while negotiating a sales price. Recommend one or two well-trained appraisers with knowledge and experience of the subject's market area who will complete a thorough, supported analysis. This prevents any surprises on the back end!
Thank you for your inquiry. I'm confident this information will assist you in helping your clients.
Appraisal Experts, Inc.
Property values are determined by the market or buyers in the market area. In today's challenging market, it is crucial to strategically price your home competively in order to capture the next buyer that comes along. However, you don't want to list your home too low because you want to get the most amount of money for your home or listing that the market will bear. Homes that are priced too high or too low are detrimental to the seller, the listing agent and property values. It is more important than ever to hire the services of a professional appraiser prior to listing your home in order to get it sold before prices decline even further. When hiring an appraiser, I recommend you get a list of professional, experienced appraisers from your Realtor verses googling or refering to the phone book. When it comes to pricing a home to sell, this market is most challenging, even for many appraisers. A professional Realtor will advise their seller to get an appraisal from an experienced, State Certified Residential Appraiser in order to price the home accurately. In addition, an appraisal may provide useful information during the negotiation process between buyers, sellers, Realtors and lenders. The fee for an appraisal up front in the listing process may potentially save or make thousands of dollars for the seller. Selling a home that is strategically priced will benefit neighborhood market values versus not selling a home due to an over-inflated asking price, which may add to the decline in property values.
For an accurrate appraisal analysis, contact Kelly Kellogg, Author, ABC's of a CMA and State Certified Residential Real Estate Appraiser (FLRD 2727) at Appraisal Experts, Inc. at 407-644-8885