Some recent changes in the appraisal report process will affect loan shoppers in the Chicago area.
The good news is you can expect a more accurate appraisal and it may even become a bit easier for buyers to get a loan. But the bad news is that appraisal fees will rise this spring.
The appraisal is an estimate of the current market value of a home. A lender usually requires an appraisal from a professional appraiser to determine the value of a property before making a loan to a buyer or a refinancer.
On Jan. 1, a revised Uniform Residential Appraisal Report became mandatory for most mortgage loans.
The key changes in the uniform appraisal report are required by federal law. They are designed to streamline the form and make it more accurate.
The new appraisal report method will insure that the appraiser takes into account all the latest sales data and a neighborhood analysis before making the final estimate of value.
Appraisers agree it will improve the appraisal process. It will be used in about 90 percent of all appraisals of single-family homes, estimates Donald R. Epley, a professor of finance at Mississippi State University in Starkville, Miss. and expert on the appraisal process.
“In the long run it’s a good thing for consumers. There will be better quality appraisals,” said Michael Kowalski, vice president and chief appraiser at StandardFederal Bank in Chicago. “Have patience while the appraisers are getting accustomed to the new form.”
Beginning in February, appraisals may cost more, ranging from $275 to $325, or about a $25 to $50 more than last year. The fee hike pays for additional time and data required to complete the new appraisal and for federal licensing requirements for appraisers.
The Federal Housing Authority will charge $300 for its appraisals effective Tuesday.
Appraisers note that prices will rise gradually through the spring. However, an overall slowdown in loan volume in Chicago, combined with heavy competition, could limit the price increases that are passed on to the consumer.
The appraisal is listed among the closing costs for a mortgage loan. In many cases, lenders require the appraisal fee be paid as part of the mortgage application process.
Appraisers point out that the main reason a loan is rejected at the appraisal stage is that the property won’t support the asked-for loan amount.
If a buyer asks for a loan of $100,000 and an appraiser looks at the house, completes his report, and estimates that it’s worth $95,000, the loan simply will not be made for $100,000.
“It will lead to fewer rejections of loans on the basis of the appraisal,” said David Kunkel, a Chicago-area appraiser of residential and commercial property and owner of David A. Kunkel and Associates in Westmont.
The new form will help assure an accurate valuation. But the appraisal process will still require buyer input and cooperation.
The appraiser may consult with you as a seller or refinancer, depending on who ordered the appraisal. You may be asked for some documents about your home.
Homeowners who are selling or refinancing a home can support the efforts of appraisers and lenders by furnishing them, if asked, with the latest information they have on the property. Recent sales data will have to be confirmed through official records, of course.
You can save time and expense by providing accurate information about deeds, legal description, maps and other information that’s needed for the reports-including improvements made to the home.
Many appraisers are tapping into computer data bases to obtain the needed sales and property data. Cook County and the surrounding counties have many property records, but they’re not available to appraisers from a single source.
Appraisers will have to plug into many sources, from county assessors to courthouses, to get the information they need to complete their report.
“Appraisers charge on the basis of time and cost,” said finance professor Epley, who has taught seminars about the new form. “The standards required by federal law and by state licensing agencies are requiring the appraiser to spend more time to complete the work. I think a reasonable increase in fees is justified.”
