My Blog

As a result of our weakened market, I have been finding it more & more difficult to justify purchase prices on homes within many areas of the Indianapolis Metropolitan area.  Considering our weakened market, this should not come to any major surprise to most of you.

However with the new rush of FHA financing, many Sellers are finding themselves being asked to pay Buyer's financing costs.  This isn't historically unusual at all.  For the past several years as an appraiser, it has been pretty commonplace to see Seller paid concessions noted on a purchase agreement.

Although given the slower real estate market, shrinking values in certain areas & tougher appraisal underwriting guidelines as of late, Realtors as well as homeowners should be aware that "Bumping" the sales price to avoid the Seller from paying concessions can be a cause for concern.  More frequently than ever, I am finding that this "Bump" in the sales price is not reflected in our slowing and sometimes value shrinking marketplace.

Additionally as a result of the slowing & sometimes value shrinking market, underwriters for investors are placing a lot of pressure on appraisers to utilize comparable sales of less than six months old in their appraisal reports.  Considering our ever changing marketplace, this makes sense.  The investor wants the appraiser to provide them with the most up to date market data available to justify the current market value of the property.

For example if a comparable property sold just under 1 year prior to the effective date of the appraisal report for $150K while another comparable property sold for $145K 3 months ago, the appraisal underwriter for the investor will push the appraiser towards a $145K current market value for the property.  If the appraiser places a $150K value on the appraisal for the subject property despite the later, the underwriter for the investor will ask the appraiser for another comparable sale of less than six months old that justifies the $150K appraised value.

Consequently, it is imperative that Realtors & homeowners alike reevaluate the market value of their properties frequently in today's slower marketplace.  I would suggest reevaluating a property's market value at a minimum of every 3 months during the listing period.  As the appraiser is being asked to supply the investor with the most up to date market information available, Realtors and homeowners alike should do their best to be realistic about a property's value by reevaluating the market price of that particular property on a regular & frequent basis.  If this is not done, the Realtor & the homeowner may come to an unpleasant surprise upon completion of an appraisal for financing to find that the home did not appraise for the agreed purchase price.

With the recent onslaught of FHA loans to the market due to tighter regulations on conforming and non-conforming lending, I have begun to experience an increasing amount of FHA "Non-Compliance" with regards to properties that I am visiting.  I think this is only due to the shear volume increase of FHA loans to the market.  But nonetheless, I thought it would be a good idea to address some things that you may or may not be aware of  with regards to current FHA compliance requirements. 

As many of you know, the good old VC Sheet is a thing of the past now.  No longer does an appraiser have to mark the areas of FHA "Non-Compliance" on a sheet that is to be included in an appraisal in the form of the 4 page VC Sheet.  Although as an appraiser, this additional form conjured up a good argument for an increased fee, I found it unnecessary.  If an appraiser is completing honest & ethical work, any FHA "Non-Compliance" could be addressed within the appraisal report itself.  There was never really any need for this sheet other than to show the reader what FHA considered "Non-Compliant".  I think FHA realized the headache that the old form was causing everyone involved.  As a result, FHA has pulled back the rains a bit by getting rid of the VC Sheet and removing some things that it previously regarded as being "Non-Compliant".

However please keep in mind, this does not mean that FHA is not still concerned about many of the other aspects regarding the property that may affect the health and well being of the future occupants (a.k.a. the borrower purchasing the home) of the property.  They have made it very clear to the FHA appraiser that the property must be safe & habitable.  This includes all utilities (water supply is a utility as well) being turned on and functioning safely within the home.  Also, windows must not be broken.  Broken windows are a safety hazard and FHA still requires that the window be repaired or replaced.

As of late, I have completed several FHA appraisals of bank owned properties only to find out that the utilities are not turned on when I visit the property for the appraisal inspection.  Obviously, there are many reasons to turn the utilities off.  If the water is left on, the pipes can freeze in the winter if the heat has been turned off as well.  Also, who wants to pay for utilities to be turned on.  Of course, no one does.  Unfortunately, FHA still requires that the utilities are on & functioning at the time the appraiser inspects the property.  As a result, someone will likely have to pay for those utilities until the loan closes.

Consequently, my advice to lenders and realtors alike is to make sure that the utilities are turned on and the home is secure (no broken windows) prior to the appraisal being ordered.  Otherwise, the appraiser will need to revisit the property for an additional fee at a later date.  And as time is money in this business, none of us including the appraiser wants to revisit a property if it can be avoided.

Winterizing Your Home

Whether you are buying or selling a home, you should have a professional home inspection performed.

A home inspection will look at the systems that make up the building such as:

• Structural elements, foundation, framing etc
• Plumbing systems
• Roofing
• Electrical systems
• Cosmetic condition, paint, siding etc

If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency. Then, hire your own inspector and pay close attention to the inspection report. If you aren't comfortable with what he finds, you should kill the deal.

Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyers are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyer's inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyer's inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home.

It's better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyer's inspector finding them, at the worst possible time. Old Man Winter is settling in for a long chilly season. Before the temperatures dip too far south, follow these simple guidelines to winterize your home and save money on utilities.

Inside Your Home

• Have your furnace system serviced to ensure it's working efficiently and not emitting carbon monoxide.
• Clean permanent furnace filters and replace paper or disposable filters.
• Replace the batteries in smoke and carbon monoxide detectors.
• If you have a wood stove or fireplace, have your chimney swept thoroughly. It should be cleaned before the soot build up reaches one-fourth inch thickness inside the chimney flue.
• Check your hot water heater for leaks and maintain proper temperature setting (120 degrees recommended by Department of Energy). On older water heaters with less insulation, for every 10 degrees Fahrenheit you lower the temperature, you save 6 percent of your water heating energy.
• Check the attic to see if insulation needs to be added or replaced. This is the most significant area of heat loss in many homes, so it is also important to see that it has proper ventilation. Inadequate ventilation could lead to premature deterioration of the insulation materials. You may also need to check insulation in exterior walls, crawl spaces and along foundation walls.
• Check all windows and doors for air leaks.Install storm windows and putty, caulk or add weather stripping as needed.
• Check basement and cellars for seal cracks or leaks in walls and floor.
• Make sure all vents are clean and operating properly.
• Clean and vacuum baseboard heaters, heating ducts and vents.
• Remove or winterize air conditioning units.

Outside Your Home

• Store or cover outdoor furniture, toys and grill.
• Purchase rock salt for melting snow and a shovel or snow blower if you don't already have one. Make sure you have the right kind of gas and oil on hand for your snow blower in the case of an unexpected snowstorm.
• Caulk joints and minor cracks on exterior walls and siding.
• Look for deteriorating finishes. Minor problems can be patched to preserve the wood. Put bigger jobs, such as scraping and refinishing painted or stained areas, on the calendar for next spring or early summer.
• Drain and shut off sprinkler systems and other exterior water lines to avoid frozen and broken pipes. Leave all taps slightly open.
• Insulate exterior spigots and other pipes that are subject to freezing but can't be drained or shut off.
• Rake and compost leaves and garden debris, or put out for yard-waste pickup.
• Clean storm drains, gutters and other drain pipes.
• Check the foundation for proper drainage. To do this, spray yard with a hose to see if water runs away from the house. A little shoveling to reshape the earth next to the house may make the water run away from the foundation.
• Make sure dirt or piles of wood don't come into contact with or touch siding, inviting termites and carpenter ants into the house.
• Seal driveway and walkway cracks, if needed, before ground freezes regularly.
• Inspect the roof for loose, damaged or missing pieces.
• Check attic vent openings for nests or other blockages.

Are You Looking For A Career In Real Estate?  Look No Further Than RE/MAX UNITED!

The advantages of being part of RE/MAX UNITED Here are the top 10 reasons why you should work with RE/MAX UNITED 1. High Caliber & Camaraderie of Personnel 2. Available Principal Broker 3. Continuing In-House Training: RSN satellite and on-site. 4. Available Mentoring Program 5. Highly Visible Office Location in high-growth area                                         6. Agent-to-agent RE/MAX referral network 7. First-class support staff 8. Regional and National RE/MAX support 9. Competitive, all-inclusive desk fees 10.Belonging to the world's best-known real estate company If you believe you have what it takes to move over to RE/MAX, contact Team United! Call Sheila or Jim at (317) 867-0177 -- or e-mail remaxunited@verizon.net We'll buy you lunch and discuss your career goals.

Foreclosure/REO appraisal

Homes in foreclosure and homes that have reverted to your institution's ownership present special appraisal challenges. At KNIGHT APPRAISAL SERVICES, we're more than ready and able to help.

For a property in foreclosure, you may need to know the difference between fair market value and "quick disposition" value, to know your potential charge-off liability. At KNIGHT APPRAISAL SERVICES, we have experience in both providing snapshots of fair market value for our mortgage lending and servicing clients as well as "quick sale" forecasts that understand your timeline.

Owners of property in foreclosure, of course, present special challenges. They may be unwilling to allow an inspection of the property. If they have abandoned the property already, they may have neglected care of the home for some time -- or worse, caused damage. We have the experience and training to deal with the special dynamics of a foreclosure appraisal, and you should not hesitate to rely on us.

For a property that has already reverted to Real Estate Owned, you likewise will be interested in a quick disposition. But you may want to know and compare three values: As-is, as repaired, and "quick sale." These represent the value of the property without any work done to it, with the work required to make the property marketable to full market value commensurate with competing properties in the area, and, somewhere in-between, with minimal investment in repairs -- selling the property quickly, probably as a "fixer-upper." Again, we understand your timeline and the unique circumstances of an REO property, as well as the special information you'll need -- competing listings, market trends, and the like.

Please browse our website to learn more about our qualifications, expertise and services offered.

When interviewing a home inspector, ask the inspector what type of report format he or she provides. There are many styles of reports used by property inspectors, including the checklist, computer generated using inspection programs, and the narrative style.

Some reports are delivered on site and some may take as long as 4 - 6 days for delivery. All reporting systems have pros and cons.

The most important issue with an inspection report is the descriptions given for each item or component. A report that indicates the condition as "Good", "Fair" or "Poor" without a detailed explanation, is vague and can be easily misinterpreted. An example of a vague condition would be:

Kitchen Sink: Condition - Good, Fair, or Poor.

None of these descriptions gives the homeowner an idea what is wrong. Does the sink have a cosmetic problem? Does the home have a plumbing problem? A good report should supply you with descriptive information on the condition of the site and home. An example of a descriptive condition is:

Kitchen sink: Condition - Minor wear, heavy wear, damaged, rust stains, or chips in enamel finish. Recommend sealing sink at counter top.

As you can see, this narrative description includes a recommendation for repair. Narrative reports without recommendations for repairing deficient items may be difficult to comprehend, should your knowledge of construction be limited.

Take the time and become familiar with your report. Should the report have a legend, key, symbols or icons, read and understand them thoroughly. The more information provided about the site and home, the easier to understand the overall condition.

At the end of the inspection your inspector may provide a summary with a question and answer period. Use this opportunity to ask questions regarding terms or conditions that you may not be familiar with. A good inspector should be able to explain the answers to your questions. If for some reason a question cannot be answered at the time of the inspection, the inspector should research the question and obtain the answer for you. For instance, if the inspector's report states that the concrete foundation has common cracks, be sure to ask, "Why are they common?" The answer you should receive will be along these lines: common cracks are usually due to normal concrete curing and or shrinkage. The inspector's knowledge and experience is how the size and characteristics of the cracking is determined.

We recommend that you accompany your inspector through the entire inspection if possible. This helps you to understand the condition of the home and the details of the report.

Read the report completely and understand the condition of the home you are about to purchase. After all, it is most likely one of the largest investments you will ever make.

What is a manufactured home and how does it differ from a modular home?

A manufactured home (also known as a mobile home) is a single or multi-sectional home built on a permanent frame, like a steel undercarriage/chassis, with a removable transportation system (hitch and wheels). The unit is permanently attached to a site-built foundation and is subject to the 1976 federal standards established by the Department of Housing and Urban Development (HUD).

A modular home is constructed in a factory using conventional home floor joists and delivered to a site on a trailer or flat bed truck. The delivered home may be in the form of panels that are assembled at the site, may be pre-cut and assembled on site, or may be pre-built and delivered in one piece. The home, panels or pre-cut panels are lifted from the trailer and attached to a foundation. A modular home may be single or multi-storied. Modular homes are not subject to HUD standards, but must be built to state and local Uniform Building Codes.