Most buyers and sellers know that a home inspection is an essential part of the purchase process. But in real estate, there's more than just one type of inspection to consider. In fact, there are dozens.
Whether you're purchasing a new home or investment property, selling your current home or trying to build equity in the house you're already in, here are the top five inspections you should know about.
Prepurchase inspections are the most common. They include a full assessment of a property's systems and structure, and they offer the buyer a full report of any repairs or issues that need attention. The buyer can use this report as a negotiating tool to have the seller address any repairs before closing or to lower the sales price to reflect the necessary repair costs.
Prelisting inspections are performed to give sellers a checklist of repairs to consider before listing the home. They can also help them gauge how much to list their property for, given its condition.
Feature-specific inspections are performed on a home's various features or systems. Some examples include inspections for swimming pools, septic tanks and wells.
Termite or wood-destroying insect inspections are needed if wood-eating pests are common in your area. Damage from these bugs can lead to costly repairs. Often, a buyer's inspector will recommend a termite inspection if they see specific signs of damage.
Municipal or COO inspections are required by municipalities to show that a newly constructed home or a home that has undergone major renovations is fit for occupancy. A municipal inspector will focus on the home's electrical, plumbing, building and fire code compliance to issue a certificate of occupancy.
The median home value in Cape Coral is $219,700. Cape Coral home values have gone up 1.7% over the past year, prediction they will rise 1.6% within the next year. The median list price per square foot in Cape Coral is $151, which is lower than the Fort Myers Metro average of $161. The median price of homes currently listed in Cape Coral is $265,000 while the median price of homes that sold is $201,800. The median rent price in Cape Coral is $1,600, which is lower than the Fort Myers Metro median of $1,880. Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in Cape Coral is 1.1%, which is lower than the national value of 1.6%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Cape Coral homeowners underwater on their mortgage is 5.8%, which is lower than Fort Myers Metro at 7.2%.
The median home value in Fort Myers is $202,800. Fort Myers home values have declined -0.4% over the past year, prediction they will rise 1.2% within the next year. The median list price per square foot in Fort Myers is $150, which is lower than the Fort Myers Metro average of $161. The median price of homes currently listed in Fort Myers is $249,500 while the median price of homes that sold is $187,000. The median rent price in Fort Myers is $1,750, which is lower than the Fort Myers Metro median of $1,880. Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in Fort Myers is 0.9%, which is lower than the national value of 1.6%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Fort Myers homeowners underwater on their mortgage is 8.2%, which is higher than Fort Myers Metro at 7.2%.
The median home value in Lehigh Acres is $154,600. Lehigh Acres home values have gone up 7.7% over the past year, prediction they will rise 4.1% within the next year. The median list price per square foot in Lehigh Acres is $111, which is lower than the Fort Myers Metro average of $161. The median price of homes currently listed in Lehigh Acres is $169,900 while the median price of homes that sold is $151,000. The median rent price in Lehigh Acres is $1,150, which is lower than the Fort Myers Metro median of $1,880. Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in Lehigh Acres is 2.0%, which is higher than the national value of 1.6%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Lehigh Acres homeowners underwater on their mortgage is 10.7%, which is higher than Fort Myers Metro at 7.2%.
The median home value in Estero is $308,400. Estero home values have declined -3.7% over the past year, prediction they will fall -0.0% within the next year. The median list price per square foot in Estero is $177, which is higher than the Fort Myers Metro average of $161. The median price of homes currently listed in Estero is $323,990 while the median price of homes that sold is $286,500. The median rent price in Estero is $2,300, which is higher than the Fort Myers Metro median of $1,880. Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in Estero is 0.4%, which is lower than the national value of 1.6%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Estero homeowners underwater on their mortgage is 6.1%, which is lower than Fort Myers Metro at 7.2%.
The median home value in Naples is $332,200. Naples home values have declined -0.9% over the past year, prediction they will rise 1.5% within the next year. The median list price per square foot in Naples is $216. The median price of homes currently listed in Naples is $415,000. Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in Naples is 0.7%, which is lower than the national value of 1.6%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Naples homeowners underwater on their mortgage is 6.0%, which is lower than Naples at 6.7%.
Higher Conforming Limits Expand Options for Home buyers.
For the second year in a row, the Federal Housing Finance Agency (FHFA) announced that it will raise the maximum conforming loan limits for Fannie Mae and Freddie Mac mortgages.
Beginning Jan. 1, 2018, the maximum loan limit will be $453,100, up from $424,100 in most markets throughout the U.S. (higher limits will be in effect in higher-cost areas).
This change paves the way for new opportunities to help grow your business: higher conforming limits can give you more options for financing. For instance, conforming loans allow for down payment options and less stringent qualifications compared to jumbo financing.
If vacation has been so much fun that you don't want it to end, a second home might be for you. Think carefully about all the issues surrounding owning a second home, however, because there can be major financial implications.
Investment property vs. vacation home
The most important decision is whether your home will primarily be an investment or a true second home. How you use the home throughout the year will determine how it is classified by the IRS. A true second home is one that only you and your immediate family use.
It's tempting to help cover your expenses by renting out the home to other vacationers while you're not using it, but in the eyes of the IRS, you may have just become a real estate investor.
You can't write off the mortgage interest on an investment property in the same way you do your primary residence, and you must report the rent you receive as income. In certain situations, you may be able to offset the rental income with deductions for interest, taxes, depreciation and home maintenance.
The catch is that the IRS is very interested in the number of days you use the home for personal use each year. If you use the home frequently, you can deduct only the expenses that are proportional with the amount of time you rented out the home. Also, if you rent the unit below market value to friends or family members, the IRS might consider that to be personal use.
As you can see, your tax situation can get complicated in a hurry. Consult a tax adviser before you buy, so you can be sure you understand how the new home will affect your bottom line at tax time.
Financing a second home also can get complicated. If you have an FHA loan on your primary residence and took advantage of the low-downpayment option, prepare to cough up more cash for a second home than you may be expecting. Because private mortgage insurance won't cover a second home or investment property, you'll need to put down at least 20 percent.
FHA only insures loans on primary residences, so your second home loan will have to be a conventional loan. This means tighter lending standards, particularly when it comes to whether you can afford the payments. Lenders will look closely at your income vs. housing expenses on both homes and may require strict adherence to debt-to-income ratios. Be prepared to show that your income is sufficient to keep both homes afloat.
Add up all of the costs before putting in an offer. Don't forget utilities, home maintenance costs and overhead that can add up, such as furnishings and decor. Also think about how much it will cost to travel back and forth to the home.
If you will rent out the home while you're away, don't forget about property management fees, and be sure to research average local occupancy rates so you're prepared for periods with no revenue.
Crowdfunding – websites or apps that encourage friends, family and others to donate money – are a popular way for some first-time buyers to save for a home's downpayment.
CMG Financial, for example, just released a version, called HomeFundMe. HomeFundMe users are incentivized to complete homebuyer education or housing counseling in exchange for a grant opportunity ranging from $1000 to $2500. The counseling fee is covered, and once completed, HomeFundMe will match donations at two dollars for every dollar raised up to the qualified grant limits. There is no fee to crowdfund, CMS says, and 100 percent of the funds raised go to the recipient.
In addition, contributors don't have to lose their "gift" if the homebuyers get cold feet and drop out. When contributing, they have an option to make their gift conditional to the home purchase. If they choose conditional, they get the money back if the buyers don't follow through.
"The downpayment tends to be the largest hurdle in the home buying process, and we've developed a solution to help remove that barrier," says Christopher M. George, president and CEO of CMG Financial and vice chairman of the Mortgage Bankers Association. "Buyers are able to utilize their own community and network of family and friends to increase the amount they have available for a downpayment. At CMG, we believe that the home buying process is a community event."
HomeFundMe also links to wedding registries and other platforms, so users can leverage life events as an opportunity to accept contributions toward the downpayment on their dream home. There is no fee to use HomeFundMe and all the funds collected through the HomeFundMe platform are directly accessible to the user as a mortgage downpayment.
For more information on HomeFundMe, visit their website.
The Federal Housing Administration (FHA) Section 203(h) is a Disaster Relief Program that addresses home loans designed for purchasers of single-family homes and FHA-approved established condominium projects.
All properties must be used as primary residences. The following properties are ineligible for this program: investment properties, second homes, attached properties, 2-4 unit properties, manufactured homes, co-ops, condo tells, and timeshares. Renters and homeowners who desire to purchase homes may take advantage of FHA Section 203(h) entitled Mortgage Insurance for Disaster Victims.
The 203(h) Disaster Relief Program provides the following benefits:
• Evidence of destruction is required
• Assists victims with substantially damaged homes that are
in the process of
buying another home
• Requires no down payment - 100% LTV
• Minimum middle credit score of 620
• Maximum debt-to-income ratio of 31/43 percent
• 15 & 30-year fixed rate conforming balance
• 30-year fixed rate high balance
• Facilitates mortgages for renters and homeowners in the affected areas
• Requires buyers to pay closing costs and prepaid expenses or arrange for
premium pricing; sellers may offer concessions (six percent limitation) but gift funding is not permitted. Mortgage insurance premiums are paid upfront and monthly. The counties and cities affected by A Presidential declared disaster area are listed on the website for the Federal Emergency Management Agency (FEMA). The agency also lists the dates that each disaster was declared.
Renovation and Rehabilitation of severely damaged properties affected by disasters are addressed under separate legislation, FHA Section 203(k) for owners rebuilding their existing home.
Disaster Relief Programs are available for homeowners who live in a Presidential declared disaster area. After the date of declaration, eligible applicants have one year to apply for mortgage insurance and 100-percent financing for home purchases.
After 2016's mixed bag of real estate results, developers, builders and the people who finance them are asking what the next two years will bring -- are we going boom or bust? The pendulum has swung. The market will remain decent to healthy. Permits are down in Lee, Collier and Charlotte counties for a variety of reasons, none of them ominous. We'll end the year at around 11,000 permits. The reason: Bold moves by Lee County commissioners in 2014 and 2015 to lower impact fees led to major growth in apartment permits. That inflated the 2015 permit numbers, which leveled off in 2016. Far and away the top news of the year was the merger of WCI and Lennar, a huge transaction, it will make Lennar the biggest Southwest Florida builder by far, instantly adding 14,000 lots to its books. To put it in perspective, last year 11,500 permits were pulled as a total of all development. That's years of inventory.
Whole Foods is coming to Fort Myers. It was zoned a month ago and it will be under construction the first quarter of 2017, with a $327 million Gulf Coast Hospital expansion starting right up the street. This year, the region's top builder with 1,200 permits pulled is D.R. Horton, especially it's economical Express Homes product line.
The reason: Apartment rents have risen to $1.40 a square foot, and renters now have better jobs and income. At the same time, Builders like D.R. Horton are knocking on their doors, offering homes equal to their rent payment. Value also made Ave Maria the top selling community in the entire market for a second year running, but don't expect that to continue. The Collier family lowered lot prices way below the cost of the lot to get the development going coming out of the bust. So expect prices to rise so they can make up costs.
Where development is going
Market Trends sees growth going north in a big way in 2017, starting with North Cape Coral. The North Cape is on fire. It's got $25,000 lots, good shopping and good neighbors.
The biggest increase in 2017 permits will occur probably be in Lehigh Acres. Just when we thought, no way, Lehigh is back. Where are you going to find $3,000 lots to build $250,000 homes for tons of ready buyers…. ? New life for East Fort Myers where River Hall, the Cascades and Portico can offer value because of lower land costs. Developers will make the leap across the river to North Fort Myers in the Bayshore corridor because of available land.
Charlotte County has even more cheap land and low permit fees, or that county will start taking away from Lee if its permit fees get too high.
In Collier County, the bulk of permits will be pulled east of Immokalee Road around Ave Maria.
Luxury high rises still on the rise
Pent up demand for luxury products in Naples ignited this market, so much so that projects in the south are nearly sold out. The first tower at Kalea Bay is 75 percent sold out. Seaglass at Bonita Bay by the Ronto Group is 50 percent sold out. And Altaira at The Colony is over 30 percent sold, fueled by discounts to an older buying market that doesn't want to wait six years for other developments to start. The demand is such that Mystique at Pelican Bay, which plans to market condos upward of $3 million, will come out of the ground in 2017, although it has no start date as of yet.
There are high compliments to the City of Fort Myers for its work to encourage Downtown development. They made bold moves pouring money into their Downtown and revitalizing it to make it a place developers want to be. The question is whether Allure and One Allure, luxury high rises planned by Jaxi Builders on the downtown waterfront, will really happen. The two original 140-unit Allure towers are about 20 percent sold, enough for financiers to let go the purse strings...? David Frye's mixed use infill project, The Place on First. The Frye project hit a sweet spot, the 19 units planned to cost from $400,000 to $850,000 with amenities for an urban lifestyle.
Many people feel strongly that this is a necessary part of home maintenance. HVAC contractors would love for you to believe that is true. The following information should help you and your clients determine when duct cleaning may be necessary. Some research suggests that cleaning heating and cooling system components (e.g., cooling coils, fans and heat exchangers) may improve the efficiency of your system. This may result in a longer operating life, as well as some energy and maintenance cost savings. Duct cleaning may not be necessary in most cases and may not increase efficiency even if completed. If you would like to review The EPA Guide in it's entirety and the associated links go to www.epa.gov/iag/pubs/airduct.html What is Air Duct Cleaning?
Cleaning generally refers to the cleaning of various heating and cooling system components of forced air systems, including the supply and return air ducts and registers, grilles and diffusers, heat exchangers heating and cooling coils, condensate drain pans (drip pans), drain lines, fan motor and fan housing, and the air handling unit housing.
If not properly installed, maintained, and operated, these components may become contaminated with particles of dust, pollen or other debris. If moisture is present, the potential for microbiological growth (e.g., mold) is increased and spores from such growth may be released into the home's living space. Some of these contaminants may cause allergic reactions or other symptoms in people if they are exposed to them. If you decide to have your heating and cooling system cleaned, it is important to make sure the service provider agrees to clean all components of the system and is qualified to do so. Failure to clean a component of a contaminated system can result in re-contamination of the entire system, thus negating any potential benefits.
Deciding Whether or Not to Have Your Air Ducts Cleaned
Knowledge about the potential benefits and possible problems of air duct cleaning is limited. Since conditions in every home are different, it is impossible to generalize about whether or not air duct cleaning in your home would be beneficial.
If no one in your household suffers from allergies or unexplained symptoms or illnesses and if, after a visual inspection of the inside of the ducts, you see no indication that your air ducts are contaminated with large deposits of dust or mold (no musty odor or visible mold growth), having your air ducts cleaned is probably unnecessary. It is normal for the return registers to get dusty as dust-laden air is pulled through the grate.
You may consider having your air ducts cleaned simply because it seems logical that air ducts will get dirty over time and should occasionally be cleaned. While the debate about the value of periodic duct cleaning continues, no evidence suggests that such cleaning would be detrimental, provided that it is done properly. On the other hand, if a service provider fails to follow proper duct cleaning procedures, duct cleaning can cause indoor air problems. For example, an inadequate vacuum collection system can release more dust, dirt, and other contaminants than if you had left the ducts alone. A careless or inadequately trained service provider can damage your ducts or heating and cooling system, possibly increasing your heating and air conditioning costs or forcing you to undertake difficult and costly repairs or replacements.
You should consider having the air ducts in your home cleaned if:
There is substantial visible mold growth inside hard surface (e.g., sheet metal) ducts or on other components of your heating and cooling system. There are several important points to understand concerning mold detection in heating and cooling systems:
Ducts are clogged with excessive amounts of dust and debris and/or particles are actually released into the home from your supply registers.
Duct cleaning has never been shown to actually prevent health problems. Neither do studies conclusively demonstrate that particle (e.g., dust) levels in homes increase because of dirty air ducts or go down after cleaning. This is because much of the dirt that may accumulate inside air ducts adheres to duct surfaces and does not necessarily enter the living space. It is importanttokeepinmindthatdirtyairductsareonlyoneofmanypossiblesourcesofparticles that are present in homes. Pollutants that enter the home both from outdoors and indoor activities such as cooking, cleaning, smoking, or just moving around can cause greater exposure to contaminants than dirty air ducts. Moreover, there is no evidence that a light amount of household dust or other particulate matter in air ducts poses any risk to health.
EPA does not recommend that air ducts be cleaned except on an as-needed basis because of the continuing uncertainty about the benefits of duct cleaning under most circumstances. EPA does, however, recommend that if you have a fuel burning furnace, stove, or fireplace, they be inspected for proper functioning and serviced before each heating season to protect against carbon monoxide poisoning. Some research also suggests that cleaning dirty cooling coils, fans and heat exchangers can improve the efficiency of heating and cooling systems. However, little evidence exists to indicate that simply cleaning the duct system will increase your system's efficiency.
Do not hire duct cleaners who make sweeping claims about the health benefits of duct cleaning - such claims are unsubstantiated. Do not hire duct cleaners who recommend duct cleaning as a routine part of your heating and cooling system maintenance. You should also be wary of duct cleaners who claim to be certified by EPA. Note: EPA neither establishes duct cleaning standards nor certifies, endorses, or approves duct cleaning companies.
Does duct cleaning prevent health problems?
The bottom line is: no one knows. There are examples of ducts that have become badly contaminated with a variety of materials that may pose risks to your health. The duct system can serve as a means to distribute these contaminants throughout a home. In these cases, duct cleaning may make sense. However, a light amount of household dust in your air ducts is normal. Duct cleaning is not considered to be a necessary part of system maintenance of your heating and cooling system, regular cleaning of drain pans and heating and cooling coils, regular filter changes and yearly inspections of heating equipment is suggested. Research continues in an effort to evaluate the potential benefits of air duct cleaning.
Experts do agree that moisture should not be present in ducts and if moisture and dirt are present, the potential exists for biological contaminants to grow and be distributed throughout the home. Controlling moisture/humidity is the most effective way to prevent biological growth in all types of air ducts.
Some service providers may attempt to convince you that your air ducts are contaminated by demonstrating that the microorganisms found in your home grow on a settling plate (i.e., petri dish). This is inappropriate. Some microorganisms are always present in the air, and some growth on a settling plate is normal.
Only an expert can positively identify a substance as biological growth and lab analysis may be required for final confirmation. These tests should be performed by qualified licensed individuals only. Mold air sampling testing is appropriate anytime there is a suspicion of mold or anytime an HVAC system has been inactive or improperly set for more than 48 hours.
As South Florida property insurance rates climb this year, homeowners are paying more attention to everything that can affect their premiums. More and more, that includes credit scores. A good score can lead to discounts. Customers with poor scores get no discount, and if they have poor scores and a history of filing claims, they'll find fewer companies willing to compete for their business.
Most homeowner insurers in Florida don't use credit checks, but a growing number do, including two of the largest – Heritage Property & Casualty and Universal Property & Casualty, covering one of every five houses in South Florida, according to documents the companies file with the state. Others that use credit checks include Ark Royal, Florida Family, Olympus, Modern USA and American Traditions. United Property and Casualty made credit scoring mandatory for its insurance applicants in 2015, documents show, while Sawgrass Mutual introduced it last year as well.
More carriers are using it compared to 10 or 15 years ago, Agents accept it but don't necessarily like it because they have to explain it to their clients.
Credit-based insurance pricing has been controversial in Florida for at least a decade. In 2008, Kevin McCarty, then Florida's insurance commissioner, called it unfair to minorities, poor people and the elderly and went to Washington, D.C., to urge a congressional committee to support a nationwide ban. A 2015 study by Insurancequotes.com found that insurers in 46 states commonly used credit ratings to help set premiums, much like auto insurance companies have used them for years. Tying homeowner insurance premiums to credit is illegal in only three states: California, Maryland and Massachusetts. Florida was the only state where researchers found the practice was legal but credit scores had no impact on premiums.
State insurance officials said that result probably occurred because the researchers reviewed data samples from only six major insurers representing 60 percent to 70 percent of the state's insurance market. And those insurers probably didn't use credit scoring because state law forbids using it to determine prices for hurricane insurance – the most expensive part of Florida policies,
About a month after the report was released, Heritage revealed it had initiated credit checks for its renewing voluntary customers, but not on customers it acquired from state-run Citizens Property Insurance Corp. through Citizens' depopulation program. Rather than penalizing customers with low credit scores with higher rates, Heritage would use the scores to reward customers with good credit with discounts, the company announced.
Heritage turned to credit checks because "we weren't competitive in many parts of the state," president Rich Widdicombe said in a recent interview. "We said, 'Let's put credit scores on this and you get better customers and give those customers a discount.'"
Heritage and other insurers subscribe to services that combine credit scores with claims histories to form "insurance scores." Widdicombe said last year that a low insurance score wouldn't trigger a rate increase, but a low credit score combined with a history of filing claims might cause Heritage to reject an applicant altogether.
A majority of companies might have avoided using credit scores because they knew the state insurance commissioner opposed it, said Jay Neal, president and CEO of the Florida Association for Insurance Reform.
Companies that don't use credit scoring include Citizens, Florida Peninsula, People's Trust, Security First, Federated, Homeowner's Choice and Tower Hill, state filings show.
Whether companies call credit-based pricing a discount for customers with good credit scores or a surcharge for customers with bad credit scores, the bottom line is the same: People with good credit are rewarded and people with bad credit pay more, Lynch acknowledged.
But that's fair, he said, and studies have found correlations between low credit scores and increased likelihood of filing claims. Just as data shows that auto insurance customers with low credit scores are greater crash risks, it's logical that homeowners experiencing financial problems will be less likely to repair their leaking faucet – setting the stage for future claims.
Using credit scores to help set prices for customers with different levels of risk is "one of the things an insurance company has to do – set rates that reflect risk. Credit scoring looks at one thing: credit, Not the ability to pay, your income or your collateral. It doesn't differentiate between someone who lost their income or someone who went on a credit card spending spree.
In the wake of the housing crisis, bank regulators published rules designed to place a wall between lenders and appraisers. But the spirit of these necessary regulations continues to be violated thanks to policies of Fannie Mae and Freddie Mac, prompting concerns that there could be another mortgage meltdown. One of the contributing factors of the housing crisis of 2007 was the overvaluing of residential real estate by appraisers. Some appraisers would effectively adjust appraisals to meet the value needed by lenders so the loan could be approved. This would then encourage the lender to send more business to the appraiser whose income is directly related to the number of appraisal orders received.
The new regulations are intended to keep the appraisers honest. One objective was to ensure appraisers were not aware of the proposed loan amount or the sales prices that could influence their appraisal. To comply with the new rules, some lenders are using a third-party vendor to randomly select the appraiser to avoid any question of an affiliation between the lender and the appraiser. Some of those third-party appraisal ordering firms also monitor and provide feedback to the lender concerning the quality and turnaround of each appraisers' work.
Other financial institutions and mortgage companies have attempted to follow the regulatory mandate by having an employee that is not involved with residential real estate lending or the loan documentation process order the appraisal from local appraisers. That employee can use a rotating list of appraisers. To be sure, running orders through a non-mortgage employee, and the reality that lenders and appraisers still likely associate with each other in their local communities, makes conflicts of interest still possible. But this is still an improvement from how lenders and appraisers operated leading up to the crisis.
All of these new regulations were designed to create an environment where the value placed on each property is fair and balanced. However, even though the regulators did their best to promote a more level playing field, Fannie Mae and Freddie Mac did not change their regulations.
Today, appraised home values still are almost always equal to the amount of a sales price on a purchase appraisal. This would suggest there is still communication between lenders and appraisers to prompt concern. But it's no wonder the appraisal corresponds with purchase amounts. A Fannie Mae policy on appraisals requires that, "The lender must provide the appraiser with a copy of the complete, ratified contract." (Fannie and Freddie standardized their appraisal regulations in 2013 so the rules are similar for both companies.) Appraisers are aware of this clause for secondary market loans and therefore they insist that the lender must provide the sales contract.
Unfortunately, many lenders are also providing, and some appraisers are requiring, the sales contract on loans that lenders know will be retained on their balance sheet. So when an overly eager buyer pays more than the true market value for a home, guess what: the home ends up being appraised for the overvalued purchase price. Does this sound familiar? Hello, 2007.
I understand that the appraiser needs certain details to do their job. They need to see the Sellers Disclosure to determine if adjustments need to be made to the appraisal for the heating, electric, roof, gas, water, asbestos and numerous other potential problems with the property. The appraiser also needs to know if there were any personal property concessions included in the sales contract. This information can be included on the Appraisal Request form sent to the appraiser. However, there is absolutely no need for the appraiser to see the sales contract. Fannie and Freddie should immediately change their regulations so lenders will hopefully receive unbiased appraisals. None of us want to relive 2007.