Tag Archives: loans

How to Challenge a Low Appraisal

Recently we had a presentation done in our office by an appraisal management company. One of the topics was how to go about challenging an appraisal that you’ve had done when trying to buy real estate that you don’t agree with. I thought I would share them with you. If you’ve had the unfortunate chance of having the appraisal on your transaction come in low, there could be a way to help your situation. You can try to “challenge” the appraisal by writing to the appraiser an appeal for reconsideration. The appraiser may, or may not take the information that you provide into account, but it is worth a shot. The following is a suggested outline on how to do so.

Please note that this is for general information purposes only and is not intended to be personal advice. 

-Write an opening paragraph. “After review the appraisal for ______________ Address, we would like to request further investigation, based on the following points:”

-Write a bulleted list of the information that you believe is inaccurate. Ask specific questions if you feel you need clarification on why certain adjustments were made.

-Make sure to provide additional comps that support the price that you believe to be accurate.

-Be concise. The appraiser isn’t likely to thoroughly read a novel.

-Do not pressure the appraiser to come in at a specific price. Let the data speak for itself.

-Closing Paragraph: write a polite final request asking for reconsideration. One suggested format: “We would humbly ask the appraiser to take a second look at the information above as it relates to data and adjustments in the appraisal report. We appreciate your time and consideration, and please let us know if you have any further questions.”

Hopefully you have not found yourself in this situation, but if you do, the information above may help the appraiser see your side of things. Then again, after careful review of the information, the appraiser may feel that the original price is still justified. At that point, you may want to consider having a new appraisal performed if you feel that the information provided in the report is inaccurate.

 

 

Interested in turning your home into a rental and buying a new home? Here’s what you need to know.

I’ve had many clients recently ask me about keeping their home as a rental and purchasing a new home. If this is you, here are the general guidelines of what loan officers have told me need to take place in order to make this happen. Please note that this is for general information purposes only and is not intended to be real estate advice. For specific information on this subject you are advised to seek competent advice from a qualified loan officer. 

The easiest scenario to make this happen for you is if the loan officer deems that you qualify for both loans without having a renter in the property.

If you do not qualify for both loan payments, the following will need to occur in addition to all of the other qualifying factors that go into obtaining a loan:

The lender will require that you have 30% equity in the home. In order to prove this, you will need to pay for an independent appraisal.

The lender will require an executed rental agreement.

Finally, the lender will require proof of a security deposit from the renter who entered into the rental agreement with you.

If you have any additional questions, feel free to contact me or your loan officer.

Flood insurance changes: what current and prospective homeowners need to know.

UPDATE: new purchases can now assume the homeowner’s current rate. See this post for more info.

I recently attended a long seminar hosted by our local board of Realtors on the topic of major flood insurance changes. Evidently, flood insurance requirements, the amount flood insurance holders pay, regulation, and the map being used has changed tremendously in the last year. Unfortunately, much of this information has been kept very quiet until now.

The biggest change to be aware of is that flood insurance rates are likely to be significantly higher than in the past, starting October 1st, 2013. Homeowners who previously had insurance and are current on their insurance premiums will enjoy previous rates. However, new policies or after a lapse in payment, all premiums will be rated at the new premium rates. And, FYI, if you haven’t been paying for flood insurance but you are required to, new regulation will fine the mortgage holders for not making sure you are carrying flood insurance, so expect to hear from your mortgage holder.

All government-backed mortgages that are issued are required to have flood insurance if the property is located in a flood zone. However, all property owners are eligible for elective flood insurance, even if the property is not technically located in what is deemed to be a flood zone.

How do you find out if you are located in a flood zone? Typically the loan officer will require a flood certification, which means that, as part of the loan process, the loan officer will contract with an agency that will do a search to find out if the real estate is located in a flood zone. However, according to the NFIP (National Flood Insurance Program) coordinator at the Oregon Department of Land Conservation and Development, many times the flood zone determination by the contractor is incorrect. In cases such as these, she recommends that you ask for a manual determination (the contractor will need to actually look at the flood map). If the determination is questionable, you can ask for a Letter of Determination Review, or a Letter of Map Amendment.

Unfortunately, if the current homeowner is not aware that the house is actually in a designated flood zone, the prospective purchaser may not find out until well into the closing process. The NFIP coordinator said that, in order to find out sooner if you are located in a flood zone, you can try searching google earth. Of course, you’ll need to install Google Earth on your computer, and you’ll need to bring up the flood zone overlay. Also, you can head to FEMA map services center and download the file for your home (though, these maps are difficult to navigate).

If the homeowner is aware that the property is in a flood zone, it is recommended that a recent Elevation Certificate be performed. One of these certificates is required before an insurance agent can write a policy for flood insurance.

The great news for those facing these premiums is that there are retrofits that can be done in order to save money on premiums. You can have flood vents (such as “smart vents“) installed if there are currently none. Gail Moldovan with Hagan Hamilton Insurance Services heads an Oregon NFIP “Reducation Team” which specializes not only in writing flood insurance policies across the U.S., but helps client find mitigation solutions!

So what is the Realtor’s role in flood insurance? We are required by law to disclose if we have actual knowledge of a history of flooding on the property, or if the property is located within a flood zone. However, we are not required to make investigations as to whether the property is located in a flood zone. For liability reasons, the investigation is left up to the buyer.

One more thing of note that came from the meeting: Jay Wilson, the Hazard Mitigation Coordinator for Clackamas County, brought in photographs of a local river that flooded a few years back. The point that he wanted to make very clear was that the three homes located near the river were not located in a flood zone, which means that the homes were not required to have flood insurance by any agency. The unique thing about this situation is that Sandy river actually moved its course, by several feet! I asked Jay how far a river can actually travel, and he says that if you look on the maps, sometimes a river can move a matter of several blocks, placing a river inside a subdivision where there used to not be one.

In this case, one of the homes actually did have flood insurance, and the homeowner received a quick settlement. The other homeowners lost a tremendous amount of money. So, just because the home you are considering may not be located within a technical flood zone, it may be a good idea to obtain flood insurance anyway, especially if you are located next to a river such as the volatile Sandy River.