Bailey and Wood Mortgage Articles

Home Appraisal

This all-important step in getting the financing you need is the home appraisal — an oftentimes-confusing part of the mortgage process in which both buyer and seller must depend on the expert opinion of a stranger. A real estate appraisal is simply that — the expert opinion of a certified, state-licensed professional who determines the value of a piece of property. If your $300,000 dream home is really worth only $200,000,then the home is overpriced.

A home appraisal also protects the bank from getting
stuck with property that’s worth less than they’ve invested. And it protects you from paying too much for a house simply because it was love at first sight. The home appraisal is a no-nonsense factor in a decision that is often emotional for the buyer.

When you apply for a mortgage, your lender typically requires the property to be appraised by one of their approved appraisers. This practice helps create more consistent appraisals and gives you assurance that the appraiser is properly licensed and certified. Even though the home appraisal is the lender’s requirement, it’s the borrower’s responsibility. You usually pay for it as part of the mortgage costs at the time of closing. The cost is typically around $300 but can be more depending on the price of the
property.

There are two primary appraisal methods for residential property. In the sales comparison approach, the appraiser compares the property with three or four similar homes that have sold in the area, often called comparables, or comps. The analysis considers specific components, such as lot size, square footage of finished and unfinished space, style and age of house, as well as other features such as garages and fireplaces.

The cost approach is used more for new property and is based on reproduction costs. The appraiser estimates the cost to replace the structure on the property if it were destroyed. The appraiser then looks at land value and depreciation to determine the property’s worth.
The appraiser gathers information for the appraisal report from a number of sources, but the process often begins with a physical inspection of the property inside and out. Additionally, the appraiser may look at county courthouse records and recent reports from the local real estate multiple listing service.

The appraisal report generally includes:

An explanation of how the appraiser determined the value of the property.
The size and condition of the house and other permanent fixtures, along with a description of any improvements that have been made and the materials used.
Statements regarding serious structural problems, such as wet basements and cracked foundations.
Notes about the surrounding area, such as new or established development, rural acreage, and so on an evaluation of recent market trends of the area that may affect the value.
A comparative market analysis that supports the appraisal
maps, photographs and sketches.

To learn more about what’s included in the report, take a look at this property appraisal form from Freddie Mac, the second biggest provider of residential mortgages. If you have questions about any aspect of the appraisal, ask the appraiser for clarification.

A common misunderstanding is that the appraisal amount is only for the house itself. In fact, the figure appraises the total value of the home and any other permanent structures, along with the land that the house is built on. This appraisal figure also determines the loan amount you can get to buy the property.

What do the appraisers really look at?

A common myth about the home appraisal is that curb appeal and general tidiness of the home will help bring a higher appraisal amount. While overall maintenance of the home and surrounding property is certainly a factor, details such as dirty dishes in the sink or a lawn that needs to be mowed do not affect the appraisal.

Information is from an article published by Sarah Siddons, “How Home Appraisals Work.”

For the complete article please click here

Home Appraisal or Home Inspection?

A home appraisal is not the same thing as an inspection. If you’re buying a home, you’ll want to hire an experienced home inspector to point out any potential problems that could turn into costly nightmares in the future. Property appraisers will likely make note of any obvious issues, but they won’t test your heat and air, check the chimney, or determine if your plumbing is up to code. That’s the job of the inspector.

What is a home inspection?
A home inspection is an objective visual examination of the physical structure and systems of a house, from the roof to the foundation.

What does a home inspection include?
The standard home inspector’s report will cover the condition of the home’s heating system; central air conditioning system (temperature permitting); interior plumbing and electrical systems; the roof, attic and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement and structural components.

Why do I need a home inspection?
Buying a home could be the largest single investment you will ever make. To minimize unpleasant surprises and unexpected difficulties, you’ll want to learn as much as you can about the newly constructed or existing house before you buy it. A home inspection may identify the need for major repairs or builder oversights, as well as the need for maintenance to keep it in good shape. After the inspection, you will know more about the house, which will allow you to make decisions with confidence.

If you already are a homeowner, a home inspection can identify problems in the making and suggest preventive measures that might help you avoid costly future repairs. If you are planning to sell your home, a home inspection can give you the opportunity to make repairs that will put the house in better selling condition.

What will it cost?
The inspection fee for a typical one-family house varies geographically, as does the cost of housing. Similarly, within a given area, the inspection fee may vary depending on a number of factors such as the size of the house, its age and possible optional services such as septic, well or radon testing.
Do not let cost be a factor in deciding whether or not to have a home inspection or in the selection of your home inspector. The sense of security and knowledge gained from an inspection is well worth the cost, and the lowest-priced inspection is not necessarily a bargain. Use the inspector’s qualifications, including experience, training, compliance with your state’s regulations, if any, and professional affiliations as a guide.

Why can’t I do it myself?
Even the most experienced homeowner lacks the knowledge and expertise of a professional home inspector. An inspector is familiar with the elements of home construction, proper installation, maintenance and home safety. He or she knows how the home’s systems and components are intended to function together, as well as why they fail.
Above all, most buyers find it difficult to remain completely objective and unemotional about the house they really want, and this may have an effect on their judgment. For accurate information, it is best to obtain an impartial, third-party opinion by a professional in the field of home inspection.

For more information on Home Inspections click here

The Value of Title Insurance

Security. Speed. Savings. That is what the title industry provides to our customers. Title companies scour public records to establish insurable ownership of the property being sold; help to cure any defects with the property title; account for and transfer the transaction funds; and, insure the entire transaction against any covered mistake, fraud, risk or defect. We save consumers vast amounts of time and money while helping them achieve the American Dream.

Information provided by: Quality Title Insurance. Click here for more info: QualityTitle.com

*Bailey & Wood Financial Group has no affiliations with Quality Title Insurance

What is Home Owners Insurance

Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home. It requires that at least one of the named insured occupies the home. The dwelling policy (DP) is similar, but used for residences which don’t qualify for various reasons, such as vacancy/non-occupancy, seasonal/secondary residence, or age. It is a multiple line insurance, meaning that it includes both property and liability coverage, with an indivisible premium, meaning that a single premium is paid for all risks. Standard forms divide coverage into several categories, and the coverage provided is typically a percentage of Coverage A, which is . The insurance policy itself is a lengthy contract, and names what will and what will not be paid in the case of various events. Typically, claims due to floods, or war (whose definition typically includes a nuclear explosion from any source) are excluded. Special insurance can be purchased for these possibilities, including flood insurance. Insurance must be updated to the present and existing value at whatever inflation up or down, and an appraisal paid by the insurance company will be added on to the policy premium. Fire insurance will require a special premium charge, plus the addition of smoke detectors and on site fire suppression systems to qualify.

The home insurance policy is usually a term contract—a contract that is in effect for a fixed period of time. The payment the insured makes to the insurer is called the premium. The insured must pay the insurer the premium each term. Most insurers charge a lower premium if it appears less likely the home will be damaged or destroyed: for example, if the house is situated next to a fire station, if the house is equipped with fire sprinklers and fire alarms. Perpetual insurance, which is a type of home insurance without a fixed term, can also be obtained in certain areas.

In the United States, most home buyers borrow money in the form of a mortgage loan, and the mortgage lender always requires that the buyer purchase homeowners insurance as a condition of the loan, in order to protect the bank if the home were to be destroyed. Anyone with an insurable interest in the property should be listed on the policy. In some cases the mortgagee will waive the need for the mortgagor to carry homeowner’s insurance if the value of the land exceeds the amount of the mortgage balance. In a case like this even the total destruction of any buildings would not affect the ability of the lender to be able to foreclose and recover the full amount of the loan.

For more info contact your local insurance agent or click here for All-American Ins Group.

*Bailey & Wood Financial Group has no affiliations with All-American Ins Group