Compass Mortgage - NH Real Estate Appraisals

New Hampshire Real Estate Appraisals

An appraisal report is an unbiased estimate from a New Hampshire-licensed real estate appraiser. This report estimates the fair market value of a property, based upon the “Uniform Standards of Professional Appraisal Practice” (USPAP).

Why is an appraisal needed?

The appraisal serves as a financial compass for everyone that has a monetary stake in the property value including the seller, the buyer, the lender, and the insurance company. Mortgage lenders require an appraisal on the property being used as security for a mortgage. The purpose of the appraisal is to ensure the mortgage loan amount is less than the value of the property by the required difference.

The Appraisal Process

1) Inspection: An inspection of the property is necessary to collect specific data about the property, including:

Exterior measurements, to determine square footage

A drawing of the floor plan

Inspection of its basement and mechanical features

Making notes about the property's quality, condition, materials, and defects

2) Assessor’s Department: A trip to the town’s Assessor’s Department will round out the appraiser’s knowledge of the property, with a review of the following public information:

Assessment card

Tax map

Review of the flood map

Zoning map

Regulations (to determine if property is legal or non-conforming)

Tax rate and equalization factor

3) Search for Comparables: The appraiser will complete a thorough search of recent sales, in order to select three to six comparables for viewing a photograph.

Sources of information include:

Assessor’s Office

Local Board of Realtors

MLS Data Services

Registry of Deeds

4) Appraisal Report: The data gathered about the subject property and the comparables will be applied to a four-page form. The report form is further supported by additional pages of narrative, photos, location maps, flood maps, certifications, licenses, etc. The appraiser will determine the value using a “Sales Value Approach”, as well as giving some consideration to income and replacement cost.

The Sales Approach compares sales of similar property, taking into account differences that may affect value like:

Location

Neighborhood

Views

Style

Size

Age

Amenities

Value adjustments are applied to the differences between the subject property and the comparable properties. These differences are totaled for each comparable to determine the relative value of the subject property.

The Cost Approach is based upon the cost of replacing an existing property, less depreciation. This method may be useful for new construction, but less relevant for older homes (due to difficulty in estimating the amount of physical depreciation The cost approach is often demonstrated by not weighted in the final opinion of value.

The Income Approach is based upon the property’s ability to produce income (i.e. rent) and the income’s ability to pay off debt or provide a return on investment (called a cap rate). This method is most relevant when valuing rental property.

What if the Appraisal Comes in Low?

If your property appraises lower than its sales price, remember: most problems are correctable if you keep your cool and try to work through them one step at a time. You have a number of possible solutions, including:

Seller reduces the price: Reducing the sale price is a common solution. The low appraisal value will affect the way the lender views the home and the buyer’s ability to secure financing. Most purchase agreements are subject to financing and the buyer may have no choice but to back out of the agreement for that reason. The seller may be willing to negotiate to save the sale.

Buyer makes a larger down payment: The buyer may want the property badly enough to make up the difference between the purchase price and the appraised value.

The seller and buyer negotiate: The seller and buyer come to an agreement, both giving a little.

Dispute the appraisal: You may have reason to believe that the appraisal does not accurately reflect the value of the property based upon the comparables. Ask the lender for another appraisal.

Bottom Line: If the house is truly overpriced, the sales price should come down. Sometimes it takes a low appraisal to convince a seller that his price is out of line.

If you have questions about property values or mortgage financing in New Hampshire, call Charley Farley at (603) 471-9300 or e-mail charley.farley@weloannh.com.

Compass Mortgage Inc. - 172 Route 101 - Bedford, NH 03110-5416
Office Phone: (603) 471-9300 Fax: (603) 472-8811 Toll Free Phone: (877) 211-5300

Homebuying Made Easy®

Licensed by the New Hampshire Banking Department.
Equal Housing Lender | Member, New Hampshire Association of Realtors® | Member, Mortgage Bankers and Brokers Association of New Hampshire | Member, National Association of Mortgage Brokers (NAMB) | Federal Housing Commissioner Approved Lending Institution (HUD) | Agent, US Department of Veterans Affairs Home Loan Guaranty Services

"Homebuying Made Easy" and "NH First-Time Homebuyers Club" are registered trademarks of