Real Estate Appraisals - Frequently Asked Questions

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The real estate appraisers of The Jordan Real Estate Group are trained property valuation professionals. Subscription to all local MLS services, on-line flood and tax databases, coupled with state of the art appraisal technology allows for fast, accurate appraisals. Our appraisers live in the communities where they work allowing for extensive market knowledge ensuring accurate property valuations.

All residential real estate appraisals done by The Jordan Real Estate Group are Appraiser Independence compliant and come with the The Jordan Real Estate Group
Appraiser Independence seal of approval.

Fair market value is defined as "The most probable price in terms of money that a property should bring in a competitive and open market under all conditions requisite to a fair sale, assuming a buyer and seller, each acting prudently, and assuming the price is not affected by undue stimulus." Implicit in this definition is the sale as of a specified date and the passing of title from the seller to the buyer under the following conditions:

• Buyer and seller are typically motivated.
• Both parties are well informed and acting in what they consider to be their own best interest.
• A reasonable time is allowed for exposure in the open market.
• Payment is made in cash in U.S. Dollars or in terms of financial arrangements comparable thereto.
• The price represents a normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

A few examples of property transfers that may NOT be considered Fair Market sales include Foreclosure Sales, Distress (Quick) Sales, Relocation Sales, Estate Sales, Non-Arm’s Length Transactions and Illegal “Flip” transactions.

Per Fannie Mae guidelines, all rooms below grade are considered basement area and cannot be included in the above grade square footage area or room count. This does not mean the basement finish and amenities are given no consideration in the Opinion of Value. Consideration for the basement’s finished rooms and amenities are included within the “Basement” sections of the Market Analysis and Cost Approach.

Many people believe you cannot call a room without a closet a bedroom. Not true. Construction practices were different when some older homes were constructed. The appraiser will consider the lack of a closet in a bedroom to be Functional “Curable” Obsolescence. In other words, if a closet can be constructed for $500 the benefit of the expense outweighs the detriment of not being able to classify the room as a bedroom.

When appraising a property the appraiser must take into account all positive and negative features that would impact an Opinion of Value. While property values tend to rise when there are significant renovations, the value of a property will be negatively affected when deferred maintenance (needed repairs) are a factor. A competent appraiser will assess what repairs need to be made to bring the property up to neighborhood standards and calculate the cost. Interesting note: all estimates must include the cost of materials and labor even if the borrower(s) plan to make the repairs themselves.

The professional appraisers at The Jordan Real Estate Group analyze all market factors and provide a well supported and documented Opinion of Value. We help you get your loan to the closing table!

We find clients still using the term "Recertification of Value". Order an “Appraisal Update” to obtain a report which states the prior value is still accurate. The phrase “Recertification of Value” is no longer used within the appraisal industry.

When the property value and mortgage amount are “upside down” there is a higher mortgage on the property than the property is worth. A short sale occurs when the lender accepts a reduced mortgage payoff to satisfy the existing debt.

The need for a short sale exists when the seller(s) cannot meet the mortgage obligation and there is no equity in the property. Rather than foreclose on the property the lender accepts a reduced payoff.

Are short sales fair market sales? Yes and no. One or two in the immediate market area would not make them typical. However, if the market is dominated by short sales they would be deemed fair market sales and valid comparables. On most occasions the short sale price is reflective of current neighborhood values. In most cases, the current lender has an appraisal completed to determine market value before agreeing to the short sale price.

Over the past few years underwriting requirements have increased dramatically. The lending community will no longer just accept three closed comparable sales. Appraisers are required to provide pending sales and active listings to demonstrate market trends. This is done to give the lender a better understanding of market conditions to aid them in their lending decision.

There is significant logic attached to listing analysis. If sales from the prior 12 month period show a market value for a given property to be $300,000, but there are active listings and pending sales for $280,000 - $290,000, the current market value cannot be $300,000.

If there are similar active listings lower than prior comparable sale prices the opinion of value would be lower than prior market sales. A potential buyer could buy a similar property for less today than the prior comparables’ sales prices. An appraisal is based on what a property could sell for on the effective date of the appraisal (date of inspection) and is a snapshot in time.

The professional appraisers at The Jordan Real Estate Group analyze all market factors and provide a well supported and documented Opinion of Value. We help you get your loan to the closing table!

The length of time a property sits on the market is called Days on Market (DOM). This statistic is used to analyze marketing time within a particular market area.

The DOM is typically required on appraisal reports but is not always a reliable indicator of trends. Many properties are “re-listed” after being on the market for a period of time to give the impression they are “fresh” listings. Numerous MLS systems have no provision for this and the DOM goes back to zero. Therefore, DOM statistical data is not always accurate. It is possible for a market that is experiencing a glut of housing inventory to still report an average DOM under 90 days.

Supply is the available inventory on the market with Demand being the number of buyers who are willing to purchase the inventory. There have been changes in buyer/seller behavior over the past few years. Bidding wars no longer exist; nor listing a property 10% higher than the last sale in the development. Buyers want a “deal” but are really unsure what defines a good deal. Sellers are still hanging onto values from the past. High LTV’s and declining values have left many in the position that they need to come up with money to sell their home.

The professional appraisers at The Jordan Real Estate Group will analyze the supply and demand within a particular market, as well as all market factors, and provide a well supported and documented Opinion of Value.

The larger the existing inventory, the longer the marketing time. Longer market times tend to lower values since it gives buyers the ability to negotiate for choice properties. When looking at Supply and Demand we analyze the absorption rate.

Absorption rate is a number which represents a particular market’s ability to sell the current inventory based on supply and demand in a given time frame. Absorption rates can be calculated monthly, quarterly or yearly. To determine the absorption rate review the number of comparable sales in a given time frame and analyze how many months of inventory are currently on the market based on that data.

Example:
Time Period: 12 Months
Number of Closed Sales: 48
Absorption rate per month: 4.0 (Number of Closed Sales/12)

Number of current Active Listings: 30
Number of Months inventory/Supply: 7.5 months (30/4)
(Number of Listings/Absorption Rate per month)

The professional appraisers at The Jordan Real Estate Group analyze all market factors and provide a well supported and documented Opinion of Value. We help you get your loan to the closing table !

Salability – Preserve the continued marketability of the property
Safety – Protect the health and safety of the occupants
Security – Protect the security of the property (security for the FHA insured mortgage)

Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants. Repairs falling outside of the FHA guidelines which have an impact on value still need to be considered within the opinion of value, but may not be a condition of the loan.

The professional FHA appraisers at The Jordan Real Estate Group analyze all market factors and provide a well supported and documented Opinion of Value consistent with FHA underwriting guidelines. We help you get your loan to the closing table!

View our full line of title insurance and closing services. We also have an extensive list of title insurance and closing frequently asked quesions.

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