Real Estate

An apartment building can still be a good investment today. Why? For starters, there are still a lot of people who are still looking for homes to rent. In addition, the units of an apartment building do not just have to be spaces for residence or homes for families and individuals. By getting the right permits, units in an apartment building can be rented out as commercial spaces.

First-time buyers of apartment buildings will certainly have high expectations regarding this particular investment. This is mainly because they will invest a significant amount of money for this venture. As such, if you want to make sure you will own the right apartment building that can help you find success in the field of property rentals, make sure you avoid these common (and costly) rookie mistakes:

Not looking into the history and reputation of the apartment building’s builder or developer.

As a first-time owner of an apartment building, the last thing you want to happen is to stumble upon some structural problems or system failures. As such, it is important to check the background, capability, and reputation of the company that constructed the whole property. Going online and asking companies or individuals that have worked with the property developer is a good way to get some ideas about their competency. If the property developer has a good reputation and has stellar reviews about the properties they built, chances are, it is quite safe to buy a building that they constructed.

Buying a property that is located in an unpopular area.

When purchasing an apartment building, keep in mind that aside from your budget, an important factor you have to consider is its location. Real estate experts say that it is a good idea to buy a property in an area that is improving since buying in a declining location will simply result in high vacancies and rent drops.

Not having sufficient cash flow and reserves.

As a newbie investor, if you are not confident with your reserved funds, you have to get into deals that will create a quick cash flow only. Avoid going into deals that won’t provide a cash flow from day one even if that transaction promises a huge potential profit since you may be put at risk of being unable to pay the bills.

In addition, make sure you have enough cash reserves. Failure to do so can get you involved in different complicated situations. As a property owner, keep in mind that a lot of unexpected issues can happen. As such, you need to have a reserve fund that is adequate to pay for these emergencies.

Real Estate

Want to learn how to deal with a low home appraisal? In a competitive real estate market, a home being sold may enter into a multiple offer situation which could potentially raise the purchase price above the comparable sales in the area. In a situation like this, it is possible that the home appraisal for the buyer’s mortgage lender will come in lower than the purchase price. In a real estate market that favors buyers (home prices are soft or declining), sellers can also face a home appraisal that is lower than what they paid for the home if they bought the house at the peak of the market. Be aware that a low home appraisal can happen in any type of real estate market.

Why Do Low Appraisals Happen?

Here are a few reasons why a home appraisals may come in low:

  • Inflated home price because of multiple offers.
  • Declining real estate market due to a large inventory of homes and not enough buyers.
  • The seller has overpriced the home.
  • The real estate appraiser lacks experience and doesn’t understand the influences on value.
  • The real estate appraiser incorrectly selected his comparable sales for his report which may have resulted in a lower home value than what should have been assessed.

Solutions for Low Appraisals

If a low home appraisal is threatening to sink your sale, purchase or refinance, stay calm, here are a couple solutions:

    • The buyer can pay you the difference between the purchase price you agreed upon and the appraised price in cash, you can sell the property for the appraised value and get the difference from the agreed upon higher price in a lump sum cash payment if the buyer is able to do so.
    • If you are the seller of the home you do have the option of lowering the selling price. If you don’t you will run the risk of every buyer running into the same problem and not being able to get a mortgage because of a low appraisal.
    • The seller can offer to carry a second mortgage for the difference.
    • If the buyer feels they absolutely have to have your home and you are not willing to lower the selling price and the buyer cannot come up with a lump sum to pay you (as mentioned in option 1) you could accept having them make payments to you over a period of time instead of the lump sum.
    • Get a second opinion, have the buyer ask the mortgage lender for a list of their approved appraisers and select another company on this list and hope for a higher value, you could end up wasting another $300 on an appraisal but appraisers are not perfect and a mistake could have happened.
  • Cancel the transaction.

Have your realtor put in your purchase and sale agreement a loan contingency that if the home appraises for a lower value that you will get your money back (if you’re the buyer). If you are a seller being affected by a low appraisal propose on of the above options to your buyer if you would like to try and salvage the transaction.

Real Estate

A home appraisal is a critical component of any real estate transaction that involves a mortgage loan. If you are refinancing you will need an appraisal, if you are selling your home to someone that needs to get a mortgage, he or she will need to have an appraisal done.

What Is a Home Appraisal?

A home appraisal is an opinion on value by a qualified, unbiased third party. Mortgage lenders require an appraisal to be completed when you are refinancing your mortgage. An appraisal is also completed in a transaction when someone is buying a home to make sure they have not over paid for it.

Mortgage Lenders require appraisal to ensure that homeowners are not over paying for a property because if the borrower stops paying for the mortgage the lender will take action to remove the borrower from the home and sell it to recoup their money, this is why it is important for the home to be worth more than the money loaned. In essence, a home appraisal is a lawyer of protection for the mortgage lender.

The Appraisal Process and How Appraisal Values Are Determined

These are the main factors that influence your home’s appraisal value: current market trends which are reflected in the comparable properties the appraiser selects, the house’s features,, square footage, number rooms/bedrooms & bathrooms, condition, is the property considered up to date, landscaping and exterior condition and parking (garage). The appraiser will do an interior and exterior inspection for the above noted factors and will also make note of any deferred maintenance which will be included in the report for the lender.

The appraiser will complete his report on a standard report form that is required by their appraisal jurisdiction. The information that has to be included in an appraisal report will not vary much from Canada to the United States.

A standard report includes the following: comparable sales, a street map, building sketch, square footage, photos of the front, back and street scene of the home, photographs of each comparable property used; a map showing the location of the comparables in relation to the subject property, plot map, description of intended users of the appraisal report, photo and description of each room in the house.

The cost of a residential appraisal report ranges from $250-$500 and the homeowner is typically responsible for paying the appraiser..

What Homebuyers Need to Know

When you’re buying a home an appraisal could potentially sink your deal. If you make an offer to purchase a house, towards the end of the home buying process your mortgage lender will require that the home being purchased be appraised. If the home appraises for less than your offer to purchase the lender will not provide the loan, however, this could be good for a buyer as well because you may be able to negotiate to lower purchase price but very often at the point of the home appraisal in the buying process an agreement of purchase and sale is already in place.. If a bad appraisal is standing between you and your home purchase, look into getting a second opinion via a second appraisal. Appraisers are not perfect and it is possible for them to make mistakes.

What Home Sellers Need to Know

As a seller, a low appraisal means that you may have to lower your home’s price to get it sold. Lenders won’t approve loans for more than a home is worth, and holding out for an all-cash buyer who doesn’t require an appraisal as a condition of completing the transaction is unlikely to net you a higher sales price. No one wants to overpay for a home but more importantly a mortgage lender will not over lend on the value of a property, therefor if the appraisal comes in lower than what your buyer is offering this will likely sink your deal unless you lower the price.

What Refinancing Homeowners Need to Know

If you’re refinancing your mortgage and looking to access some of the equity in the home the appraised value is very important. Mortgage lenders will have maximum loan to value ratio that they will go up to so the larger the difference between what you owe on your current mortgage and what the home is appraised at obviously the better. Having a better loan to value ratio will also make obtaining the lowest possible mortgage rates possible. Lenders put a lot of emphasis on this ratio so a high appraisal value is very important.

The Bottom Line

The home appraisal is a very standard process these days in any real estate transaction involving a mortgage loan, it should be taken serious, you should know how the appraisal works and what the value is based upon, if you feel your home is undervalued you can speak with the appraiser and make your case or get a second opinion.

Real Estate

Independent house valuation is one method which is being adopted by those who are willing to buy or sell a house. This is one method, which gives them a clear and comprehensive idea about the value of the property with regards to the market rate. Most of the people are not aware about the technicalities that go in when it comes to house value assessment; however, most of them know that is an important thing to do while buying or selling a property. When it comes to know the value of properties, there are numerous aspects which need to be considered. In the following sections, an insight will be presented on house valuation.

Income Method – What is it?

This is one method which is used for the property valuation. Here the total worth of a property is being estimated based on the revenue potential. The income which is calculated can either be generated as rental income or from re-selling the property. This is quite a complicated method; however, it is quite frequently being used by the investors when they are to fix a value on a property or when it comes to assessing the profitability of their investment in the days to come.

Certain assumptions need to be made and one needs to rely on them in order to come to an accurate conclusion using the income method. Here are the assumptions that are required to be made:

• Property Resale Value: This includes assuming the value which the property is likely to yield if it is being resold. Various factors need to be taken into consideration while assessing the resale value of a property.

• Income which is likely to be generated from Rent: This is another area which needs to be assessed. As mentioned, income from rent plays an important role while using the income method for property valuation.

How a Property’s Value is being calculated?

In order to get a better idea about the Independent house valuation, there are various assumptions and considerations which are needed to be made. This type of valuation comes into the picture when the generated income is set against the invested capital in order to find out how much profit can be generated by re-selling the property. One very common method which is being used to estimate the profit which is likely to be generated is by comparing the value of the property in question with the same type of capital expenditure or investment of similar nature.

Calculating the risk factors are perhaps the most difficult thing to do when it comes to ascertaining the value of a property. Though some sort of idea can be gained by having a look at the past market trends; however, it is very difficult to predict the nature of the property market in the days to come. Hence, it is wise to take the help of the valuation experts to know the actual worth of your property.

Before buying a property, selling it, hiring a property or giving out your property for rent, get it evaluated perfectly. For this one of the best companies you can find is Valuations.