Mortgage Basics


Appraisal Essentials with Brick Mortgage in Arizona

Embarking on the journey to homeownership can feel overwhelming, but it doesn’t have to be when you have trusted experts by your side. At Brick Mortgage, led by Jared Halbert, we guide you through every step of the Arizona home loan process. One of the crucial stages you'll encounter is the home appraisal, a pivotal factor in determining the value of your prospective home and how much you can borrow.

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An appraisal is a professional assessment conducted to determine the market value of a property. This process is generally required by lenders to ensure that the loan amount requested by a homebuyer is appropriate based on the home's value. An unbiased, licensed appraiser carries out this assessment, considering various elements such as the condition of the property, the value of similar homes in the area, and market trends.

Do I Need An Appraisal?

The short answer is, yes. An appraisal is typically a mandatory requirement when securing a home loan in Arizona, whether you're looking to purchase a new home or refinance an existing one. Brick Mortgage, headed by expert mortgage broker Jared Halbert, strongly advocates for the appraisal process. It serves as an essential protective measure for both the lender and the homebuyer, ensuring that the loan amount is aligned with the property's actual worth.

The appraisal process safeguards your investment by preventing you from overpaying for a property. It's a critical step that provides financial clarity and peace of mind, both of which are integral to the client-first approach that Jared Halbert and Brick Mortgage offer to all Arizona homebuyers.

    There are 3 common approaches, or Appraisal Methods, used by Appraisers to establish property value. After thorough exercise of all 3, a final value estimate is correlated. When evaluating single-family, owner-occupied properties, the Sales Comparison Approach is heavily weighted by an Appraiser.

    1. Cost Approach – A formula is used to obtain the property value: Land value (vacant) added to the cost to reconstruct the appraised building as new on the date of value, less accrued depreciation the building suffers in comparison with a new building.
    2. Sales Comparison Approach – The Appraiser identifies 3 to 4 comparable comps, recently sold properties in the neighborhood, ideally, sold in the previous 6 months and within ½ mile of the subject property. A comparison is done between the recently sold properties and the subject property including square footage, number of bedrooms and bathrooms, property age, lot size, view, and property condition.
    3. Income Approach – The potential net income of the property is capitalized to arrive at a property value. Capitalization is the process of converting a future income stream into a present value. This approach is suited to income-providing properties and is used in conjunction with other valuation methods.

    The mortgage company owns the appraisal even though the borrower paid for it. This is because the mortgage company orders the appraisal on the borrower's behalf, and the Appraiser lists that mortgage company on the report. The borrower does have the right to receive a copy; however it's the mortgage company's discretion to give the borrower the original appraisal report.

    Yes. In most cases you will not have to pay for another appraisal if you change your mortgage company, and depending on the loan program typed, the first lender can transfer it to the new lender. Some appraisal firms may charge a small fee because additional clerical work is required to reflect the new mortgage company; this is called an "Appraisal Retype Fee". The original mortgage company has the right to refuse to transfer the appraisal to another lender. In this case, a new appraisal is needed.

    The property seller sets the price, especially for residential property, not the Appraiser. Sellers usually don't order an appraisal because they want to obtain the highest price for their home and therefore don't want to be bound by the Appraiser's assessment.

    The real estate agent receives a percentage of the price as compensation and often represents the seller in the transaction and assists them in setting the sale price. They perform a Comparative Market Analysis (CMA), which real estate agents in most states are allowed to perform without an Appraiser's License or Certification. The CMA is vital to the agent's preparation for a listing examining recent property sales in the neighborhood to arrive at a listing price. Typically the agent will suggest a price to the seller based on the CMA however the seller may choose to list their property for a higher price.

    It's to your advantage to help the Appraiser perform the assessment by providing additional information:

    • What is the purpose for the appraisal?
    • Is the property listed for sale, and if so, for what price and with whom?
    • Is there a mortgage? And if so, with whom, when placed, for how much and what type (FHA, VA, etc.), at what interest rate, or other type of financing?
    • Are any personal properties or appliances included in the property?
    • With an income-producing property, what is the income breakdown and expenses for the last year or two? A copy of the lease may be required.
    • Provide a copy of the deed, survey, purchase agreement, or additional property papers.
    • Provide a copy of the current real estate tax bill, statement of special assessments, or balance owed on anything, i.e. sewer, water, etc.