Susan McCall

Q and A about Inspections and Appraisals

Question

 Hi Susan,

I have a few ideas rolling around in my mind :) So back to the super old farm house that I first sent you. Since there was an offer before then does that mean there would be an inspection report available? And is it kept with the county or the inspector?
And what about an appraisal? Are those things kept secret or can the public access them? I am wondering if the house is salvageable and/or is the value in the lot without the house? Since there was an offier would it be possible that there is an inspection and the appraisal?      "T"

Answer

The inspection and the appraisal are paid for by the buyer.  The bank (or investor, or mortgage company) is the beneficiary of the appraisal even though it is the buyer's responsibility to pay for it. 

This would go for the inspection also.  The buyer hires an inspector to decide if the house is worth buying, and if so, what the condition of the property is.  I had a buyer back out of a sale, after having the inspection completed.  There were just way too many things that needed to be addressed and there was no extra money, outside the mortgage payment - taxes - insurance, for this buyer to take this on. 

About a week later another buyer came along and and the listing agent gave the new buyer's agent my phone number and told them there was an inspection report.  So I called my buyer and asked if it would be OK to share the report (already paid for). We discussed the request.  There was no benefit to either my buyer or me to share this (other than being nice).  In my case it would have taken time and an addendum/disclosure signed by all parties involved.  The reasons are many for having everything is writing, mainly fiduciary for my real estate license and to protect everyone involved. 

For instance, when you have an inspection completed by a professional inspector, there is a 2 or 3 page contract that is presented before the inspection will take place.  This is to protect the inspector basically for anything that may arise later.  (For instance, what if the inspector "missed" some dry rot that was not evident until the new owners moved in and discovered this problem)?  If this report were shared with anyone other than the person that signed the contract, it is possible to have consequences down the road.

Some agents are chatty and will share information.  There is a law that if a seller is made aware of a problem they are required to disclose the deficiency or problem in a disclosure statement.  This is usually sent out after an offer is accepted, although some sellers or their agents may disclose deficiencies up front.  This basically saves everyone a lot of trouble in the beginning.

As far as an appraisal, this has become a very interesting phenomenon in the last year or so.  The quantity of foreclosed properties is driving down real estate values, especially in certain neighborhoods where there is a lot of newer construction.  Many of these homes were purchased at the height of real estate values skyrocking and financed with 100% loans with Adjustable Rate Mortgages.  These ARMS are now resetting after a few years and homeowners are unable to make the increased payments. Therefore it is basically difficult to refinance these homes since the value is less than it was when purchased a few years ago. 

There is a new loan out there that will allow a refinance at 105% of the appraised value for persons and properties in this predicament, i.e., those homeowners who want to keep their homes and move into a fixed rate mortgage.  I have heard reports that most of those buyers that took out these risky ARMS could actually have contracted for a fixed rate, except for the fact that certain mortgage brokers or banks made more money on these riskier products and so promoted them vigorously.

I had an appraiser value a property for some buyers at $1,000 below their bid price.  (I think this was a personal thing and had nothing to do with the actual property.  It took a whole day of "ME" doing another appraisal and transmitting comparable properties for an "appraisal review" to the bank to justify the value). Appraisers have all kind of formulas that they plug in to arrive at a value.  But real estate values right now are a moving target and changing daily so it all comes down to an opinion.  There is deinitely an art to appraisals and different appraisers specialize in different kinds of properties.

Mortgage brokers almost always had their own appraisers that they knew well and had a working relationship with.  (I'm sure there were brokers/appraisers that did things that were not legal to justify a loan). There has recently been a law passed about by the State of Oregon on how an appaiser will be selected.  It is my understanding that mortgage brokers have the opportunity to select 4 or 5 appraisers that they work with on a regular basis and keep this list as an official list in the office.

A really good way to get an idea of the land value is to look it up on www.portlandmaps.com, or other websites for the different counties.  The improved value is different than the land value.  I just looked it up and the real market value is listed at $373,100, with the land valued at $245,390. It is zoned commercial and backs up to a busy street which may explain why the list price is  low and ithe property s not selling.  Check it out.  There is a photo available and you can see a major parking lot at the back side of the property.