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Alternatives to Mortgage Appraisals

Contrary to what your lender may want you to believe, appraisals are not necessarily required.

As stated by Mortgage Insurance Companies of America (MICA) the Private Mortgage Insurance Association . . .

"your lender must be satisfied that the property value has not declined".

There are a myriad of ways you can prove to your lender that not only has your property not gone down in value but has appreciated considerably.

  • Your Home Value
    Understanding what your house is worth can help you remove PMI.
  • What Makes Property Values
    When you bought your house, you bought it for it's inherent value. Inherent value is what attracted you to your new home, ie. architecture; quality of construction; square feet; landscaping; etc. But property value, or market value, depends on many other factors.
  • Direct Factors
    Efficient utilities, adequate resources and a thriving business district usually translates into healthy property values.
  • Improvement (Sweat) Equity
    Before and after pictures with receipts work well.
  • Appreciation Equity
    Current tax appraisals are your best bet, however, sales of comparable homes in your area may be satisfactory.
  • Neighborhood
    Low crime rates, attractive well kept and well-located areas usually appreciate steadily in market value.
  • Schools
    Proximity of good schools raise value of real property.
  • Amenities
    Close proximity of parks; bike paths; libraries; shopping centers; hospitals; fire; police; convenience stores enhance value.
  • Transportation
    Whether it's public transportation, near an exit to a freeway, or close to a thoroughfare or boulevard can be a plus.
  • Indirect Factors
    A rising economy lifts most real estate prices and boosts sales.
  • Demographic Changes
    As more new jobs in the area open up, demand for housing subsequently follows suit - driving up prices.
  • Comparable Sales Prices
    The most reliable indicators of current market value are pending and closed sales (within 6 months) of properties similar to yours.
  • Comparisons
    Bear in mind that comparisons are based on local sales and prices at one point in time and may not reflect other issues affecting your equity.
  • Market Conditions
    Find out how long recently sold comparable properties were on the market before they sold. The shorter the time frame, higher is the perceived value.
  • Square Footage
    Use square footage to compare your price against comparable listings and recent sales. For example: if you have 2000 sq. ft. and you estimate your property value at $200,000 - that is $100 / sq. ft. How much per square foot have nearby properties sold for?
  • Land
    The size and location of your lot may play a vital role in pricing your property. A corner view lot goes for more than a middle of the block lot.
  • Features
    An extra bath, deck, hot tub, RV/boat parking, separate entrance, and extra storage will drive the value up as well.
  • Low Interest Rates
    Low interest rates drive demand, which pushes up prices and equity.
  • Demographics
    Large influx of buyers (baby boomers) causing demand on housing can force prices up at a rate higher then inflation.
  • Question:
    Where can I go to find out what the appreciation rate is?
    Answer: U.S. Department of Commerce tracks home sales and construction. The National Association of Realtors monitors home resale prices. Ask your librarian for information that suits your needs best.

"It takes a phone call, a letter, and sometimes, but not always, an appraisal."
Scott Veitch of F&M Bank (Tulsa Times 10/2001)
"If the lender balks (about getting an appraisal) you may want to suggest that you will refinance with another company if they are not willing to help."
Andrew Jacob, Pres. World Wide Financial (Money Magazine 10/1998)

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