What Can a Real Estate Appraisal Do For You?
What is PMI and how to get rid of it
Assuming a decent credit rating, any potential home buyer can secure a loan for a house. Why? Because these transactions are secured by a very valuable asset: the home itself. If a borrower defaults on a loan, the risk for the lender is often only the difference between the value of the home and the amount outstanding on the loan, less the amount it costs them to foreclose and resell the property. For this reason, lenders are very wary of lending more than a certain percentage of a homes value. Traditionally, this has been 80 percent. The cushion this provides the lender helps ensure that their losses from loan defaults are kept to a minimum.
In recent years, however, it has become increasingly more common to see home buyers using down payments of 10, 5 or even 0 percent. Naturally, loaning this much presents the lenders with a lot more risk. To offset this risk, these transactions often require Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower defaults on the loan, and the value of the house is lower than the loan balance.
PMI has been a large money-maker for the mortgage lenders. The amount of the insurance often $ 40- $ 50 per month for a $ 100,000 house is commonly rolled into the mortgage payment. Given the size of the overall payment, this additional fee is often overlooked. Homeowners continue to pay the PMI even after their loan balance has dropped below the original 80 percent threshold. This occurs naturally, of course, as the home owner pays down the principal on the loan. On a typical 30-year loan, however, it can take many years to reach that point.
Until recently lenders were under no obligation to tell home owners when they had reached a point where the PMI could be dropped. That all changed in 1999, when the Homeowners Protection Act took effect. In most cases, this law now obligates lenders to terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook a little earlier. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent!
It is important to note that this law only applies to home loans either first time or refinances that closed after July, 1999. Also certain other conditions must be met, such as being current on the loan payments. Buyers that purchased before July 1999 can also have their PMI removed, but they must initiate the process and though the lender is under no obligation to do so, most will.
Of course, there is another way that home owners equity can reach beyond the 80/20 percent ratio. Many areas of the United States have seen significant gains in the value of real estate over the past decade. In fact, certain areas have seen appreciation levels of 100 percent or more. Even those people living in areas with more modest gains may find that the value of their property has quickly grown to the point where the amount of principal they owe on their loan is less than 80 percent of the homes current value. Again, in these cases, the lenders are under no legal obligation to remove the PMI. In most cases, however, as long as the home owner has been prompt on their loan payments and dont represent an exceptional risk, the lenders will agree to remove the extra fees.
The hardest thing for most home owners to know is just when their home equity rise above this magical 20 percent point? A certified, licensed real estate appraiser can certainly help. It is an appraisers job to know the market dynamics of their area. They know when property values have risen or declined. Many appraisers offer specific services to help customers find the value of their homes and remove PMI payments. Faced with this data, the mortgage company will most often eliminate the PMI with little trouble. The savings from dropping the PMI pays for the appraisal in a matter of months. At which time, the home owner can enjoy the savings from that point on.
Assessment appeal services
Most locales determine your property tax burden based on an ad valorem valuation of the property's value. Sometimes, as a property owner, you get an unwanted surprise in the mail telling you your taxes are going up, and sometimes it may seem as though your assessment is too high.
It is common knowledge that in many areas values are in a decline. It is possible that homeowners who have recently purchased their homes are being assessed above market value due to the declining property values in some areas. Of course every case is different and it is recommended you consult an appraiser or a local real estate professional for input on current market trends in your area.
Often, matters like this can be resolved with a phone call. However, if after considering your assessment with your local taxing authority you still feel as though your property was overvalued, a professional, independent, third-party appraiser is often your best bet in proving your case. That's where we come in. There are as many different procedures for appealing assessments as there are property taxing districts, so it's important to enlist the help of a professional appraisal firm that's experienced and trained in the ins and outs of your particular jurisdiction.
Please note: It makes sense to do your own research before determining whether to go forward with a property assessment appeal, especially before you make the decision to hire a professional appraiser. However, according to the Uniform Standards of Professional Appraisal Practice (USPAP), we are not allowed to take "shortcuts" – ie, your research – and use it on its face as part of our independent evaluation. When you hire us for an assessment appeal, you're commissioning an independent, third-party professional appraisal report. As such we do our own evaluation, beginning to end. If you're right that your property has been overvalued, an independent report such as ours will be even more persuasive than any other evidence you can marshal on your own. But it depends on our ability to do the work independently.
Sometimes, you will have a hearing on your assessment appeal and will need for the appraiser you've hired to testify on your behalf. Be assured that at INFINITY APPRAISAL GROUP, LLC, we are able to professionally testify at appeal hearings. Browse our website to learn more about our qualifications, expertise and services offered.