Understanding the Home Appraisal Process

Both homeowners who are selling their home and potential buyers are often confused by the home appraisal process.  

Sellers often feel that their home is worth a certain amount especially if they upgraded their home, made improvements or added amenities.  On the other side of the process, a potential buyer may have found their dream home for X amount and wonder if the house is really worth that much. 
These questions and concerns are at the heart of home appraisals. 

At its core, an appraisal determines the value of taxable property or property that appreciates; such as fine jewelry, art, businesses and land.  A home appraisal is simply the opinion of a state-licensed third-party professional whose expertise is in determining the value of the land and buildings or structures contained on the property. 

In residential properties, the appraiser will usually compare the sales cost of other properties in the area.   However, the appraiser will also evaluate the lot size, square footage of finished and unfinished spaces, condition of the property and features like a garage or fireplace.

When it comes to home improvements, it is important to remember that there is no set amount associated with upgrades.  The appraised amount of any upgrade could very well be less than the cost the homeowner paid for the upgrade.  Again, appraisers will look to other properties in the neighborhood with similar upgrades to determine the value.

For example, a homeowner may spend $25,000 on a swimming pool but if the local marketplace can only support a $10,000 pool, then that upgrade will be marked on the appraisal as $10,000.  This is the reason why homeowners should choose their upgrades wisely.  

Lenders determine appraisal guidelines in order to force appraisers to attach a fair market value on a home based on comparable sales.  Comparisons are based on the most recent six months of market activity and often examine closed or pending sales of at least three similar properties.   This process prevents appraisers from over-valuing the home in question; a practice that some believe contributed to the 2007 housing bubble.  Recent Federal rules have been instituted to prevent lenders from having influence over the appraiser’s results by requiring non-interested third party services to select and communicate with the appraiser prior to its completion.

Although the home appraisal process protects the lender from unnecessary risk, it also protects the buyer from overpaying on a house. 

If you have any additional questions about the home appraisal process, please call Stuart directly at 410.491.0200 or email at septstein@baybankmd.com.

Mortgage On A Tight Deadline

We just received this from a recent client:

"I came to Stuart and his team about a possible mortgage on my first house only a few weeks before I was supposed to close. There was a tight deadline in place that we managed to hit. The experience that I had working with Stuart's team was excellent. They had my best interests at hand throughout the process and processed all of my paperwork quickly. I would suggest Stuart and his team to anyone because of their knowledge and professional approach while working with customers." – Matt McEwen

Contact our office today if you are in the market for a new home or re-fi. Call us at 410.491.0200 or email us at SEpstein@BayBankMD.com

Carrollton Bank and Bay Bank Are Tying the Knot

Banking on Positive Changes: Carrollton Bank and Bay Bank Merger

Carrollton Bank is excited to announce to our clients and future clients that the closing date for the merger with Bay Bank has been scheduled for April 19th.   Carrollton Bank has received the necessary regulatory approvals from the Office of the Comptroller of Currency (OCC).

Carrollton Bank’s current and future clients can expect the same great service and same great rates.  Carrollton Mortgage Services will be continuing business as usual especially as the housing market ramps up for the summer season.

Carrollton Bank and Bay Bank are coming together to create a new bank that will be in a better position to compete in the market.  The two holding companies will merge under Carrollton Bancorp and the banks will operate as Bay Bank.  The combined 12 branches will be able to serve a broader market.  The merger is a wonderful opportunity for both banks to become the bank of choice for consumers and businesses who want a bank with deep roots in the community.

Carrollton Bancorp will be a well-capitalized institution in good standing with our regulators.  In 2010 Jefferson Bancorp formed Bay Bank after purchasing the failing Bay National Bank.  This merger will pay off $9.1 million in Troubled Asset Relief Program (TARP) funding to the U.S. Treasury and remove both banks from the limitations imposed by this program.  This allows the new bank to better leverage successful services such as Carrollton Mortgage Services.

The new team of over 160 employees will have a broader reach in the community and the deeper management team will continue to build the bank into a top-tier bank in the region.  Carrollton Bancorp will have a strong Board of Directors made up of both Bay and Carrollton directors who are active in the business community in the region.
The Carrollton Bank and Bay Bank merger will combine the strengths of both organizations to provide better service to customers and be the go-to local bank in the community.

Look out for new exciting mortgage products coming soon!

If you have any questions, please call Stuart directly at 410.491.0200.

Lean Green Mortgages

Going green isn’t just a trend anymore; what started as a not-so-cost-effective environmental movement is now proving to have a twofold benefit, both to our wallets and Mother Nature.  

Most people want to save on their electricity bill.  Double-pane windows, low-wattage lights, better insulation, programmable thermostats, and smart appliances all contribute to reducing a home’s carbon footprint. 

But could an energy efficient home lower your mortgage payments?

The Institute for Market Transformation (IMT) partnered with the University of North Carolina in a study released on March 19th 2013.  The study found that Energy Star homeowners are 32 percent less likely to default on their mortgages.

The results of this study may prompt lenders to reduce the monthly mortgage payment when considering how energy efficient a home is. 

Lenders compare monthly expenses to monthly income when assessing lending risks.  For years, lenders assumed that smaller utility bills from energy efficient homes would reduce lending risk, but there was never any hard data to back up the claims.  Lack of study metrics, and small survey pools yielded inconclusive data. 

For the recent study, the IMT researchers looked at a real estate database from CoreLogic in order gather a sufficient sampling.  In an effort to make the study more controlled, researchers factored in metrics such as the borrower’s credit score, the size and age of the home, local unemployment rates, and local climate and energy prices.

The study examined 71,000 single-family, owner-occupied homes across 38 states and D.C. between 2002 and 2012.  Real estate statistics from California was unavailable due to privacy laws and the real estate data from Alaska and Hawaii deviates substantially from the rest of the continental US, so these three states were left out of the sample.    

Approximately 35 percent of the homes sampled were Energy Star-certified. 

The study measured loan default based on the percentage of homeowners who fell behind on their mortgage by 90 days or more.  Foreclosure laws differ from state to state making measuring default based on this indicator relatively tricky. 

The “urban legend” that lenders had assumed to be true, did indeed turn out to be true: homeowners of energy efficient homes were 32 percent less likely to default on their mortgage.   It is likely that having a couple of hundred extra dollars a month in a homeowner's pocket from energy savings could make well-insulated, tightly sealed homes a safer bet for banks.

However, there could be other factors contributing to these results. Since these homes tend to be more expensive, it is possible that a person who pays a premium for an energy efficient home may also be someone who is already more financially stable or astute than a conventional home buyer, even despite the fact that the study factored in a homeowner’s credit score,

Ultimately, this report could benefit homeowners looking to lower their mortgage. Lenders could better assess risks and offer attractive rates to encourage people to buy efficient homes. 

If you have any questions about this topic, don't hesitate to contact us. You can call us at 410.491.0200 or email at septstein@baybankmd.com.