The appraisal is the single most important step in the reverse mortgage process. It is also the part of the process that we have NO control over. A third party FHA appraiser will be blindly selected to visit your property and determine an appropriate fair market value for your home. This value that is calculated will ultimately determine how much money you will have access to.

 

NOTE* Once an appraised value is assigned, it is very difficult to have that value changed. Also, that value will stay with the property for any FHA proposes for 6 months.

 

HOW DOES AN FHA APPRAISAL WORK?

 

An appraiser will first visit your property. They will notate the number or rooms, the size of your home, the overall condition of the property, and any additional features that will add or subtract value.

 

The appraiser will then research other homes in your area that have sold recently (usually six examples), and compare those sales to your home as far as size, features and condition. Then, based off the sales price, they will either add value to that sales price, or subtract value from that sales price based on how your home compares to that example. After running that analysis on all examples, the appraiser will then average out the values to find a “fair market” value for your home. That will be the number we are required to use as we move forward with the reverse mortgage

 

*NOTE: Don’t be surprised if the appraised value comes in lower than you may be anticipating. Since we all have an emotional attachment to our homes, we often see value in our homes, that may not be represented by comparable sales. The appraiser must separate emotion from the numbers, and base the value solely on comparable sales.

 

CONDITION OF THE PROPERTY

 

One of the biggest hurdles I run into with appraisals is the condition of the house. The home must be kept in good condition, and the FHA has some very specific things that they will look for. If the appraiser comes across any potential condition issues, they will require you to remedy those issues prior to them signing off on the appraisal. Here is a list (not inclusive) of some of the more common issues that I have come across:

           

• Peeling Paint: This is the most common condition that I see come back from the appraisal. If your house has any sort of peeling paint, I would recommend having it scraped and painted before the appraiser goes out to the property. This will avoid a re-inspection fee and a delay in the process.(*note, the paint does not need to match or look pretty, it just can’t be peeling)

 

• Leaking Water: They will inspect all faucets and shower-heads, as well as look for signs of any leaky pipes. (they will look under the house, in the attic, or in the basement to inspect these as well.

 

• Water Damage: If there is existing water damage from a previous issue, they will want proof that the cause of the issue has already been remedied.

 

• Down Spouts: Make sure all down spouts are attached and draining water away from the property.

 

• Ground Grading: There must be appropriate grading near the foundation of the house to make sure water is not draining towards the foundation.

 

• Smoke Detectors/CO2 Detectors: Make sure your alarms are up to code and in working condition prior to the inspection.

 

• Railings: Make sure you have sturdy, attached railings on all porches and going down stairwells.

 

• Foundation Issues: The inspector will check to make sure the foundation of the property is up to FHA code and standards.

 

• Any other health and safety issues.

 

WHAT DO I DO IF I NEED REPAIRS, BUT WAS PLANNING ON USING THE REVERSE MORTGAGE TO HELP FUND THEM???

 

This is a common problem that I have often run into. With many clients, their homes have fallen into slight disrepair due to lack of disposable income. They often plan to use the proceeds of the reverse mortgage to update and repair their homes. If you fall into this category, you may need either pay for the work upfront, and recoup the costs at closing of the loan, or find a contractor that is willing to delay receipt of payment until after the loan closes.

 

Here is a link to a company that will work with homeowners in these situations:

https://www.curbio.com/

 

*note: ReverseWithPreston, Premier Mortgage Group, Cherry Creek Mortgage, and 1st Reverse Mortgage USA does not specifically endorse this company or any of its affiliates.