The Appraisal Report is given to everyone who is applying for a mortgage loan, but the type of report can vary based upon the type of mortgage you are applying for. The Standard “full blown” appraisal report contains tons of important information on the front page – but most folks simply flip to the 2nd and 3rd pages to find out how much the home appraised for.
In looking at the comparable sales, and the final value assigned, it’s important not to miss the Description of Property Conditions listed on the bottom of the first page. Reading and understanding the Property Condition Rating on the first page, allows you to understand what the Appraiser is putting value to – and how he is comparing your property to others in the nearby area.This is all especially important to understand, not only so that you feel confident you are getting the right price for the home, but also you can see what closing costs are typical for Sellers to pay in the area you are buying.
How to Read The Property Condition Rating On An Appraisal
In the bottom section of the first page of the Uniform Appraisal Form you will see the Improvement Section, that describes the general “improvements” made to the raw land that the home is on. This section includes:
- General Description
- Type of Foundation
- Exterior Description
- Interior Description
- Number of Rooms
- Square Footage
- Description of property conditions (including needed repairs, deterioration, renovations, remodeling, etc.).
One place that mistakes sometimes occur with an appraisal is the Square Footage. Various areas of a home can be calculated for square footage differently. For instance, a loft area, or galley way might be calculated as partial square feet.
A 3rd floor or basement with separate heating and air conditioning will be figured differently as well. Therefore, the first thing to always check, when reviewing your appraisal is the actual calculation of the square footage of the home.
Explanation of Physical Condition Codes on Detailed Property Description
Physical Condition is a rating system that is based upon the Appraisers Judgement when going through the home. In an abbreviated appraisal report, the appraiser does what is called a “drive by” and therefore they have not inspected the interior of the home to compare condition – or upgrades.
The Property Condition Rating on an Appraisal is also intended to reflect the overall physical condition of the dwelling and considers the level of maintenance that you would normally expect to find in a dwelling relative to its age.
The physical condition of the home is used as a factor in calculating depreciation and determining the best comparable sales.
In North Carolina There are 11 categories available in the Property Condition Rating on an Appraisal Scale: EX-Excellent, VG-Very Good, GV- Good to Very Good, GD-Good, AG-Average to Good, AV-Average, FA-Fair to Average, FR-Fair, PR-Poor, VP-Very Poor, DL- Dilapidated.
A North Carolina home with a physical condition rating of AV (average) is a house that shows signs of normal “wear and tear” and exhibits an ordinary standard of maintenance and “updates” based upon it’s age. It is the benchmark from which the physical condition factor is adjusted upward or downward.
Dilapidated: Homes in NC that have fallen into a state of disrepair or deterioration through neglect and/or structurally unsound requiring major repair.
Very Poor: Homes that have been poorly maintained and/or structurally unsound; major repair, refinishing, and renovation required throughout the structure.
Poor: Homes in North Carolina that are of low-cost construction and meet minimum building code requirements. Interior and exterior finishes are plain and inexpensive with little or no attention given to detail. Architectural design is concerned with function, not appearance.
Fair: Homes that are frequently mass produced. Low-cost production is a primary consideration. Although overall quality of materials and workmanship is below average, these houses are not substandard and will meet minimum construction requirements of building codes. Interior finish is plain with few refinements. Design is from stock plans, and ornamentation is usually limited to the front elevation.
Fair to Average: Homes that are in need of moderate repair, refinishing, and/or renovation required; some items in satisfactory condition.
Average: Homes that are typically encountered more frequently than residences of other conditions. They are usually mass produced and will meet or exceed the minimum construction requirements of building codes.
By most standards, the quality of materials and workmanship is acceptable, but does not reflect custom craftsmanship. Cabinets, doors, hardware and plumbing are usually stock items. Architectural design will include ample fenestration and some ornamentation on the front elevation.
Average to Good: Homes where all items are in satisfactory condition, some may be like new, but no obvious repairs or refinishing required. These homes also begin to have energy ratings that are better for appliances and heating and air conditioning.
Good: Homes that may be mass produced in above-average residential developments or built for an individual owner. Good quality standard materials are used throughout. These houses generally exceed the minimum construction requirements of building codes.
Some attention is given to architectural design in both refinements and detail. Interiors are well finished, usually having some good quality wallpaper or wood paneling. Exteriors have good fenestration with ornamental materials or other refinements. NC homes that are in “Good” condition usually have some Energy Star appliances and better ratings on Energy efficiency for Windows and Doors.
Very Good: Homes that are typically built in high quality tracts or developments and are individually designed. Attention has been given to interior refinements and detail. Exteriors have good fenestration with some custom ornamentation. Extra insulation, and “smart home” features are often found in NC Homes with a Very Good rating.
Excellent: Homes that are usually individually designed and are characterized by the high quality of workmanship, finishes and appointments and the considerable attention to detail. Residences at this quality level are inclusive of high-quality material and workmanship, and are somewhat unique in their design. Some of these NC homes are solar powered, and Energy efficiency features are critical at this level.
The physical depreciation is based on the age and condition of the building. Age, in this case, equals the year of the Appraisal minus Effective Year built (if null, Actual Year Built)
If you have questions about buying a new home in NC, or have questions about qualifying for a home in NC and you want to know more about the Property Condition Rating on an Appraisal please call Steve and Eleanor Thorne 919 649 5058.
Many very good New Home Builders want you to use “their” mortgage person for a home loan. The way we see it, $2000 could be your new living room furniture – or drapes, or lawn equipment! Often times, we can offer you a better deal than the one offered by the Builder’s Mortgage Guy.
Not all lenders in North Carolina offer the Mortgage Tax Credit (MCC) program through NCHFA. As an approved lender, we can help those who qualify obtain a tax credit that adjusts how much income you bring home, helping you qualify for more upgrades! The program has new features specifically designed to help folks wanting to purchase new homes in North Carolina!
Call Steve and Eleanor Thorne 919 649 5058.
I try and answer all questions :)