Appraisal Info for Reverse Mortgages -
What Happens When An Appraisal Is Done?

What is an Appraisal?
Part of the process of obtaining a Reverse Mortgage is the appraisal. An appraisal is a judgment or opinion by a licensed appraiser who provides a valuation on your home. Since the HECM is insured by FHA, your home requires an FHA appraisal. On May 1, 2008 Fannie Mae and Freddie Mac implemented the Home Value Code of Conduct known as HVCC. This ruling was established to create a separation between the real estate appraiser and the mortgage originator. All appraisals must now go through an AMC, Appraisal Management Company, who chooses your appraiser (at random) out of a list of appraisers.

How is An Appraisal Done? An appraiser inspects each room of your home and also take photos of the inside and outside of your home. The photos are not just for condition but to substantiate, for instance, that you do have a working bathroom or a living room, etc. All systems of the home will be looked at such as the heating, electrical, and plumbing systems. The home will be measured as to gross living area, neighborhood, and general location of the home as to shopping will be noted on the report. In order to complete his appraial report (typically 15 to 20 pages long), the appraiser will search for three comps, comparable properties in your area, to support his opinion of the value of your home. He will take pictures of the exterior of those homes. His report will include data, analysis, and conclusions that are relied on in estimating the value and marketability of your property.

What is An Appraiser Looking For?
Appraisers look for structural integrity to a home such as foundation, roof, sidewalks, interior of home and its proximity to any hazards in the area. If you have peeling paint inside or outside or if you have significant cracks in the foundation, the appraiser will note it on his report and suggest it be repaired.

With each HECM loan there is a Repair Set Aside account that can be established if there are repairs needed which are not necessarily safety issues. Monies will be "set aside" from the proceeds of your loan so the lender can be assured they will get done. Minor issues do not require immediate repair but can be included in your Repair Set Aside account which is 150% of the cost of repairs (from a contractor's quote). Those types of repairs are given six months after closing to complete. After all the required repairs are completed the appraiser will return to your home to do a reinspection of your home to substantiate that the repairs in question have been completed. There is a reinspection fee charged (usually about $100).

What Repairs Must I Do Prior to Closing?
Repairs that detract from the safety of the occupants and the marketability of the property must be repaired prior to closing your loan. For example, exposed wiring causes a safety hazard and must be capped or repaired. Sidewalks which are cracked severely enough to cause someone to trip and fall and thereby jeopardize the security interest of the lender must be fixed prior to closing.

Roofs that are leaky or roofs that are significantly damaged, in which the appraiser notes the roof should be replaced, must be taken care of. Exterior paint that is peeling, broken windows, structural damage to the dwelling, etc. must be repaired. It is always advisable to do repairs prior to closing but not always necessary.

Generally speaking, we find most homes are in fair to good condition so please do not get overly concerned with your appraisal unless the appraiser calls for repairs. Note: Appraisers can do a better job if you participate in the appraisal of your home; It is always good to prepare for your appraisal by making a list of updates to your home and anything you can think of to give to the appraiser. (Note: You cannot be declined for clutter in your home unless it blocks entrances and exits or otherwise presents a fire hazard in your home.)

• Free Reverse Mortgage information, call 1-888-843-9797