Dollars and Sense: The Significance of Knowing Your Home's Worth

You would have to be living under a rock or in an area that is completely off grid to not be somewhat aware that real estate prices have been fluctuating and increasing significantly in many areas over the past couple of years. If you have not purchased or refinanced recently, your homes value might have changed from where you thought it was just 12 -18 months ago. Knowing the value of your home can be important for many reasons of which, here are a few:

Financial Planning

The value of your home is a significant component of your overall net worth. Your home is likely one of your most significant assets. Knowing its value allows you to calculate your net worth accurately. Understanding its value helps you make informed decisions about your financial planning, such as determining your assets, calculating your equity, or evaluating your borrowing capacity.

Selling or Renting

If you're considering selling or renting out your property, knowing its value is crucial. It allows you to set a competitive price that aligns with the market, ensuring you don't undervalue or overprice your home.

Refinancing or Home Equity Loans

When refinancing your mortgage or applying for a home equity loan, the value of your home plays a vital role in determining the amount you can borrow. Lenders assess the loan-to-value ratio, which compares the loan amount to the home's appraised value, to determine eligibility and interest rates.

Property Taxes

The value of your home often influences property tax assessments. Local tax authorities use property values to calculate the amount of tax you owe. Knowing your home's value helps you ensure that you're being taxed fairly and can plan for potential increases.

Insurance Coverage

Understanding the value of your home is essential for obtaining the appropriate insurance coverage. If your home is underinsured, you may not receive sufficient compensation in the event of damage or loss. Conversely, overinsuring your home means paying more in premiums than necessary.

Investment Decisions

If you're considering real estate as an investment, knowing the value of your home can help you assess its potential return on investment, evaluate rental income potential, or make informed decisions about buying additional properties.

It is important to note that home values can fluctuate over time due to various factors such as market conditions, location, renovations, or changes in the neighborhood. Therefore, regularly monitoring and assessing your home's value is important for staying informed. If you would like to check out more information regarding the importance of knowing your homes value, check out the following articles:

https://www.homes.com/blog/2017/03/benefits-of-knowing-your-homes-value-whether-you-are-staying-or-selling/

https://www.homelight.com/blog/check-house-value/

Great news! No need for an appraisal... Or is it really??

Fannie Mae recently announced in their Selling Guide (SEL-2023-02) update that “as part of the valuation modernization” they are transitioning to a “range of options to establish a property’s market value”.

Click on this link to view the actual document as released by Fannie Mae on March 1, 2023 https://singlefamily.fanniemae.com/news-events/announcement-sel-2023-02-selling-guide-updates

They have changed the term “Appraisal Waiver” to “Value Acceptance”. According to FNME, this is being changed to “better reflect the actual process of using data and technology to accept the lender-provided value”. Wait a minute… read that again!!! Yes- you read it correctly- “Lender-provided”. This can’t have the possibility of ever going wrong.

In FNME’s release they describe the valuation modernization process as a way to enhance the management of collateral risk, making the process more efficient for lenders, borrowers, appraisers and secondary-market investors. They also stated that it benefits consumers via greater accuracy, lower costs and increased speed. Here is another “wait-a-minute-moment”! I was told long ago “You can have it fast, you can have it good, you can have it cheap: pick two”. This is a long standing principle that applies to just about every service you pay for. Fannie Mae is saying that, for once, there is a way you can have ALL THREE!

Then there is the option of Value Acceptance plus Property Data. This is a combination of the “lender-provided data” plus a “new option that utilizes property data collection by a third party who conducts interior and exterior data collection on the subject property.” It is then the lender who confirms based on this information if the property is eligible and an appraisal is not required. Again, the lender decides this.

Lets add another layer to these already troubling changes. FNME will now allow a borrower to provide an attestation letter to verify repairs were made if they were required or for a builder to provide an attestation letter to verify a new construction is 100% complete. How could this go wrong? There have been plenty of times I have showed up to complete a repair inspection or final inspection on a new construction and it was not completed.

The Appraiser Blogs that I follow published a letter that was written by the Massachusetts Board of Real Estate Appraisers that points out the issues regarding this and the question of consumer protection. This letter was written to the Consumer Finance Protection Bureau and asks them to consider the answers to some very important questions. Value acceptance does not offer the consumer protection that they seem to elude to as part of the FNME modernization process. Please read through their letter because it asks some very important questions and asks the CFPB to consider making Consumer Protection more important than the speed and cost of an appraisal. You can read the full letter and blog post at https://appraisersblogs.com/fannie-mae-appraisal-waiver-option-is-eroding-consumer-protection