Appraisals are a common part of most real estate transactions. Anytime a person applies for a loan an appraisal is ordered to help the bank determine whether or not making the loan will be a good risk. There are many other reasons to order an appraisal but in this case (seeking a loan) the appraiser is working for the bank.

Appraisals are not an exact science, but there is a very detailed process that appraisers must go through to determine value. Their intended audience is the underwriter at the bank who will be approving the loan. The appraiser’s job is to be the eyes and ears for the bank and they are required to stick to the facts. However, since no two homes are exactly alike there are many subjective “facts”

A bit about the process

First step is to gather data by researching the tax records and MLS. Apraisers must also study the subject property’s sales history for the past three years, determine the zoning for and around the subject property, acquire the tax information, study the site and select appropriate comps.

Selecting comparable properties is one of the most important factors that helps appraisers determine value.

A comp must be similar in design: a ranch home must be compared with a ranch home.

A comp must be within 1 mile radius (for the city this radius is even smaller)

A good comp must have sold within the last 6 months

A comp must be similar in site and size

Again, since no two homes are ever the same, adjustments must be made for amenities like fireplaces, spa-bathrooms and hardwood floors. The adjustments are made to the comparable properties and if the net of all the adjustments made alter the value by more than 15% either way, the comp is discarded.

Another part of the appraiser’s job is to study the terms of the contract. The appraiser is required to review all the terms of the contract, including all offers, counter offers and addendums including any kind of concession in terms of closing costs and prepaids to determine how these conditions will affect value.

The appraisal is performed at the expense of the buyer and the cost of the appraisal will be billed to the buyer at closing in the form of closing costs. While the appraisal is techinically done for the benefit of the lender it is still an important safe guard for the purchaser. According to the SLAR Appraisal Rider, the buyer has three choices if their appraisal does not meet the agreed upon purchase price stated in the contract.

1. The buyer can terminate the contract with earnest money returned to the buyer.

2. The contract can be renegotiated to reflect the value stated in the appraisal.

3. The buyer can continue with the agreed upon purchase price if the buyer can bridge the gap between appraisal and purchase price with the buyer’s own funds.

I was taking a walk through Compton Heights last week and noticed that there were several places for sale. This neighborhood includes about 250 acres in the center of the city and is located just east of Grand Ave and a block south of Reservoir Park.

STL Magazine in December 2006 had a pretty good article on the neighborhood. According to the article Compton Heights was the first development in Missouri to use deed restrictions which designated a uniform set-back from the street and specified that there would be no more than one single-family residence per lot.

The two main streets, which were laid out by Julius Pitzman, designer of Vandeventer Place, were named for writers Henry Wadsworth Longfellow and Nathaniel Hawthorne.

Click here to view the MLS listings of the 16 homes now available for sale in Compton Heights. Prices for the current listing in this neighborhood range from $349,500 to $1,095,000 with a median price of $577,000. Average days on market is 146 with listings as new as 10 days old and others that have been testing the market for nearly a year. The oldest home on the list is 123 years old and the newest home currently for sale is only 57 years old.Visit the Compton Heights neighborhood website here.

Note: 3153 Longfellow (not pictured here) was at one time home to Irma S. Rombauer , author of The Joy of Cooking.

Visit the Compton Heights neighborhood website here.

On  May 10, ( this Saturday) ten homes and community gardens will be open to the public from 10 a.m. until 4 p.m. Tickets are $10.00 per person in advance, and $12.00 the day of. Each ticket comes with one FREE ice cream cone from Crown Candy. Check the ONSL website for purchasing details.

In addition I will be opening 1412 Hebert from Noon-4PM the day of the tour (this Saturday). While the other ten homes may be coveted by the many visitors, only Hebert may actually be purchased. If you are looking for a great community of neighbors and historical St. Louis architecture with only a 1 mile commute to downtown, look no further.