Navigating rural home loan programs can feel daunting, especially when it comes to appraising rural properties. Accurate appraisals are the cornerstone of successful rural mortgage lending, ensuring fair and reliable valuations.
At RuraLiving, we understand the unique complexities that come with appraising rural properties, from vast acreages to unique building structures.
Here's our expert guide to best practices for property appraisers to ensure precise, efficient valuations for rural mortgages.
1. Choose the Appropriate Appraisal Form
For rural properties, appraisers may use either the standard Fannie Mae 1004/Freddie Mac 70 appraisal forms or the Uniform Agricultural Appraisal Report (UAAR).
2. Include a Full Legal Description
Rural home insurance providers and mortgage lenders require detailed documentation to guarantee accurate valuations. Always include the full legal description of the property in the appraisal report. This step ensures the property’s boundaries are clearly defined.
3. Ensure Appraiser Qualifications
Appraisers must hold either a Certified Residential or Certified General appraisal certification. To maintain transparency and credibility, include a copy of the appraiser's current license.
4. Use Both Sales and Cost Approaches
For accurate rural home insurance valuations and mortgage rates, RuraLiving recommends using both the Sales and Cost Approaches. Comparable sales should be from within the last 12 months and ideally located within a 50-mile radius of the subject property. If comparable properties are farther away, provide a clear rationale for their inclusion. Additionally, the Cost Approach should assess the value of any secondary buildings on the property, not just the main residence.
5. Address Acreage Challenges
Rural properties often come with extensive acreage, which can complicate finding comparable sales. If the comparables differ greatly in acreage, make the necessary adjustments and explain them in detail. Using independent land sales can help justify these adjustments.
6. Provide Detailed Property Documentation
Interior photos of the primary home are essential to any appraisal report, offering clarity on the property’s condition and features. Additionally, include at least three comparable sales from within the past 12 months.
7. Address Property Issues
Documenting issues related to property access, easements, environmental concerns or well and septic systems is crucial for an accurate appraisal. Thorough documentation gives rural home insurance providers and mortgage brokers a full understanding of the property’s value and potential risks.
8. Exclude Personal Property
Make sure personal items such as mobile homes, irrigation or grain bins are excluded from the property’s valuation. Focus strictly on real estate assets, ensuring an accurate appraisal.
Appraising unique rural properties may feel challenging at first, but with us as your guide and our appraisal best practices readily available, you can see the beauty and value the countryside brings.
At RuraLiving, we’re committed to supporting our partners in navigating all aspects of rural lending. Call 507-385-4965 or email [email protected] to connect with a RuraLiving team member today!