Appraisers often find that following a disaster, determining home values can be a challenge, according to a blog post from CoreLogic.
A recent report takes a look at what factors impact the appraisal process following severe natural disasters, and why homeowners affected by storms and other disasters may seek an appraisal.
When a home partially is damaged, a homeowner may seek an appraisal to help support a diminution in value in order to seek a reduction in property taxes. These “as-is” property value opinions could be hard to quantify because the damage may impact the true market potential of the property.
If a home is destroyed completely, it can create more challenges. It may be impossible to determine the home’s quality and condition prior to destruction, and some homes, such as those destroyed by wildfires, may not be able to adequately offer local sales comps, CoreLogic says.
Even if a house is intact, the damage on a surrounding area may still negatively impact homes value. Loss of vegetation and changes in market conditions due to natural disasters may play into a home’s value, despite a lack of damage. Additionally, the risk of further catastrophe may impact appraisals. CoreLogic notes that the fear that hazards such as wildfires or floods may return in the near future may impact values and delay the rebuilding process.
CoreLogic also notes how policies can cause the values to vary, and that a policy often is determined not by the appraisal or assessment, but by the reconstruction costs, which unlike an appraisal, captures all of the additive costs associated with rebuilding after a loss.
“The disruption of a family’s regular flow of income and payments, as well as substantial loss in property value, can trigger mortgage default; especially if homeowners are underinsured and cannot afford to rebuild,” CoreLogic Chief Economist Frank Nothaft said.
Without proper insurance, many homeowners impacted by natural disaster may be forced into foreclosure. CoreLogic’s 2019 Insurance Coverage Adequacy Report reveals how underinsurance can leave an impact on the lending industry.
CoreLogic said: “If information is power, then having full disclosure of a property helps protect families and businesses from financial catastrophe.”