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Appraiser's Topics

 

Inspector's Topics

Mortgage Insurance (PMI)
Pricing Hints

 

Foundation Considerations
Pressure Relief Valves
Roofs & Bullets

Licensed Appraiser's Topic, June, 1999:

Author, Jay Westrick is Manager of the Residential Appraisal Department at O’Connor & Associates. He is a Texas State Certified real estate appraiser. (Lic. #Tx 1327601-R). You may contact the O’Connor & Associates Residential Appraisal Department at (713) 686-9955.

PMI (Premium Mortgage Insurance)

There are three hidden charges in almost every mortgage payment: (1) homeowners insurance, (2) taxes, and (3) PMI. All three of these hidden charges increase the cost of owning your home.

PMI is a mortgage term commonly used but little understood. PMI is an acronym for Premium Mortgage Insurance. PMI is insurance, similar to your car, home or life insurance. But who does the insurance pay, and when? PMI insurance will pay the mortgage company when the borrower stops paying or does not pay the mortgage. PMI is required for people who loan more than 80% loan to value ratio. Banks and major underwriters of mortgages have determined that when people loan more than 80% of the value of the home they are a higher risk of defaulting on the loan. PMI is a way of pooling the risk to lower the individual exposure to default. The cost of PMI varies with the risk group the individual loan is in and the amount. Usually PMI is $40.00 - $150.00 a month of your mortgage payment.

Can and how do I remove PMI?

PMI can be removed when your current outstanding loan to value ratio is lower than 80%. Every bank has minor variations on how to remove PMI but most require contact by you to initiate the procedure. Loan to value ratio is not static. It changes as you own your home. There are two ways that the loan to value ratio changes over the lifetime of your loan. The first way the loan to value ratio changes is when the outstanding balance on your loan diminishes as you pay the loan. It usually takes about 5 years of home ownership to diminish the outstanding balance by 10%. The second way the ratio changes is when your property increases or decreases in value. The loan to value ratio is obtained by dividing the current outstanding balance of the loan by the current value of the property.

What does this mean to me?

If you have purchased a home one or more years ago, you might qualify to lower your payments by eliminating PMI. The Greater Houston residential market has seen prices of homes rise in the past year. The Houston Chronicle states that the median home price for Houston has risen 10% in the past year alone. If you have refinanced or have a mortgage payment, check your PMI. You may be paying for what you don’t need.

How do I proceed?

Check you mortgage statement. If you are paying PMI it will be stated there. If you are paying PMI, roughly calculate the loan to value ratio. On your monthly mortgage statement your current outstanding balance will be stated. Divide your current outstanding balance by the estimated current value of your home. To obtain a free, rough estimate of your value call the O’Connor & Associates Residential Appraisal Department.

Once you have established that your loan to value ratio is below 80%, then call your mortgage company and ask them how to proceed with having your PMI removed from your mortgage. Follow their instructions. Usually they will require a full appraisal of your home.

Your independent appraiser is looking out for your best interest.

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Licensed Appraiser's September 1999 Topic:

Author, Jay Westrick is Manager of the Residential Appraisal Department at O’Connor & Associates. He is a Texas State Certified real estate appraiser. (Lic. #Tx 1327601-R). You may contact the O’Connor & Associates Residential Appraisal Department at (713) 686-9955.

HINTS ON PRICING A HOME

 The most common way to price a home for sale is to calculate a sales price per square foot. The typical data source for the square footage of a property’s living area can be obtained from the local appraisal district. This information is often reasonably accurate; however, those records are sometimes in error. In some instances, these errors can be as much as 10% or more.

To calculate a price per square foot, the sales price of a home that recently sold in the same subdivision or immediate area is divided by the square footage of the living area. Once again, the square footage for properties is likely from the appraisal district. Pricing homes on this basis is simple but may tend to ignore features in your property, such as an oversized lot, quality of construction, a larger than typical garage, etc. The data provided on the MLS service does not provide the sketch from the county records. Having the sketch of the property would allow comparison to the home for accuracy.

How can erroneous prices per square foot be avoided? Either measure your home personally or have someone experienced in measuring homes do it for you. If you have the plans to your home, they can be a source of reliable data. A trip to the local appraisal district for a copy of the sketch also could be useful.

Typically, an appraiser will value a home based on a personal visit, which includes a measurement of the residence. Both exterior and interior observations are made in order to complete a detailed report. The report includes items, such as lot, living area and garage size. Other details listed would be interior finish items, kitchen appliances, floor coverings, ceiling fans, fireplace(s), heating and cooling equipment, room count (including the number of bedrooms and baths), exterior decks, etc. Then the appraiser makes a comparison of these major components of the home to other recent sales in the neighborhood. He or she usually has access to a database which provides square footage data based on the appraisal reports from other appraisers. That footage data is usually based on personal measurements which local appraisers use to verify the local appraisal district information. Appraisers use this data when comparing square footage between the home being appraised and the sales data being used for value estimation.

The difference between an appraisal and the pricing process used by most real estate agents is the extent of verification involved in the detailed appraisal report.

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Licensed Inspector's Topic, June, 1999:

Author, Edward Robinson is vice president of Professional Engineering Inspections, Inc. He holds a degree in mechanical engineering from the University of Houston and is a TREC licensed real estate inspector in the Houston area. You may contact Professional Engineering Inspections's at (713) 664-1264.

Foundation Considerations

Arguably, the most significant component of the structure of a building is the foundation. As a result of the importance of providing a quality foundation, it is often the most expensive consideration in constructing a new home and is often the item of most concern when one is buying or selling a home. The foundation of a home is intended to provide a stable platform to support the components of the structure which rests on it. Due to the expansive soils in the Houston area, providing a foundation which is strong enough to support the structure of a home adequately while resisting damage caused by seasonal movement in the soil and still being within a reasonable cost is no easy trick and is one which consumes a significant amount of engineering consideration.

Consider the most prevalent types of foundations in the Houston area and what their significant differences are. The four most common foundation types in the Houston area are a concrete slab on grade foundation, a concrete slab on grade foundation having piers for additional support, a pier and beam foundation, and a block and pad foundation. The concrete slab on grade foundation supported by piers may be considered a hybridization of a pier and beam foundation with a concrete slab on grade foundation.

A concrete slab on grade foundation consists of a slab of concrete poured into a site built form which is partially submerged below the soil grade. It typically consists of a relatively thin flat piece of concrete in the shape of the building which is strengthened by grade beams cast into the foundation at regular intervals. This results in a foundation that resembles a waffle if viewed from the underside. Reinforcing for this type of foundation may vary significantly. The current, most popular method of reinforcing is to install steel cables across the foundation in a grid pattern. These cables are placed in tension after the concrete has had sufficient time to cure, placing the concrete in compression and thus providing reinforcing to resist damage caused by bending. This method of reinforcing is popular with tract builders who are seeking a cost effective method of fabricating foundations and can be found in most of the tract homes built in the last 20 years. Conventional reinforcing is used in most homes over 20 years old and in custom homes. Conventional reinforcing consists of steel bars and wire mesh placed in the foundation in a regular pattern to provide strength to the concrete in order to resist damage caused by bending. Concrete slab on grade foundation are the most common foundation type found in the Houston area due to the relatively low cost of fabrication.

Pier and beam foundations and block and pad foundations are very common in the older parts of the Houston area, and pier and beam foundations are becoming more popular in custom construction. Pier and beam foundations and block and pad foundations can be similar in appearance but vary significantly in performance. The biggest similarity between the two is that they are both foundation types that support the structure of the building off the surface of the ground, normally resulting in some accessible crawlspace below the foundation. The significant difference between the two is that a pier and beam type foundation provides support for the structure on concrete or wood columns set in the ground to a depth of 12 to 15 feet typically, depending on the soil in a given area; and block and pad foundations support the structure on blocks of concrete resting on the first few feet of soil at a maximum. The difference in the bearing depth of the supports results in significantly less movement in the foundation of a pier and beam foundation because the soil at greater depths is normally less rapidly affected by periods of wet and dry weather which results in drying or wetting of the soil. Since soil in the Houston area expands and contracts with changes in moisture content, this is a plus. The block and pad foundations are sometimes used because they are much less expensive to build since drilling and casting of concrete piers is quite expensive, and they can perform satisfactorily if properly installed and maintained. A significant benefit of these two types of foundations is the crawlspace they provide below the house. If there is sufficient crawlspace, it can be used to route ductwork and to run wiring and plumbing lines. This allows for easy changes during remodeling and, in the case of ductwork, can result in a more efficient air conditioning system. As part of purchasing a home, many problems can exist in the structure and mechanical/electrical systems at the crawlspace, creating a critical need for this area to be inspected.

Each type of foundation has its benefits and its drawbacks. If possible, one should consider these drawbacks and benefits against the cost of the house or construction. Although some types of foundation have more trouble with differential movement than others, most can be made to perform in an acceptable manner if properly installed and maintained.

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Licensed Inspector's Topic, July 1999:

Author, Edward Robinson is vice president of Professional Engineering Inspections, Inc. He holds a degree in mechanical engineering from the University of Houston and is a TREC licensed real estate inspector in the Houston area. You may contact Professional Engineering Inspections's at (713) 664-1264.

Failed Temperature And Pressure Relief Valve.

Temperature and pressure relief valves are included on all closed-system equipment intended to produce hot water, including water heaters. The purpose of a relief valve is to prevent excessive pressure and/or temperature into the steam range, which can cause tank explosion or scalding at fixtures in the event of a control malfunction in the operation of a water heater. Unfortunately, a majority of the valves encountered during inspections are found to be non functional or have not been properly installed and may fail under actual use, which can result in catastrophic failure of the water heater. This is mostly as a result of owner negligence in not properly testing and having the valve serviced or negligence by the installer of the valve. Worse yet is the fact that many do not understand the importance of this safety device. The importance of the proper operation of the valve is underscored by information provide by ASME that over 21,000 boiler and pressure vessel accidents occur in the United States alone. Explosion of a water heater due to excessive pressure and temperature often results in severe damage to property and can result in loss of life because of people being in the proximity of the heater when it explodes with extreme violence.

Proper Installation:

The temperature and pressure relief valves on most water heaters are installed with a temperature sensor extending into the tank, near the top of the tank, and have a drain line graded downward for its full length and extending to a visible outside location, with the end of the line pointed toward the ground and within approximately 1 foot of the ground. In most cases where the valve is installed for residential use, the valves are rated to open at a temperature of 210 F and a pressure of 150 psi; however, the ratings for pressure should be below the rated pressure for the water heater in which they are to be installed. The drain line connected to the relief valve must be the same size as the valve outlet, be as short as possible, and it must have very few turns to allow pressure buildup if the valve is activated. Additionally, care should be taken when installing the elbow at the discharge line so that an elbow is not used which could allow caps or plugs to be installed on the drain line in the future. The discharge of the valve is normally installed to vent to a safe visible location at the outside of the house for safety in the event the valve should open.

Improper installations of valves may include:

bulletThe improper use of an unapproved drain line material. This may result in failure of the plumbing pipe if it is not rated at the temperature and pressure of the safety valve used, allowing scalding water to be discharged into the living area. The best drain line materials are copper pipe and galvanized steel pipe.
bulletThe use of an undersized drain pipe, a drain pipe having too many turns, or of an excessive length. These factors can prevent the relief valve from venting sufficient water from the heater in order to prevent the water heater tank from failing. Often, threaded elbows are used at the discharge point of the drain line, which may allow a plug fitting to be installed. This is seen most often if the valve begins to leak and is plugged by a homeowner.
bulletThe valve may be improperly installed on a discharge or inlet line at the top of the water heater. The manufacturers of most valves require that the valve be installed directly onto the tank with a sensor probe extending into the tank.
bulletImproper testing of the valve. The valve should be tested at a minimum of 1-year intervals, with more frequent testing desirable. Testing of the valve ensures that it does not become clogged with corrosion or mineral deposits. Testing also ensures that the drain line does not become clogged with debris or insects.
bulletImproper routing of the drain line. The drain line should be installed with a down grade away from the water heater. If the drain line is routed up, water which may periodically seep from the valve will stand against the valve, which can result in corrosion and failure of the valve to operate. Additionally, the drain line should be protected where it passes through areas where freezing could occur to prevent seepage from freezing in the drain line and causing a clog.

It is recommended by most manufactures that temperature and pressure relief valves on water heaters be tested at intervals of at least one year, with more frequent testing being desirable. It is further recommended by many manufactures that these valves be removed and inspected by a qualified plumber at intervals of not greater than 3 years. If the valves are found to be worn or defective as the result of testing and/or inspection, they should be replaced. Signs of a worn or defective temperature and pressure relief vale include:
bulletA valve which does not open when the test lever is pulled with a normal amount of force.
bulletCorrosion on the stem of the valve.
bulletWater leaking from the valve stem.
bulletWater leaking from the drain valve.
bulletA valve which does not close normally after being tested.

Owners should be on the lookout for water heaters showing signs of distress which indicate a malfunction. Indications of an overheating water heater may exhibit the following conditions:
bulletA discharging safety relief valve.
bulletScorched or burning paint on the skin/casing.

The recommended safe intervention is to:

bulletRemove the heat source by stopping the supply of fuel.
bulletDo not try to relive the pressure.
bulletDo not add cool water into the vessel.
bulletDo not try to cool the vessel.
bulletLet the vessel cool down naturally.
bulletGet away from the vessel and call a qualified repair company.

As well as having an operational temperature and pressure relief valve, it is a good idea to have a readily accessible shutoff valve for the gas supply to a gas heater or know where the controls for an electric heater are. This will make it safe and easy to turn off the fuel supply to the water heater in the event of a malfunction. In addition to frequent testing of the temperature and pressure relief valve, it is also a good idea to have your water heater inspected on a yearly basis in order to detect any need for repair before any malfunction becomes a hazard to one’s house or health.

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Licensed Inspector's September 1999 Topic:

Author, Edward Robinson is vice president of Professional Engineering Inspections, Inc. He holds a degree in mechanical engineering from the University of Houston and is a TREC licensed real estate inspector in the Houston area.  You may contact Professional Engineering Inspections's at (713) 664-1264.

Roofs & Bullets

One common defect you do not expect to find in a roof in the Houston area is a bullet hole or a whole imbedded bullet, yet frequently, we find such bullets. Bullets seem to be most commonly found in the roofs of houses on the north side of Houston, around the Heights and Montrose areas; however, they have been found in many other locations in the Houston area and highlight the need to better inform the public about the dangers of discharging guns into the air.

Bullets have been extracted from a number of roofs in the Houston and surrounding areas. The rounds were taken from locations that might surprise you. Affluent neighborhoods were no exception.

These projectiles were doubtless fired into the air, probably during a holiday like the Fourth of July. All of the subjects shown were buried to a depth at least equal to their length and some deeper. It is a popular perception that falling bullets are harmless. The truth is simply a matter of physics. The speed of a projectile traveling up into the air will decrease due to gravity until its vertical motion is halted. Gravity continues to work on the projectile starting from its high altitude stopping point accelerating it downward. Since the distance it traveled up will be equal to the distance it will be accelerated down, while falling, the projectile will be accelerated to its terminal velocity which has been found to be approximately 300 feet per second. According to information published in the Los Angeles Times, as many as 118 people were injured by falling bullets between 1985 and 1992 and 38 of the victims died. In information provided by B. N. Matto (Journal of Forensic Sciences, 1984), a .38-caliber revolver bullet will perforate the skin and lodge in the underlying tissue at 191 feet per second and a triple-ought buckshot will do so at 213 feet per second. A .30-caliber bullet will perforate the skin at only 124 feet per second. It is easy to believe that such a bullet falling at 300 feet per second could seriously injure a person, possibly fatally, especially if it struck you in the head.

The damage caused to roofs is not severe but does require some repair in most cases. Normally, the bullet will penetrate the roof surface through to the roof deck, leaving a hole were water may run into the building. It is recommended that the roof be patched by replacing damaged shingles or installing flashings below the shingles to prevent water from running through the roof.

Just A Few Bullets Removed From Area Roofs !

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