In my experience, there seems to be a lot of confusion about appraisals. I hear a lot of misstatement about how appraisal values are determined. If an appraisal comes in below the agreed upon sales price there is usually a lot of push back, anger, and harshly worded statements about the intelligence of the appraiser. Many sellers, some buyers, and even some realtors use methodology and data that is not accurate. The reality is that there is a way to challenge an appraisal that is quite simple. All you have to do is come up with recent comparable sales (aka comps) that you think are better than the ones that the appraiser used. The problem is what some people come up with for comparable sales are not really viable comps. Read the rest of this entry »
Not many people realize that their house needs to be 100% complete to get financing on it. I see situations more than you would think where a property is not 100% complete and we run into troubles getting the financing approved. I know it sounds silly that settlement on a $300,000 mortgage on a home valued at $400,000 would be held up because the property doesn’t have any railings on one stairwell, but that is the case. And the reason for this Read the rest of this entry »
I have lately had a few appraisal problems that I hope does not turn into a trend. The inventory in the DC Metro area is at the lowest point it has ever been since these sorts of inventory statistics have been tracked, starting 16 years ago. The problem, which is far from alarming at this point, is that little inventory means there are not as many sales as there could be, which means there is not as much turnover as there could be, which means when a house does sell and the appraiser goes looking for recent comparables to support the purchase price, there may be a problem finding enough comps to support the purchase price. So what exactly does this Read the rest of this entry »
I have blogged about appraisal problems many times in the past. I am not going to repeat those posts. Maybe the data below will carry more weight than my opinion, because it is fresh out of a thorough and expensive study that I have cited on this blog recently. I will cut and past comments directly from the study that quotes Realtors, and I will let their comments speak for themselves. As a mortgage consumer, the below should be plenty to tell you where you need to go for a mortgage. Mortgage brokers, large banks, online lenders and credit unions, many of whom the consumer thinks is working in their best interest are actually setup to fail the consumer by design. Just because you bank at a big bank or a credit union does not mean they are setup to provide you the best service. I worked at a big bank before, and unless you had millions of dollars Read the rest of this entry »
Most people that own a home make some improvements. Some home improvements are modest and some are substantial. It is important to get some enjoyment from whatever improvements you make, but it is also important to remember to watch the economics of your projects. Many people don’t consider the return on investment when they take on a renovation project, and some people make poor assumptions about how much they will get back from their cost to remodel. Read the rest of this entry »
I have recently had a re-occurrence of an appraisal issue that keeps repeating itself. I am not sure if its part of the tightening of underwriting standards, or if it’s logical. But I’d like to explain the recent issue so everyone can be aware of it. This piggybacks off of Read the rest of this entry »
Many people don’t realize that if you borrow $1,000,000 ($1MM) or more on a mortgage, most lenders require two appraisals. They deem a larger loan such as this a riskier loan, and they want to take extra precaution in confirming the value of the asset. The problem is Read the rest of this entry »
Does anyone know what a proper comp is anymore? Yes, I believe they do. The problem lies in the fact that people do not go to the effort to do the research to uncover the facts and differences behind each comp. So I end up screaming at my computer or my telephone (just like the man in the picture) when I get responses from homeowners who are trying to refinance their home and claim a certain high valuation, or from a seller who is trying to justify a certain high price on a home they are selling. The lack of research is stunning. Below are some examples: Read the rest of this entry »
There are times when a lender might enter a loan application into the automated underwriting system, and the resulting approval may allow for a “PIW”. A PIW is a Property Inspection Waiver, which means that Fannie Mae or Freddie Mac has decided that due to the characteristics of the particular loan entered that they feel comfortable proceeding without an appraisal being done. Read the rest of this entry »
Appraisals seem to be the issue of the day in the mortgage and real estate world. Everybody seems to value property differently even in the best of real estate markets. In a more difficult real estate environment, appraising becomes even more contentious.
For example, banks have really tightened their underwriting policy on appraisals. On an FHA loan they may require two appraisals if if the loan is an FHA jumbo loan (which is one that is over $417,000), if the property is in a declining market, and if the buyer is borrowing the maximum loan to value (which is 96.5%, i.e. a 3.5% down payment).
Also on an FHA loan, even if it is a loan that is a conforming FHA loan (which is one that is below $417,000) the bank may require a desk review Read the rest of this entry »