As a Mortgage Broker in South Florida (Northern Palm Beach County) I have several Appraisers that I use and recommend all of which are highly ethical and accessible. What I have been seeing lately is where the Borrowers don't like what the Property Appraisers are writing up the appraisals at. The Borrowers believe they can keep shopping (like they did for a Mortgage Company) for the perfect appraisal.
Like Mortgage Companies and Realtors you will have good and bad in every industry. If the Borrowers keep searching long and hard enough I am sure they will find the "Appraiser" to write something (For a Fee) that will make them happy. Please keep in mind with the guidelines changing and becoming much tougher the Investors (Lenders) are really looking long and hard at the appraisals, especially if the loan is a high Loan-to-Value.
Appraising is not an exact science but their are guidelines that Appraisers must follow. For example: A Borrower is shopping for the "Right Appraiser" and speaks to several Licensed Appraisers and they are on average telling the Borrower the property Value is X and one Appraisers says they can use other Comparable's and drive the price much higher. Beware!
Most Appraisals are either COD or the Borrower must pay the Mortgage Company an application fee where the Appraisal will be paid from so either way if you receive a bad appraisal their is really not much you can do about it.
Recently a Borrower came to me with an appraisal in hand and asked me to please help them finance their home. I won't go into the details of the loan however, I will go into the details of the appraisal. Most of the appraisals are all standard throughout the industry however when it comes to comparable's the appraiser has a little leeway. Now with that being said this "Perfect Appraisal" used Comparable from 16 - 21 miles away from the subject property. This is not standard through out the industry. In some rare occasions this might be necessary to find the value of the property. In those cases it must be very well documented why they appraiser how to go to such extremes to find value on the property. Of course in this case it was not documented
Can I Use This Appraisal?
Yes you can you this appraisal, but please keep in mind that EVERYLOAN goes to an appraisal review department. Where they will tear apart the appraisal and if it is valid their won't be a problem. In this case most likely the Lender will require a new Appraisal of the property. Thats right more fee's for the Borrower! If the Lender does not require a new Appraisal they can opt to lower the value of the property when doing their own research. Either way the Borrower will not be happy with the outcome.
In closing you found the perfect Realtor, the Perfect Mortgage Broker make sure you find the Perfect Appraiser.
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Full-Time Mortgage Broker in South FL. Palm Beach County. Specializing in Hard Money / Private Money, Foreign Nationals, Jumbo and Super Jumbo Loans. In addition I work with Today's Premiere Lenders.
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This is soo true. especially with forclosures it seems to be a tightrope. Getting people to understand that another will do no good is tough on my end too. I can't imagine the calls you must get.
Matt,
Thats funny, I just ordered an Appraisal!! Now to see what our Value is. I just deal with it! because it is what it is :0)
Tom Weiss
This was one of the many problems in the boom ... agents shopping appraisers and appraisers (especially independent appraisers) being put under the gun to make the deal happen.
I am reading SMARTEST GUYS IN THE ROOM the Enron story and you can see the similarities ... if the group that is suppose to make sure things are on the up and up is fudging their work so they can get more business then the whole house-of-cards will fall.
Matt,
Uh Oh...Neal Bloom google alert is turned on:)
I can only go by what I hear from the banks. First when a buyer gets an appraisal the bank contracts them out...the buyer doesn't choose. If some one does a refinance the same thing. But a HO can do an independent appraisal but it still doesn't give them the choice of who comes in. They can have as many as they can pay for. Even if they have an independent one done it still doesn't mean the buyer who comes in will be able to have their bank use the independent one..as for guidelines being strict that is your answer...we have discussed when you change lenders...generally they will not accept submitted documents from the last lender since most have their own guidelines. I'm not saying it has not happened but generally from what I see and here it does not....would you agree?
Appraisers in our area are taking a beating with few exceptions. One guy was honest during the boom and could hardly get the time of day from lenders or anyone because he we TOO ethical (if you can believe it). No he's doing very well because lenders aren't accepting shineola appraisals anymore.
What I think is funny about someone wanting a different appraiser is that the investor will cut the appraisal if it isn't accurate. Good luck. Comps are Comps.
Matthew...... I just ran into this issue last week, so your post is perfect timing. Something that I thought about writing, but never got to it. Great awareness. But mine was a little different. I already had the client, ordered the appraisal and she felt her value was a lot more. Got a 2nd appraiser and the value was about $20,000 less. As so many will say, be very careful of what you wish for.
Question though, you said every loan goes through an appraisal review? I am wondering if that is different with brokers using a lender that underwrites? Again, I am just curious since we underwrite the majority of our loans.
Again, great awareness. Clients try to control the transaction and the majority of those loans that fail are because the loan officer allows this to happen.
Matt - Very relevant & timely article here. Appraisals are being combed over very finely these days and people have to come to grips that (as Tom says) it is what it is. Here in Lehigh Valley, there has been some minor appreciation in some areas and some are just holding solid, that's the market. But to be counting on your home appreciating 15% to 20% (which it did in this area) year after year after year, is a dangerous & foolish game to play.
Matthew- I am glad you posted this post, it goes along well with my post about the cash back at closing scams involving pay offs to appraisers too! Play by the rules! Katerina
Keith & Robin, Oh yeah the phone calls are always fun
Tom, Always fun fun fun when the appraisal comes back
Allen, I am friendly with a couple of appraisers and they tell me what some people demand or expect from them.. Geez
Neal, Glad to know your google alert is working.:-) As far as a choice. It is ILLEGAL for any lender with the exception of direct lenders. (Bank of America, Countrywide, etc...) for the borrower to be forced into using a certain appraiser. Mortgage Companies can only suggest their appraisers.
Keith, I know. Keep in mind during the boom most lenders let a lot of things slide because in some area's homes where going up 20% a year so if they where off a little it was ok. Now is a total different story
Shaun, Exactly..:-)
Jeff, They should go through even if you have an underwriter in your office. Lets face it if that loan is bad they would have to buy it back.
Jason, Your right but people played that game
Katerina, Oh cash back at closing.... Think the State would like a word with those people on those scams.
Appraisers have there hands full right now!
Matt - you beat me to the post. Not only are appraisals being reviewed on a regular basis, most loans are having a 4506-T puilled as well. Even the stated deals. Mortgage brokers beware!!!! At least the ones that are left.
Rey, You are so right they really do
Lewis, not really sure why a 4506 would be pulled on a full doc deal. I can see on stated.
Matt,
I think you opened the flood gates on this topic. I also had a listing agent last week get relentless over a value issue. Your explanation is 100% correct.
Smiling like a gator over mine today!!
Gary, Thank you.. People don't understand about the appraisal and the lenders.
Keith & Robin, You Go! Now lets see what the Lender says..:-)
Matt,
My question is...when you are getting someone a loan to purchase a home...who picks the appraiser? Doesn't the bank contract out their choice that is on their list? For example Countrywide was using land-safe at one time but I never heard of them asking the buyer to choose.
Neal, Most Lenders have an appraisal review department where they go through the appraisal and look up the comps, etc.. It is up to the client after all they are paying. However, most clients really don't know an appraiser so they rely on their mortgage company to make the choice. When it comes to Super Jumbos Lenders will require 2 appraisal where they will have their own appraiser go out and re-appraise the property.
When it comes to countrywide they will accept an outside appraisal as well.
Hi Matt, thanks for the link. :) only I wish I was 'prefect' ! I discussed this with a Bank of America appraiser yesterday.. and it rings true with every other appraiser I've talked to. Appraisers get strong armed all the time. One big client, who basically supports your livelihood will push and push the appraiser to hit a number. The honest and ethical ones who don't will either not get paid on past invoiced assignments (I don't do invoice!) and not get future work (tell me about it). With that being said, I can't even call myself an appraiser anymore, due to the lack of work. Ethics get in the way of people pushing junky loans. for now, I will use my appraisal experience to complement my salesperson license. I tell people well in advance what their house will sell for AND appraise for. Sometimes they don't believe me and list with another. In the end, 180 days+ down the road, they normally get even lower than I told them, because they chased the market downward.
I like to hear a broker like Tom & Jason say.. "it is what it is". This tells me that they are dealing with quality consumer, not predatory style with the person who's entire life depends on getting that loan worth more than their home is on junky credit!! It's sad how people get hussled by the vultures in this business. They can't see down the road a few months or a year, when they are upside down in every aspect. the worst part is, when a deal gets killed, everyone is upset, but the FACT is that you saved that person from being preyed upon!
It always amazes me when someone wants a second appraisal - the comps are the comps - unless you have an idiot for an appraiser it is what it is
MAtt, excellent timing. Working with a couple right now that is on their 3rd appraisal. They didn't like the first so they called the guy that did it last year when the purchased the home and since he didn't call them fast enough, they called a 3rd guy. Funny thing is the first 2 where about 2000 bucks different in value.
THANK YOU for posting this! I'm an appraiser working in the Seattle area, and we do come up against this issue of 'shopping' appraisers quite a bit among borrowers. I even had a broker ask me what my 'value bid' was on a property! This is not as prevalent since the market has shifted. In fact, a lot of my clients (brokers) listen carefully now when we discuss a property and it's potential complexities. Work is going to get more competetive for all of us - having a trust relationship with a good appraiser will ensure the business you DO have will be solid. Great post!
As an apraiser in the Atlanta area, it is quite difficult sometimes to deal with the pressures especially with the over-saturation of appraisers in the area. I get calls or emails all the time asking if I could just pull a few comps real quick to see a ballpark figure. Basically these types are fishing for a value and expecting an opinion of value for free. Then they will send the order to the "highest bidder". My favorite is when they call me and ask if I will take out that statement about the structural problems.
I am in the business of providing expert advice and opinions. I have taken the additional steps to make myself as competent and respected as I possibly can in the industry and I am still pushing further. As a result, I am trusted by my clients and they call me when they really want to know the truth. I have brokers that will call skippy to do most of their jobs because he will push values and ignore deferred maintenance, but call me when they are purchasing their own home.
I may not be the richest appraiser in the area but at least I can sleep at night!
Nick, My pleasure for the link. You are one of the true professional appraisers that I have met. As you know I have a few appraisers that I use and it always amazes me when I hear the stories about broker's or lenders demanding what the value should be. They don't understand or don't want to understand what they are asking you to do. I tell me client it is what is. We can sometimes offer additional comps but in the end it is up to the lender to accept it.
Thesa, So true. I always laugh when I see that
Joe, How crazy is that and now they have to pay 2 maybe 3 appraisals.
Jennifer, I have to say that is a new one on me "Value Bid" wow.. How about my Value Bid is the truth.
Benjamin, I know exactly how you feel. Being a Mortgage Broker I might take a pass on deals but at least I know I can sleep at night.
yes Matt lenders are pulling 4506 T 's on Full Doc loans....... some on every single deal...
Lewis, I know they are requiring it but I am not sure if they are pulling it or not.
Very good post. The Appraisal is an essential part of the process of closing on a mortgage. It is very important to make sure that the appraiser you are working with is not only good, but also that he is ethical and that his appraisals are acceptable to the UW's.
Chris, Very true they should be ethical. Thanks for the comment