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Is there any way to know what a house is worth without having to pay hundreds for an appraisal?

Unless you have been under a rock this year, you know about the HVCC regulations that were effective as of May 1st, 2009. If not, please go to my blog, I have several blogs on this topic.

Gone are the days when a mortgage broker can call up an appraiser and ask us to "check the comps" to see where the home is value-wise before ordering an appraisal report. Now let me say "comp checks" should never have been done to begin with they are against USPAP, but we all know appraisers got around this one way or the other as long as an appraisal order was in their possession.

So now how do Realtors, Buyers, Sellers, Banks, Mortgage Brokers know what the value will be without having to pay hundreds of dollars to find out? Enter Desk Top or Drive-by appraisal reports.

I will preface this with saying that in my humble but experienced opinion, there is no better appraisal product than a full interior/exterior appraisal report. Unless we see the whole picture, there is always some doubt involved and therefore the value could be affected.

BUT for those who want a clue on value, we can do a Desk Top report, whereby we pull courthouse records on the home in question and talk to the homeowner about interior amenities and assuming they are telling the truth, we should be able to provide a fairly credible valuation for a fraction of the full appraisal report.

We can also do what is known as a Drive-by appraisal report. Just as it sounds, we drive by the property and we see it only from the exterior, but it gives us an idea on the neighborhood, exterior quality, site appeal, etc. much more so than a Desk top, where we do not leave the office.

On special properties like lakefront, river front, large custom homes, these reports would be less credible as we really need to see your lake lot or all the quality upgrades you have on the inside of the home, but for many other homes these reports can at least give you an ideas as to whether the loan is going to work for you or the price you want to pay for a home or sell a home realistically, without paying hundreds for a full report.

So ask your local appraiser if they can produce these kinds of reports for you and for my fellow appraisers out there, I suggest if you do not have it there already, you offer this on your website, to generate more business and maybe not have to deal with AMC's as much for your lender business.

Just a thought! Good luck out there everyone

Mary Thompson

Your Active Rain Appraiser

www.marytappraisals.com

Posted by Mary Thompson Lake Lanier Appraiser in Georgia on 06/04/2009 10:55 AM

Comments (17)

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17 Comments on Is there any way to know what a house is worth without having to pay hundreds for an appraisal?

JUN

Mary there should not be drive by appraisals. Something needs to be done about the appraisal ordering method for sure-have no idea what the right thing is, but we have a lot of work ahead of us.

Drive by appraisals do not show a roof causing an interior leak, torn worn carpet, torn or lack of flooring, possible structural defects, etc. I could go on with the list of items, but you know them and drive by appraisals do not protect banks and their assets.

Heather:

Absolutely AGREE with you and if we did a drive by we do have a disclaimer that says only the outside was seen. This is why I feel the best product is a full appraisal report, but be prepared as Banks want a way to save money for themselves as well as for their clients and they want to find a way to keep costs low.

As part of this process, if the appraiser does a drive by and sees anything that leads them to believe there are issues, it would be noted in the report and suggested that a full appraisal should be completed as the drive by is not reliable in this case.

There are definite drawbacks and this is why many lenders went to full interior reports awhile back instead of drivebys but for those who just want an IDEA of value, because they could be way off in their thinking, this is the product for them.

Mary,

It seems to me that understanding the purpose for the appraisal, if one is really needed is key. Sometimes sellers will ask me for a ballpark, as they want to see if they have enough equity to net enough for a move up. Or, a lender will ask me for comps just to advise a homeowner if they have any ability at all to refi, so in those cases a detailed appraisal may not be necessary. For me, I sometimes suggest would-be sellers go to the expense before we price the home if the property is unique enough. We did this for my parents who had an older home needing some updating, but on a highly desirable lake front property. With no other comps in the last two years for their neighborhood we were really at a loss to effectively price the home. Yes, the appraisal cost us, but helped emmensely in coming on market at the right price to get an offer in just 3 weeks.

I can see where what you have described would have some helpful applications.

The other question is: Why do you need to know what the house is worth? For a Real Estate Transaction go with an appraiser because that is they way it is done and there is too much liability. Simply curiosity or thinking of selling? Call a Realtor to do a Free Home Evaluation.

A drive by could be useful if the appraiser has access to the Seller's Disclosure, which would reveal all of the known defects, at least to some degree.

Mary:

I find that mortgage brokers don't mind getting a desk top appraisal - until I ask them to pay for one!

When people ask me for a "ballpark", I usually mention Cityfield, Fenway Park, or Yankee Stadium...

Jesse: Love that response! :). The brokers have no option now. Either they pay for a desktop or take their chances on the appraisal when they send the order thru the bank or AMC and get an unpleasant surprise. People don't want to pay for a full appraisal if they may not get The loan based on value. I think that is the cost of doing business but lenders and homeowners will want some idea before making that Commitment to pay for the full report

JUN

I love that with the HVCC - all my calls for "comp checks" have ceased! However, now I get calls from FHA orders - asking if I could still give them a "feel" for what the value might be.

Of course I go through the whole litany of responses, encourage them to check with Zillow.com, Cyberhomes.com etc. They say "I already have, but I just want to know if those are accurate"

In other words, "I want you to work for free and give me a value before I send you this order".

Hey - I understand a borrower does not want to pay for an appraisal more than once. So instead of shopping for a value, they should be shopping for quality, experience, and credentials. If you find the most experienced appraiser out there....then one appraisal to tell you the TRUTH should be all you need. And if the value isn't there to make the loan work - the borrower at least knows the truth about their value to make the next decisions in life.

Richard: Well said. I totally agree like any other professioanl service prople pay for Appraisers are made to feel and many have provided FREE services! So they have Come to expect it. Like any other professional we should not work for FREE! Thanks for your comments.

Richard, the joke is that with FHA, the Broker get face legal action also, not just the Appraiser, for those comp checks. That's a hell of price to pay for a little "Feel"!

As with any new regulations, the best thing to arm yourself with is knowledge. Mary brings up a good point that Realtors and mortgage brokers need to look at new ways to find the information they need to work efficiently, for their client's benefit and their own. Our company's solution was of course technology. But like most technological tools, the user must learn how to apply it to their situation in order to make the most of it.

The problem with your solution Mary is that the end user (borrowers & buyers) do not see the benefit of paying a few hundred dollars to be told 'no'. As an appraiser, I clearly know the value of the end user getting a realistic appraised value of a property. Unfortunately our national organizations (as pointed out by Mike Lay) have not done anything to inform the general public that there is as much value in an appraisal that does not support a refi or contract price as there is in one that does. PROTECTION. Pure and simple, but this concept is lost on most users of appraisal reports.

The AVMs supplied by our company are meant to be a 'baby steps' tool for loan originators etc to get realistic valuations in a cost effective manner. At just $10-$40 any buyer, borrower, etc can see that this is a better alternative to a $200-$300 driveby that is only minimally more effective (as both avm's and driveby's cannot confirm an accurate condition of subject/comps). But again, it is up to the real estate professional involved in the transaction to understand the limitations and applications. While our AVM's can provide accurate valuations on 85% of homes nationally, they will not return a report where there is a lack of available data such as the lakefront homes that Mary is probably very familiar with. In other words, don't bother running an AVM on the White House :) .

--Andrew

JUN

Mary. Thanks for taking time to educate us. It helps us keep current.

JUN

I have been offering a $75 written "desktop" appraisal for years. I have done 4 in the last 3 years or so, none for mortgage brokers or lenders...

Kenneth, good to hear from you. Why would anyone want to paid $75.00 for a quaility desktop, when for $20.00, they can get an AVM. Never mind the AVM might use Townhomes or Duplex units to "comp" a SFR.

JUN

Michael,

You have to give at least some credit where it is due. When I speak about AVMs I am not referring to the type of 'information' you get from zillow or homevalues, etc. (you get what you pay for)

Any actual AVM easily filters out duplex v sfrs based on title data, just like all appraisers do. When it comes to townhomes v sfrs it can be a little trickier, but again title records indicate lot size and it is fairly accurate to weed out 1500sf homes on 1200 sf lots v 1500 sf homes on 5500 sf lots, again, just as appraisers have to when utilizing data sources for an actual appraisal.

Not all title data is perfectly accurate though, and that is why AVM's rely on a much larger pool of data (sales, trends, etc) than appraisers do. By examining hundreds of sales records vs dozens, the few bad data points have far less of an impact on the valuation.

--Andrew

JUN

Thanks to this dialogue, I used some of the advice posted. I will meet an appraiser at a property today where I represent the buyer. She is not from this area and I asked her if it would be helpful for her to see some neighborhood comps. She was very receptive. I'm offering no opinion, just data that compares neighborhoods as with the MLS and so many out of area agents, the neighborhood fields aren't always populated properly if at all.

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