What's LOVE Got to Do With IT?

Very Little! You may love a property and be willing to pay more than it is worth but your lender will now have more of a say. We have a new game in town called the Lender Authorized Appraisal, arriving on May 1, 2009 compliments of Fannie Mae. This means conventional lenders (who resell their loans) will be calling the 'fair market value' on your properties. Well you had your chance to comment and now the law is going to be laid down. Nobody believed we could lose this 'right' to order appraisals. Even appraisers I know said they doubted this would happen. Welcome to the Monkey House!

What Does This Mean to Your Borrower? Firstly, even though you have a Sale Price affixed firmly on your contract it is just possible that your lender may downgrade the value and your borrower would be forced to come up with the difference or negotiate the price again. The only problem with this new kink is not knowing going into the application process how any particular bank authorized appraiser will see your unique property. AND they may not even send out a person but rely on their Auto Valuation Models. Naturally we have relationships with lenders who may have relationships with respected local appraisers and that would be a good thing to know (which we do). Considering the vast difference in value I've seen from a 'bank appraiser' and a VA appraiser on the same property suffice it to say the bank's report is usually lower. A lot lower.

Who Determines Fair Market Value? If you have in the past relied on your bank to tell you what your house is worth please ask yourself: what is their motive? I realize that mortgage brokers and the 'sellers of scumprime' as we are called have been tarred and feathered by the media to such a degree that some of us stopped going to cocktail parties last year. However, the thinning of our ranks has left a stalwart band most likely to give a darn. We aren't motivated to lower your value. In fact, we are charged with the duty to hire an independent third party to provide unbiased valuations. If the value is found to be below the sale price we are legally charged in our fiduciary role to advise the client of their consumer rights to negotiate like hell. Great--eh? We imagine our Realtor partners will be less enthused about this news.

What Is A Residential Appraiser? They are NOT to be confused with Certified Realtors who assess market value. Buyers often confuse CRS Realtor valuations as 'appraisals'. Each have their place. Residential Appraisers spend several years to become licensed and many become certified, having apprenticed under senior appraisers to get their stripes. They then have to submit their work to lenders to get on their good books and pass another rigorous set of tests to get HUD approved.

Third Party Independent Opinion. You lender is not supposed to 'steer' the value in any way. We can state what the owner or buyer or sales document says and that is all. An appraiser goes out in person and looks at your property, taking measurements, pictures and copious notes, looking at the county data, finds recent sales and goes out and take pictures of the homes they consider comparable then pull all that into a format that compares many factors of size, age, value number of rooms, style, neighborhood --oh and ONLY recent sales (not listings) to arrive at your market value. Consider this a snapshot in time.  To think your bank can get an accurate AVM result from the comfort of their desktop in Iowa is a little far fetched don't you think? The AVM knows nothing of the neighborhood, the people or the local market trends.

AVM Factors: According to a Senior Lender I know (name withheld) Core Logic AVM's (Auto Valuation Models) are used to asses values using very generalized statistics for a region. According to a Senior Appraiser (name withheld) when you use AVM's to value or review a property you get a vanilla result. Since the duty of an appraisal is to represent LOCAL in fact quite CLOSE comparables for a subject, those can best be found by a human being researching actual statistics of SALES in the immediate vicinity to compare the variables of a subject property based on other very similar factors. No two properties are exactly alike in every way!

FYI: This does not affect FHA, VA, US-RDA and Reverse Mortgages (or portfolio loans for that matter) since they have different certifications for appraisers.

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susan templeton  www.loannetter.com  

washington loan officer license 510-LO-31434 branch license: 510-MB-24707-50145