Appraisals are UNDER ATTACK! Okay, I may be exaggerating, but I’ve been searching blogs for the last week and I think I can probably high-five when I say they’re being scrutinized.
As an underwriter, I understand why my fellow underwriter is requesting the additional compensation, appraiser’s comments, and corrections. As a former loan processor, I understand the frustration of the loan originator and real estate agents. The appraisal represents the guarantee of the mortgage loan. The insurer cannot physically go to the property (although I have heard stories), so the appraisal is the only way to see it.
First let me say this: NO ONE IS PERFECT! This includes Appraisers, Underwriters, Originators, Processors, and Agents. I have always subscribed to the philosophy that subscription is part guidelines and part COMMON SENSE, but the reality of the matter is that this is not true. The underwriting has become part of the guidelines, part of past experiences, part of the underwriting meeting of the last few weeks, part “the last loan I signed like this one did not sell” and LOTS OF PERCEPTION (of everybody!).
I’m almost 100% sure I just pissed off half of my fellow subscribers!
For this reason, I have listed some questions to ask yourself when viewing your appraisal. Ask yourself these questions: before you send it to subscription!
1. Are the compositions older than 12 months?
The FannieMae / Freddie Mac guides ask for comps that are no older than 12 months and evaluator comments for comps older than 6 months.
2. Are the compositions of the subject subdivision?
This may seem like an odd question, but the insurer is looking for value in the immediate area. When compositions are drawn from neighboring subdivisions, they must be close together and the property must be similar in style and design.
3. If the property is new construction: Did the appraiser obtain at least compensation outside of the new subdivision?
The reason the underwriter needs compensation outside of the new subdivision is because they are trying to determine market acceptance. They want to make sure there is a market for the property in question.
4. Did the appraiser go more than 1 mile from the subject? Urban / Suburban = 1 mile, Rural = 10 miles.
Typically, properties in urban cities are within a mile of each other. Now before you get a dozen emails, let me tell you: there are exceptions. I can think of at least 2-3 small towns that are quite spread out and I also know that some urban properties are located on the edge of town. These are obvious observations that can be seen on the map included in the appraisal. Which brings me to my next point …..
5. If the appraiser has passed the recommended mileage search, does the map support it?
There are no guidelines that say the appraiser CANNOT go a certain number of miles, the guidelines say the appraiser has to document WHY they traveled a certain number of miles. The rater feedback is great, but the feedback and the map behind the feedback are even better!
6. Did the appraiser cross any major street or highway?
The problem with crossing major streets, highways, and train tracks is that it can put you in a different neighborhood of value. I’m sure my fellow real estate agents know exactly what I mean.
