{"id":231,"date":"2010-08-26T02:50:26","date_gmt":"2010-08-26T02:50:26","guid":{"rendered":"http:\/\/www.terrascopeappraisal.com\/?p=231"},"modified":"2010-11-01T23:23:36","modified_gmt":"2010-11-01T23:23:36","slug":"articles-internet-lender-scrutiny-extra-costs-consumers","status":"publish","type":"post","link":"https:\/\/www.terrascopeappraisal.com\/?p=231","title":{"rendered":"New Articles on the Internet About Lender Scrutiny and Extra Costs to Consumers"},"content":{"rendered":"

Today, I came across this article on MLS Real Estate : http:\/\/realestate.msn.com\/article.aspx?cp-documentid=24569959&Gt1=35006<\/a><\/p>\n

\u00a0 It is an interesting and well informed piece, but I feel I must add my own “two-cents”…<\/p>\n

The first quote I came across in this article is: “Any time you have a market in transition, appraisals aren’t going to keep up because the appraisal is based on historical data”<\/p>\n

Now, that is true to a point; however, most lenders have been requiring appraisals have at least two relevant sales that closed within the past 90 days and at least one or two active or pending sales that support the appraiser’s conclusions – this has been (for at least the past year or two) the “norm”; among the bulk of lenders I work with and most appraisers I know; so, even though a “closed sale” \u00a0is “historical data” it stands to reason that a properly supported appraisal will also include at least one or two “currently offered” (listed) properties to balance the “historical” data with current inventory; it is then up to the appraiser to reconcile the current data with historical data. For instance: in a declining market, closed sales will likely be higher than what\u00a0the available listings support; conversely, in an increasing market, the\u00a0closed sales may be less than what current listings can justify. The bottom line: a good appraiser will not only look at closed sales, but also\u00a0current inventory and market trends to make an informed and reasonable opinion of market value that\u00a0takes the “historical” (closed sales) and “current”\u00a0(active\u00a0inventory and pending sales) into account when estimating a property’s value.\u00a0 This helps to balance the “historical” with the “current”; and helps to recognize and apply market trends when appraising a property.<\/p>\n

One other point I’d like to add: there is nothing preventing a home owner (or mortgage broker or\u00a0agent)\u00a0from consulting with a different appraiser than the one\u00a0who performed their appraisal in order to be sure there are no major errors or problems with the original\u00a0appraisal. A well informed and trusted local appraiser can provide a consultation assignment for a home owner\u00a0that involves a technical review of another appraiser’s work; if major errors or violations of USPAP (the Uniform Standards of Professional Appraisal Practice – the codes, ethics and general rules for the appraisal profession) are found, the current rules (including the HVCC) require\u00a0the lender to order a second appraisal; AND (if USPAP violations are present) it is up to the LENDER to provide the second \/ new appraisal at their own expense, not the borrower’s (under the HVCC).<\/p>\n

Under current rules and law, the lender is responsible for selecting a competent appraiser and the quality of the appraisal for lending purposes. The lender is also responsible for being sure that an appraiser is paid a fee that is “customary and reasonable” in the market area; THIS is typically where the\u00a0problem lies, as many of the large lenders use an Appraisal Management Company (AMC) to handle the appraisal ordering, appraiser selection, and quality control of the appraisals. Surprise!\u00a0 The big banks also own the AMC they\u00a0use; it has been common practice for the lender to order an appraisal through their own AMC that engages the appraiser who is providing the fastest and least expensive\u00a0appraisal product; this results in a less reliable appraisal because the appraiser is often times only given a day or two to\u00a0estimate a property’s worth and is only being paid a fraction of what has been “customary and reasonable” in their market.\u00a0\u00a0To top it all off: the lender then charges the consumer the “customary and reasonable” fee for the appraisal and keeps the difference as profit (or “cost of business”, as they would argue). This has\u00a0been a second revenue source for big banks\u00a0within the lending process and should be considered appraisal “fee skimming”, an illegal practice in most, if not all, states.<\/p>\n

I provide appraisal consultation services to home owners, lenders, and brokers; I\u00a0have found that, when USPAP violations are present, the borrowers have been able\u00a0persuade the\u00a0lender to provide a second appraisal at no cost to the borrower -sometimes, this results in a different\u00a0appraised value – sometimes, it also results in a better appraisal that the\u00a0lender feels more comfortable proceeding with when providing a home loan – sometimes, it results in a second appraisal that is equally flawed as the first – and sometimes the second appraisal has no significant\u00a0change in value from the first. At the very least, a borrower (or\u00a0broker, or\u00a0correspondent lender, or agent)\u00a0can feel confident that they have a second set of “trained eyes” to find any errors or issues with an appraisal that may be questionable and a course of action. Most borrowers cannot recognize the most common appraisal errors, because most home owners are not appraisers or bankers.<\/p>\n

If you find yourself in this position (with a questionable appraisal that appears flawed), feel free to give me a call (or email).<\/p>\n","protected":false},"excerpt":{"rendered":"

Today, I came across this article on MLS Real Estate : http:\/\/realestate.msn.com\/article.aspx?cp-documentid=24569959&Gt1=35006 \u00a0 It is an interesting and well informed piece, but I feel I must add my own “two-cents”… The first quote I came across in this article is: “Any time you have a market in transition, appraisals aren’t going to keep up because […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[],"class_list":["post-231","post","type-post","status-publish","format-standard","hentry","category-residential-appraisal"],"_links":{"self":[{"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=\/wp\/v2\/posts\/231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=231"}],"version-history":[{"count":4,"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=\/wp\/v2\/posts\/231\/revisions"}],"predecessor-version":[{"id":243,"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=\/wp\/v2\/posts\/231\/revisions\/243"}],"wp:attachment":[{"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.terrascopeappraisal.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}