Appraisals are under UNDER ATTACK!Okay, I may be exaggerating but I've been blog searching for the last week and I think I can probably get a few high fives when I say they are being scrutinized! As an Underwriter I understand why my fellow underwriter is asking for the extra comps, comments from the appraiser and corrections.
As a former loan processor I understand the loan originator and the real estate agents frustration.
The appraisal represents the collateral of the mortgage loan.
The underwriter cannot physically go to the property (although I have heard stories), so the appraisal is the only way to view it.
First let my say this: NO ONE IS PERFECT!This includes Appraisers, Underwriters, Originators, Processors, and Agents.
I've always subscribed to the philosophy that underwriting is part guidelines and part COMMON SENSE, but the reality of the matter is that's not true.
Underwriting has become part guidelines, part past experiences, part of last weeks underwriting meeting, part "the last loan I underwrote like this didn't sale" and a WHOLE LOT OF PERCEPTION (from everyone!).
I'm almost a 100% sure I've just made half of my underwriting buddies mad! For this reason I've listed a few questions that you should ask yourself when viewing your appraisal.
Please ask yourself these questions:before you send it in to underwriting! 1.
Are comps over 12 months old? FannieMae/Freddie Mac guides call for comps that are no older than 12 months old and comments from the appraiser for comps over 6 months.
2.
Are the comps from the subject's subdivision? This may seem like a weird question, but the underwriter is looking for the value in the immediate area.
When comps are pulled from neighboring subdivisions they need to be close by and the property should be similar in style & design.
3.
If the property is a new construction: Did the appraiser obtain at least one comp outside of the newsubdivision? The reason the underwriter needs a comp 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 subject property.
4.
Did the appraiser go over 1 mile from the subject?Urban/Suburban = 1mile, Rural= 10 miles.
Typically property in urban cities are located within a mile from each other.
Now before I get a dozen emails let me say: there are exceptions.
I can think of at least 2-3 small cities that are pretty spread out and I also know that some urban subject properties are located on the edge the city.
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 gone over the recommended mile search does the map support it? There are no guidelines that say the appraiser CANNOT go over a certain amount of miles, the guidelines say the appraiser has to document WHY they went over a certain amount of miles.
Comments from the appraiser are great, but comments and the map supporting the comments are even better! 6.
Did the appraiser cross any major street or highways? The problem with crossing over major streets, highways and train tracks it that it can put you into a different neighborhood value.
I'm sure my fellow real estate agents know exactly what I mean.