Don’t Finish Your Basement (or Garage or Patio) IF…

“Your godda***d appraiser only gave $7,500 to my basement after I spent 85,000 f**king dollars finishing it! Go f*** yourself!” So said a borrower to me years ago after he reviewed an appraisal of his home that he clearly did not like (to put it mildly). Knowing that “the customer is always right,” I tried […]Read More

Bedroom Counts And Home Values – A Very Big Deal!

WHAT CONSTITUTES A BEDROOM? I wrote a blog last year called What Constitutes A Bedroom? in response to an agent who was angry b/c our appraiser refused to deem a 42 square foot (sf) room “a bedroom.” The appraisal came in low b/c the house was correctly deemed a two-bedroom instead of a three-bedroom, as […]Read More

Why Appraised Values Have To “Season” After A Purchase

“I just bought the property for $800,000 but it is worth $1,000,000 now, and I would like to refi using the higher appraised value…” We get emails like the above all the time, and sometimes we can garner the higher appraised value. But often we can’t. This is why. APPRAISERS CORRELATE TO PURCHASE PRICE This […]Read More

Holy High Appraisal Fees, Batman! Please Warn Clients!

Economist Milton Friedman famously said, “Inflation is always and everywhere a monetary phenomenon.” (meaning that it is always caused by increases in the supply of money) But, when it comes to appraisals Milton might be … wrong,** as hard as it is for me to type that. 😊 Appraisal fees have risen from as low […]Read More

How To Use Single Premium/Lump Sum PMI To Cover Appraisal Shortfalls

Recently, I blogged about why Private Mortgage Insurance is “Awesome,” pointing out why its stigma from the 1990s is so underserved. One of the many benefits of PMI is using it to help cover appraisal shortfalls, and I wanted to elaborate on that in this blog. $900,000 PURCHASE APPRAISES $100,000 UNDER Assume the following: Purchase […]Read More

Financing And Building ADUs Or In-Laws

CUTEST HOUSE I EVER SAW I have been in the mortgage industry since 1994 and have seen thousands of homes in every setting imaginable. And the cutest house I have ever seen was a 3,500 square foot brick, single-level ranch house on ten acres in the wine-growing region of Livermore Valley in California. It had […]Read More

Are Lenders Obligated To Share Appraisals?

We often pay for purchase appraisals upfront on behalf of clients for a few reasons. Rush Fees: We pay a large rush fee that we don’t charge our clients and b/c we can’t separate the rush fee from the standard fee, we just pay the entire fee upfront (we don’t want our clients paying the […]Read More

The Need For Speed; 14-Day Closes; Appraisals Remain The Problem

14-DAY CLOSES ARE BACK! We are bringing our 14 Day Closes back in full force now, but with certain caveats. We cannot close the following transactions in 14 days: (1) Condos – b/c we have to wait for HOAs; (2) Jumbos – b/c underwriting and required appraisal reviews take longer; (3) Complex self-employed borrowers b/c […]Read More

Appraisal Reviews = Collateral Reviews = CDAs = DELAYS (Mostly For Jumbo)

APPRAISAL REVIEWS SLOW DOWN JUMBO FINANCING The appraisal review requirement is one of the reasons why jumbo loans take at least a week longer to close than conforming (Fannie/Freddie) loans. These appraisal reviews take anywhere from two to five days and can only be performed of course after the appraisal report is complete. This is […]Read More

Appraisal Problems – 5 Options When Appraisals Come In Low

Our Zillow rep told us yesterday that searches for new homes are down 25% from recent months, as buyers appear to be “fatigued” and are putting their searches on hold. Despite that fact, the market remains extraordinarily hot and we continue to see appraisals come in under contract price all too often. This should not […]Read More

Duplex vs. House + In-Law Unit (ADU)?

UNDERWRITER KILLS DEAL BY CALLING IN-LAW PROPERTY A DUPLEX A few months ago, we had a purchase with two units on one lot. It had two addresses and two electrical meters, and our underwriter insisted it was a duplex – effectively killing our deal. So, we called Fannie Mae and explained all the particulars and […]Read More

Appraisal Woes Not Your Lender’s Fault; Blame Andrew Cuomo :)

One of the most frustrating and expensive aspects of our business is dealing with low appraisals. It is frustrating b/c borrowers invariably blame us for the problem – even though we have very little control over the issue. It is expensive b/c we often end up throwing money at the issue to assuage borrowers and […]Read More

Appraisers Can’t Push Values; Must Avoid Reviews/Cuts

APPRAISAL COMES IN LOW We had an appraisal come in slightly under contract price this week. What made it a surprise was the fact that there seemed to be ample comparable sales to support the value (unusual in this market, to say the least). So, when the appraisal came in low, both agents, the seller […]Read More

Covering Appraisal Shortfalls

Whenever the market heats up like this, particularly in the springtime, appraisals invariably come in low. This is simply because there are often no closed comparable sales (comps) that even come close to supporting current contract prices, especially when there are bidding wars. REMINDER: Appraisers can only use comps that close prior to the appraiser’s […]Read More

Appraiser Shortage Makes 14 Day Close Impossible; “Exterior Only” And “Desktop” Does Not Help

The shortage of qualified appraisers is worse than ever for several reasons: Demand exceeds supply. The continued surge in both refinance and purchase transactions has created a situation where the demand for appraisers far exceeds the supply. COVID concerns. B/c of COVID concerns, many appraisers are justifiably reluctant to accept orders requiring physical (interior) inspections. […]Read More

Low Appraisals – 5 Options When Appraisals Come In Low

Whenever an appraisal comes in under contract price, we work quickly to consider all options with both agents and buyers, and we can usually resolve appraisal issues within a day if everyone is responsive. Below are five of the options available when an appraisal comes in under contract price. 1. Rebut the appraisal. This approach […]Read More

Appraisers Can’t Ignore Low Comparable Sales; Agents Should Not Either

APPRAISALS COMING IN UNDER CONTRACT PRICE B/C MARKET’S SO HOT We are seeing appraisals come in under contract price more frequently than normal again b/c the market is so hot and buyers are bidding so aggressively. This is not b/c our appraisers are not trying to support contract price; it is b/c appraisers simply lack […]Read More

Valuing An In-Law Unit Or An ADU (Accessory Dwelling Unit)

I touched on this last year a few times but am getting questions again because so many people have built Accessory Dwelling Units (ADUs) as a result of the COVID crisis. HOW MUCH IS MY ADU WORTH? An ADU or in-law or granny flat or outside cottage (or whatever you want to call it) is […]Read More

Comparable Sales Appraisers Can’t Use; Appraisal Reviews

Hot markets foster appraisal issues – every time. This is b/c aggressive buyers in multiple bid situations frequently offer to pay far more for a property than what closed comparable sales can support in an appraisal. If buyers have ample cash, low appraisals are often not an issue, as buyers can simply bring in cash […]Read More

Appraisal Issues – Low Values, Delays & Why; When Summer = Spring

Our Social Media Manager recently noted a lot of comments on social media  regarding appraisal issues – both low values and delays. The conditions that foster these issues are worse than ever right now and I wanted to discuss a few reasons why. LOW VALUES: WHEN SUMMER = SPRING Spring is usually the issue. Appraisers […]Read More

Why Appraisers Often Come In So Much Lower Than Homeowner Estimates

We once had clients who spent dozens (if not hundreds) of hours removing the popcorn ceilings from their $950,000 home. Because they put so much “sweat” into their equity, they were convinced that their home would appraise for substantially more when they were done. But because their neighborhood market had recently softened a bit, their […]Read More

Appraisals: Cosmetic Vs. Structural Issues; Why Appraisers Often Don’t Call Out Cosmetic Issues

We recently had a purchase involving an older property and the buyers were concerned because the appraiser did not call out a broken window pane and some torn floor coverings. I just blogged about condition issues in June – Condition Issues – What’s Lendable? Don’t Disclose In MLS If “As Is.” But the point of […]Read More

Bigger House Vs. Smaller House +In-Law Unit; Price Per Acre Issues

Several months ago, I blogged about a 3,700 square foot property that appraised for far less than the owner thought it would because it was really a 2,300 square foot main house with a detached 1,400 square foot in-law unit. The property appraised for less than expected primarily b/c the appraiser had to correlate to […]Read More

Why We Say A $2 Million Home Is Worth $999,000; Best Month Ever For Mortgage Rates

“PIWs” REIGN SUPREME “PIW” stands for Property Inspection Waiver or an Appraisal Waiver. We are getting more of them than ever before, making both refinances and purchases faster, easier and cheaper. We are getting them more often now b/c Fannie and Freddie loosened their guidelines in response to the COVID-19 crisis and b/c more and […]Read More

When Appraisers Are Right (Which Is Often)

We have an excellent pool of hand-picked appraisers that I tout often as a competitive edge. I tout them often b/c we used to get burned all the time when we were forced to use giant Appraisal Management Companies (before setting up our own appraiser pool). Several months ago, one of our appraisers came in […]Read More

COVID-19/Mortgage Industry Update

Here are a few reminders and key updates that are warranted (despite some repetition) b/c the overall situation remains so fluid and b/c we are still getting so many questions. MORTGAGE INDUSTRY REMAINS OPEN Most lenders remain open and fully operational and are still funding and recording loans (with most team members working remotely), as […]Read More

Why & When Appraisals Do NOT Equal Market Value

BEATING THE APPRAISAL DEAD HORSE I beat this dead horse more than any other simply because the issue surfaces so often. This week was no exception when a buyer of ours got cold feet when his appraisal came in $25,000 under contract price. This happens from time to time in hot markets whenever there are […]Read More

Smoke and Carbon Monoxide Detectors Required – Contract Provision?

Time and again, we have to send appraisers back out to re-inspect properties to verify the presence of both Smoke and Carbon Monoxide (CO) Detectors. This is frustrating for us b/c the detector requirements have been in place in CA since 2010, the re-inspections can delay closings, and agents often inexplicably get upset with us […]Read More

Two Guaranteed Appraisal Killers: Overstating Square Footage & Including Expensive Personal Property In MLS/Contract

OVERSTATING SIZE BY INCLUDING DETACHED UNITS In September, I blogged about a Realtor who vastly overstated the value of his own home because he included the square footage of his huge, detached in-law unit in his total square footage estimate. His main house/dwelling was only 2,300 square feet while his detached in-law was 1,400 square […]Read More

When to Expect High Appraisal Fees and/or Appraisal Delays

We recently had a Texas transaction involving a large acreage with a 1 bedroom home and an accessory dwelling unit. It took us a few weeks just to find an appraiser willing to appraise the property (even though we shopped it very aggressively), and the fee was $1,000! The delay and the fee caught the […]Read More

Why Agents Need to Share Low Comps Too; When Cat Pee Matters :)

Agents often share relevant comparable sales data with appraisers to help support value. B/c of this we often share basic appraisal guidelines with agents to ensure they share comps that appraisers can actually use. Comparable Sales Appraisers Can and Can’t Use is just one example from a past blog. Comps can’t be too large, too […]Read More

What Constitutes a “Bedroom?” Ceiling Height? Closet? County Records Wrong!

My wife Heejin spoke in front of a brokerage recently and an agent approached her afterward to complain about a transaction we closed over three years ago. The agent was still upset b/c the appraisal came in low. We researched the transaction and found out that the county records and the MLS had the bedroom […]Read More

No Appraisals For Loans Under $400,000; “New Home Premium;” Appraised Value’s Not Market Value

I want to share a few more interesting comments about appraisals today. On Wednesday I blogged about how appraisers can’t ignore comps that don’t support value. The agents wanted us to use dated comps and ignore more recent comps, but appraisers of course can’t do that b/c underwriters and reviewers will see the ignored comps […]Read More

Why Appraisers Can’t Ignore Comps That Hurt Value

The 1990s were good and bad for appraisers. They were bad b/c appraisers had to use analog sources (books and printouts) to find comparable sales; they were not online. They also had to take analog photos and glue them to old fashioned paper reports. The 1990s were good for appraisers b/c there were no appraisal […]Read More

DANGER! Appraisal Waivers Can Disappear!

I recently blogged about the increasing occurrence of Appraisal Waivers. If a particular property is already in Fannie Mae’s or Freddie Mac’s database, it could be eligible for an Appraisal Waiver, meaning no property inspection or appraisal will be required. Some lenders are offering to check for possible appraisal waiver status for particular properties for […]Read More

Appraisal Waivers More Common Now; Here’s Why

Prior to 2016, every mortgage required an appraisal.  That changed, however, in 2016 when Fannie Mae started to offer “Property Inspection Waivers” or “PIWs.” In 2017, both Fannie and Freddie started to offer PIWs for both refi’s and purchases. I blogged about this in early 2018, pointing out two things: PIWs are less common than […]Read More

Why ALL Lenders Must Pay Appraisers Extra and Promptly!

AGENT SENDS COMPETING LOAN OFFICER TO US FOR ADVICE An agent we know well recently referred another loan officer to us to get advice in regard to how to finance a Site Condo (a stand-alone unit on a condo lot) he had listed. The loan officer was having great difficulty obtaining financing for her client/buyer, […]Read More

How Much Is a Huge Lot Worth? Appraisal Adjustments for Lot Size

In response to this blog about the value of in-law units, I received numerous other appraisal-related inquiries including a few questions about lot-size. Agents are often frustrated b/c they think appraisers ignore or underestimate the value of larger lots. But, there is much more to the story. NEED COMPS IN SAME OR SIMILAR NEIGHBORHOOD TO […]Read More

How Much is an “In-Law” Unit Worth? Interior Access; Less Than You Think

REALTOR MISSES VALUE OF HIS OWN HOME BY $500,000 Years ago I was refinancing a Realtor who insisted his remodeled 3,700 square foot home was worth at least $1.5 million. I was therefore shocked to see the appraisal come in under $1 million. I reviewed the appraisal and quickly realized why it was so low. […]Read More

Why Friendly Appraisers Should NOT Push Values Too Far; Review Appraisers Are Like Sharks

$125,000 APPRAISAL CUT KILLS DEAL Several years ago, we had a $700,000 purchase of a property with an unpermitted in-law unit in Concord, CA (very common in both our Bay Area and Austin markets). There was 1,600 square feet of permitted (legal) space and an additional 800 square feet of unpermitted space (the in-law unit). […]Read More

Internal Appraisal Panel; Why We Left the Broker Channel; Never Pushing Values

APPRAISER WHO LIVED 100 MILES FROM SUBJECT PROPERTY In October, I shared an appraisal horror story about a huge Appraisal Management Company hiring an appraiser who lived 100 miles away from our subject property. The appraiser crossed a major freeway to find comparable sales in a vastly inferior neighborhood, and came in $200,000 under contract […]Read More

Appraisers Need Ratified Contracts & Comps That Close Prior to Inspection

APPRAISERS NEED RATIFIED CONTRACTS This is a reminder that we need a fully ratified contract (signed by all parties) before we can order an appraisal. This is a regulatory requirement and many appraisers won’t even accept orders without ratified contracts. Appraisers need ratified contracts so they can review all the terms within it to see […]Read More

Comparable Sales Appraisers Can & CAN’T Use

Realtors often send our Appraisal Manager comparable sales (comps) to review for their upcoming appraisal appointments or for rebuttals when appraisals come in low. The problem is that we often cannot use the comps b/c they are so far outside of standard appraisal guidelines. This happened recently when an agent sent us comps that were […]Read More

Appraisal Condition/Health & Safety Issues to Watch For!

Realtors are often frustrated about “condition” and “health & safety” issues that get called out by appraisers, and they come to us for guidance. They obviously want to avoid getting conditions called out by appraisers that will either cost too much to repair, delay closings, or kill deals altogether. Our Appraisal Manager, Jennifer Muzzall, provided […]Read More

When “Appraised” Value Is NOT Market Value

B/c the market is heating up again, we have had several appraisal issues recently where there were simply no comparable sales available to support the contract price (despite multiple offers at that price). B/c the agents involved in the transactions were frustrated, I thought it was necessary to repeat this blog. TEN OFFERS OVER $1 […]Read More

Condo vs. Townhome vs. PUD

PUD vs. TOWNHOUSE vs. CONDO This is another reminder that condos are not distinguishable from PUDs (Planned Unit Development units) by appearance alone. Attached side-by-side two-story units that all touch the ground can be zoned “CONDO” or “PUD.” Complexes with units that “float” (that do not touch the ground) will almost always be zoned Condo […]Read More

Curb Appeal for Marketability and “Appraisability”

BAD LANDSCAPING COSTS SELLERS $200,000 I live near a home that was on the market for nearly three months before it finally ended up selling for over $200,000 less than its original list price. In contrast, I live near another home that is the same size as the home I just referenced, and it recently […]Read More

Bedrooms 101 – Everything You Must Know About Bedrooms

When my wife Heejin and I visit Austin, Texas, we stay (via Airbnb) in a small two bedroom bungalow that is worth close to $800,000.** If that same bungalow had three bedrooms though, it would be worth $50,000 to $75,000 more. In many Bay Area markets, those numbers would be much larger. ** Quick Tip: […]Read More

Property Condition: Old, Tired, Worn Is OK; Health/Safety/Structural Issues Not OK

We once had a Realtor call us about a property that was formerly used for the “production of medicine” (aka an illegal weed farm). He asked whether the appraiser would call out the holes in the floor (for ventilation and grow lights) and the damage caused by the angry guard dog. The answer was yes, […]Read More