How Fast Appraisals Can Equal No Appraisal Contingency

Our appraisals are completed within four business days of the time we receive a ratified purchase contract, on average. Getting an appraisal back so quickly benefits everyone b/c it eases minds and cements transactions. There is another benefit, however, that many of our referral partners take advantage of – they waive the appraisal contingency altogether […]Read More

Appraised Value Often Does Not Equal Market Value

I share this story often during our Mortgage 101 Seminars. We once had a transaction in Berkeley involving a property that was listed for $850,000, and there were more than ten offers for over $1 million. The market value for that property was clearly over $1 million b/c there were so many buyers willing to […]Read More

Appraisals; Turn Times; Rush Fees; Tracking; Herculean Effort

We take appraisals far more seriously than most lenders. It costs us dearly, but it is well worth it. Rush Fees: First of all, we order every appraisal as a rush, and we eat the rush fee. We do this b/c we have discovered that paying the extra fee to appraisers helps get much higher […]Read More

Adverse External Influences On Appraisals – Explained

Adverse External Influences “Adverse external influences” are structures or entities near a property that negatively affect its value. Appraisers often use the phrase “External Obsolescence” when describing these influences. Adverse influences include freeways, busy arterial through-streets, railroads, BART or mass transit trains, cemeteries, schools and commercial buildings or establishments. Real estate agents involved in transactions […]Read More

Appraisal Comes In Higher Than Contract Price? Correlate to Contract; Red Flags

We remind readers often that no matter how high a purchase appraisal comes in over contract price, lenders always have to correlate to the price on the contract for financing purposes. If a purchase contract indicates the price is $500,000 and the borrower is putting down $100,000 (20%), the loan to value ratio will remain […]Read More

5 Options For A Low Appraisal

Here are a buyer’s options when an appraisal comes in low: 1. Negotiate a price reduction with the seller. This option is often not viable in a competitive market like today’s, when sellers have ample back-up offers. 2. Bring in the extra cash necessary to make up the appraisal shortfall. This option too is often […]Read More

What Realtors Can Say To Appraisers- Anything; Comp Guidelines

Lenders are not ever allowed to communicate directly with appraisers. We are only allowed to order appraisals through our Appraisal Management Company, which in turn contacts the appraiser. Realtors, however, can communicate directly with appraisers and we highly recommend it. Realtors often ask us what they are “allowed to say.” Our answer is: “anything, as […]Read More

Importance Of Own Appraisal Panel! Why We Left The Broker Channel

We used to navigate the broker channel with amazing efficiency b/c we knew every lender’s guidelines and systems so well, and our volume and reputation allowed us to curry many favors. Reminder: The “broker channel” is one where loan officers do not work for a specific mortgage bank but instead submit their loans to multiple […]Read More

Owner Occupancy Ratios; Appraisal Management Companies – Problems & Solution

Reminder: Owner-occupancy ratios for condos are irrelevant if a buyer plans to occupy the unit; owner-occupancy ratios can be well under 50%. One of the primary reasons we left the broker channel in 2014 was appraisal issues. The wholesale banks forced us to use large appraisal management companies (AMCs), and it was a nightmare. Prior […]Read More

Danger! Dry Rot! This Deck Will Kill You! (Condition Flags)

We recently had an appraiser visit a condo for an “as is” purchase appraisal, and there was a large sign stapled to the deck that said: “Danger. Dry Rot. Do NOT Stand On Deck!” Needless to say, the “as is” deal came to a screeching halt until the issue could be addressed. This was a […]Read More

Created Full Time Appraisal Manager Position at JVM; Necessity & Scope

We recently created a full time Appraisal Manager Position at JVM, devoted exclusively to JVM’s appraisals. We are the only lender with an Appraisal Manager with this scope of duties and training. It is absolutely necessary, however, b/c appraising has become so complex, due to guidelines, shortages, CU scores, and the lack of comps in […]Read More

Appraisal Issues; The Dreaded CU Score

High “CU Scores” are causing appraisal issues more than ever, and creating a lot of confusion. What Does A High “CU Score” Mean? Fannie Mae now requires a “Collateral Underwriting” (CU) Score on every appraisal. This score reflects an automated risk assessment of the appraisal based on county records, comparable sales in the area, and […]Read More

Great Email Illuminates Appraisal Issues; Business Decisions; Costs

Our Office Manager, Tiffany Nordgren, sent the below email last week. The email is excellent b/c of its clarity, but also b/c it illuminates many issues we currently face. 1. Appraiser Shortage. There are too few right now and everyone has to pay extra to get orders picked up. 2. Cost for Better Service: We […]Read More

Not Enough Appraisers For Current Loan Volume; Thankless Job

Due to the very low rates and recent surge in loan volume, there are simply not enough appraisers to meet the current demand. So, despite the fact that JVM pays a large rush fee (that we eat and do not pass on to borrowers), appraisers are not picking up our orders as fast as usual. […]Read More

Paying More Than Appraised Value? Why? Appraisal Not Market Value

Several realtors have asked why borrowers are willing to pay over appraised value. There are several reasons that we have observed: (1) the buyer is a 27 year old social media employee with $11 million in stock options, and money is not a significant concern; (2) the buyer is getting a massive gift from relatives, […]Read More

Options When Appraisal Comes in Low

We have a highly skilled & fair appraisal panel, but in today’s hot housing market, sale prices are sometimes above the value an appraiser can fairly attribute to a home. Here are a buyer’s options when an appraisal comes in lower than the purchase price: 1. Renegotiate a price reduction with the seller. This option […]Read More

Major Appraisal Issues; Please Read; Not Market Value; Other Issues

As predicted, we are seeing many more appraisal issues surface this year. A few reminders/things to note: 1. Appraised value often does NOT reflect market value. This scenario surfaces all the time: There are ten offers above $900,000, but the appraisal comes in at $850,000 b/c there are simply no “closed” comparable sales available that […]Read More

“Save This Deal, JVM!” Appraisers Can’t Ignore Glaring Issues

We got an email from a Realtor that said: “Save this Deal, JVM.” I point that out b/c we get similar emails every week b/c rookie loan officers at other lenders miss deal killing issues. But alas, we were not able to save this particular deal b/c the repair issue was too obvious. Good appraisers […]Read More

“As Is” Deal? Clean Up MLS, Social Media, Contracts

We had an “as is” transaction blow up last week b/c the appraiser referenced (rightfully so) some very negative inspection reports that were posted and referenced on MLS. The rookie listing agent forgot to clean up the MLS comments after the contract was ratified. We were able to salvage the transaction, but not without significant […]Read More

Appraisal Issues and Reviews More Prevalent in 2016

We are seeing appraisal issues surface much more frequently lately. These include many more underwriter requests for 2nd appraisals or formal appraisal reviews, as well as low appraisals. A major reason for this is Fannie Mae’s increased scrutiny of appraisals in areas with a lot of appreciation. Fannie’s automated underwriter (DU) now calls for an […]Read More

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

We recently had a Realtor call us about a property that was formerly used for the “production of medicine” (aka a pot 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 is yes, so […]Read More

Why and How We Order Appraisals Immediately; Huge Monthly Expense

Heejin and I personally eat over $15,000 in appraisal fees every month. This is b/c we order every purchase appraisal as a rush as soon as we get a contract, before sending out disclosures and before charging the buyer. We eat ALL of the rush fees that appraisers charge us (never charging the borrower), and […]Read More

Switching to FHA or 80/10/10 If Appraisal Comes In Low

We often have buyers make offers with no appraisal contingencies as a necessity in competitive situations. We remind those buyers that they have several options if their appraisal happens to come in low. 1. Simply bring in the shortfall. Buyers can stick with their original financing, but bring in the difference between the appraised value […]Read More

Smart Appraisers Essential; Using Local Companies/Appraisers

“The unique nature of the subject property necessitates going outside of the typical market area of influence to garner adequate comparable sales data.” In 1994, a really smart appraiser taught me to say that in appraisals whenever it was necessary to go outside of the neighborhood or a 1 mile radius to get comps to […]Read More

Appraised Value Often Not Market Value; Happy Thanksgiving!

This is a reminder that appraised values often do not reflect market values. Appraisers are trained to make a concerted effort to correlate to contract price whenever there is a wide range of adjusted values. In addition, appraisers are severely constrained by appraisal and underwriting guidelines. We see extreme examples of this in very hot […]Read More

Interacting With Appraisers; Appraisal Comp Criteria

As a lender, we are never allowed to directly communicate with appraisers before an appraisal is done. Real estate agents can, however, communicate with appraisers and many do with great skill, particularly when they meet appraisers at properties. There a few things to remember when meeting appraisers. First, most are much smarter than people realize. […]Read More

Collateral Underwriter & Appraisal Reviews; Bad News/Good News

Last winter when Fannie Mae’s Collateral Underwriter surfaced, there was panic (and yes, it was panic) in the industry about what it would do to appraisals and closing-times in general. The panic of course turned out to be overblown and unjustified. The situation was much like TRID is now. Our industry seems to face many […]Read More

Homes In Poor Condition Revisited – Reports & Visible Repair Needs

We currently have an escrow that is stalled b/c the property has significant condition issues that we were not aware of until the appraiser inspected the property. There is conspicuous dry rot, a sagging rear deck, and an adverse pest report that is referenced on MLS. In situations like this, the appraiser has to disclose […]Read More

Ordering Appraisals ASAP As A Rush; JVM Eats Rush Fees & Pays Up Front

Most lenders insist on charging borrowers up front for all appraisals. This creates significant delays b/c borrowers cannot be charged until all loan disclosures are prepared, reviewed by borrowers and signed. This can take as long as a week. At JVM, we order all purchase appraisals as soon as we get the contract. We pay […]Read More

Two Appraisals Instead of Appraisal Review; Rush Fees Too

We spend as much as $15,000 per month on extra appraisal fees that we as a company absorb and do not pass on to borrowers. One of these costs is “Rush Fees.” We order all appraisals as “rushes” and we absorb the extra cost, for several reasons: (1) we think we get better quality work […]Read More

Appraising “Subject To Repairs and Completion”

We often have short close of escrow periods involving properties in need of repairs (furnace not working, pool issues, broken garage door, a visible leak in roof, etc.). Usually, if we wait to do the appraisal until after the repairs are done, we will not be able to close on time. The solution is to […]Read More

Delay The Appraisal Inspection If Pendings Closing Soon

Appraisers cannot correlate to any comparable sales that close after the appraisal date (the date of inspection). In “hot markets” this is a very important consideration b/c the necessary comps are often pending. Appraisal inspections should be delayed until after necessary pending sales close. If an appraisal comes in low and a higher priced pending […]Read More

No Value to Un-Permitted Space Unless Comps Have Similar Space

We were asked about an Oakland property today with three bedrooms and one bath upstairs (permitted), and three bedrooms and one bath downstairs (un-permitted). The issue is this: The Oakland market gives tremendous value to un-permitted space, but appraisers are usually not allowed to. So getting the property to appraise will be difficult. Appraisers have […]Read More

Appraisals Are Not Public Record; FHA Sometimes

Appraisal Are Not Public Record We “inherited” a transaction from another lender today b/c their appraisal came in too low. That lender tried to convince the Realtors, however, that the low appraisal was effectively “public record” and that it would do no good to go to a new lender (the current lender was hoping to […]Read More

“Flip” Rules Again – Selling 90 Days After Purchase

We still see the occasional “Flip” surface, although not nearly as often as we saw them in 2010-2012. A “Flip” once again is a property that is purchased (usually by investors) and re-sold within 90 days. FHA will not finance Flips at all. Conventional and Jumbo lenders will finance Flips, but they require two appraisals. […]Read More

Why Appraisals Do NOT Reflect Market Values In Hot Markets

Appraised Values often do not reflect market values. We address this often b/c there is so much confusion about this in the overheated California housing markets. The reason is that appraisal guidelines force appraisers to only use “closed” comparable sales. Appraisers cannot correlate to offers or pending sales. In a quickly appreciating market, closed sale […]Read More

Cannot Give Value to Un-Permitted Space, In Most Cases

Most lenders allow space built without permits, as long as it was constructed properly and there are no health or safety issues, such as the presence of a stove. Appraisers can tell when there is un-permitted space either by appearance (garage conversion) or when the measured gross living area does not match the county records. […]Read More

Loans Are About Rules/Regulations & Not About “Making Sense”/Logic

We have a very strong borrower whose loan is held up right now b/c the appraiser is unable to find rental data (for a rent survey) that is necessary for an FHA triplex appraisal. We and the borrower (and the appraiser) are extremely frustrated b/c we all know market rents are much higher than available […]Read More

Price Per Square Foot Analysis? Why Appraisers Don’t Use It

Realtors and buyers often rely on a “Price Per Square Foot” analysis, but appraisers often cannot for a variety of reasons. This is a message we repeat from time to time. If comparable sales involve similar sized homes, of similar age, on similar lots, then a “price per square foot analysis” works. But, if a […]Read More

Strict Appraisal Rules For Comparable Sales

Realtors often provide us with comparable sales that we (when doing rebuttals) or appraisers cannot use b/c they do not comply with appraisal guidelines. Here are some basic Comparable Sale Guidelines that we re-post periodically. a. Size: Comps need to be within 20% of the size of the subject property. For example, we usually cannot […]Read More

Lenders ALWAYS Correlate to Lower of Contract Price or Appraisal

One of our borrowers has been in contract to purchase new construction in Oakland for almost 9 months. His plan was to put down 10%. Now that the property is ready, however, the property could easily be appraised for $100,000 over the contract price. The buyer and his agent were ecstatic b/c he now has […]Read More

What To Do If Seller Refuses To Do Required Repairs?

We are often asked what to do when a seller refuses to perform required repairs. This happens when appraisers call out repair items like missing floor coverings when we have a VA purchase requiring a clear Section I, or when a seller is a Bank selling an REO. Our only choice in these situations is […]Read More

Comps Must Be Within 20% of Size of Subject; Comp Criteria

This is a reminder that Comparable Sales in appraisal reports must be within 20% of the size of the subject property (in most cases). Hence, a 1,500 square foot house requires comps between 1,200 square feet and 1,800 square feet. We often get comps that we cannot use b/c they are way too big or […]Read More

Paying More Than Appraised Value? Why? Appraisal Not Market Value

Yesterday we pointed out how borrowers with large down payments sometimes use FHA or VA financing when appraisals come in low. Several realtors asked why borrowers are willing to pay over appraised value. There are several reasons that we have observed: (1) the buyer is a 27 year social media employee with $11 million in […]Read More

Unpermitted Space is OK – No Value; No Health and Safety Issues

One of our Realtors asked us about a house in Oakland with 1,800 square feet and 4 bedrooms and 2 baths (per MLS). The problem is that the county records indicate that the house has 1,100 square feet with 3 bedrooms and 1 bath. The house’s lower unit (1 bedroom and 1 bath) was built […]Read More

Appraisal Comes In Low? Options

“Remember all those smart folks who said rates were going higher this year? Well, so far they’re dead wrong”This quote is from Rob Chrisman’s mortgage blog: “Remember all those smart folks who said rates were going higher this year? Well, so far they’re dead wrong” Here are a buyer’s options when an appraisal comes in […]Read More

FHA Appraisals – Only One Is Allowed;Value Can’t Change w/ New Lender

We had a borrower leave us for an online lender about a month ago. The online lender screwed up the loan, and the appraisal came in low (despite ample comps that supported value). The borrower came back to us with 8 days left to close escrow, and we could have closed on time but for […]Read More

Why “Rush” All Appraisals? 5 Day Contingencies; Value

At JVM we order every purchase appraisal as a “rush” and absorb the rush-fee ourselves. There are two reasons for this: (1) 5 Day Appraisal Contingencies: We typically get appraisals back in 3 to 4 days, and this allows us to always remove appraisal contingencies in 5 days. We know that doing so makes purchase […]Read More

Unpermitted Kitchens Need to Become Wet Bars (Yank Out Stove)

We have a purchase involving a full un-permitted kitchen in a basement area. We instructed the Realtor to simply remove the stove before the appraiser arrives and call the area a “really nice wet bar” with a refrigerator, lots of cabinetry, large counters, and a big gap where the stove used to be. I am […]Read More

Appraised Value Higher than Contract Price? Irrelevant

We are financing a condo purchase in Newport Beach and the appraisal came in $13,000 over the contract price. This was a big surprise, given the strength of the current market. The buyer, of course, wanted to know if he could use the higher appraised value to push his loan-to-value ratio down to 75% and […]Read More