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

“No Mike, your new faucet does not add $100,000 to your home’s appraised value;” Market Not That Sensitive

Homeowners are often very confused about how much improvements will impact the appraised value of their properties. Major improvements such as a new pool, a remodel or an addition to a home will almost always add value, as most people know. But confusion arises with minor and/or “functionally obsolete” improvements – b/c the markets are […]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? Probably Less Than You Think

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

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 (PUDs must touch the ground). […]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

Computers Replacing Appraisers – Coming Soon? Hopefully Not

APPRAISAL STORIES Story #1 We had a borrower come to us a few weeks ago to refinance b/c she needed cash to repair the inside of her home that had been badly damaged by a burst water pipe and the resulting flood. B/c of the extensive damage, our only option was a 203k (rehab) loan […]Read More

Ordering Appraisals Immediately – Is It Worth It?

We order every appraisal as a “rush” as soon as we receive a ratified purchase contract. WHY WE ORDER APPRAISALS IMMEDIATELY: 1. It ensures that we can close very quickly when necessary. 2. Getting a clean appraisal back quickly cements transactions and alleviates anxiety for buyers, sellers and agents. 3. If there are value or […]Read More

Appraisal Horror Story; Appraisal Success Story! “Appraisal Manager”

APPRAISAL HORROR STORY Back when we were in the Broker Channel (when we sent loans to outside lenders for underwriting), we ordered a purchase appraisal in a high-end Bay Area community called Orinda. The lender forced us to order appraisals through a nationwide Appraisal Management Company that kept most of the appraisal fee itself and […]Read More

Appraisal Differences Explained! Conventional vs FHA vs VA

This blog was written by our Appraisal Manager, Beau McGlasson. Agents and borrowers alike often find the appraisal process confusing and opaque – it’s why we consistently field questions on what appraisers look for when inspecting a property and how agents can best prepare. Not only can appraisers’ opinions on value make or break a […]Read More

Condition Issues Again; Inspect The House Prior to Appraisal; Fast Appraisals

ORDERING RUSH APPRAISALS TO SPOT CONDITION ISSUES UP FRONT One of the reasons we order ALL appraisals as a “rush” (and eat the rush fee :)) is b/c it allows value and condition issues to surface right away. If we get the appraisal back within five days, we have ample time to address problems, or […]Read More

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” 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 with external influences […]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

Options When Appraisal Comes In Low

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. 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 appreciation of the subject property. If the […]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