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 meet required appraisal guidelines. The market value is clearly above $900,000, but there is nothing the appraiser can do to support that value. Appraisers often well know market value is higher, but they are constrained by guidelines.
2. Two Appraisals or Appraisal Reviews. Some loans require two appraisals from the start, i.e. price is above $1 million and LTV is above 75%; or Flips. Other times, Fannie Mae’s automated “Collateral Underwriting” software requires a field review no matter what.
We have started to order 2nd appraisals instead of “field reviews” despite the added expense (that we mostly absorb) b/c we have discovered 2nd appraisals are more accurate.
In these situations, borrowers and Realtors are reminded not to release appraisal contingencies until the 2nd appraisal comes in.
3. Increased Scrutiny/Appraisers More Conservative. B/c of the increased scrutiny by software and underwriters, appraisers are sometimes more conservative with respect to comps used and values overall, and how they treat un-permitted space.
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646