Appraisals-It Is A Mystery?
This is the big unknown in the mortgage business today. When I say the big unknown, what I mean is that many folks today worry about appraisals because they aren’t sure:

1. What value the house will appraise at
2. What, if any repairs will be noted

So lets address value first. Appraisers are hired by third party management companies. Per recent legislation no one directly involved with the mortgage/sale of the house is supposed to have any contact with the appraiser. They do not want “us” attempting to influence the value of the home. So banks, brokers and correspondent lenders alike use third party management companies to order and manage appraisals. These companies have the responsibility of taking the appraisal order from the bank, making sure the appraisal is done in a timely fashion (7-10 days), and making sure the appraisers are doing a competent job of appraising.

Appraisers are intended to be neutral third party candidates who assess the value of the home using recent sales in the neighborhood or area and noting upgrades or issues with the home that might affect value either way (up or down). They typically will enter the house, take measurements, room counts, pictures, etc and then provide a written report to the bank. You should ALWAYS receive a copy of your appraisal. They will issue a “value”. This value will typically be at or slightly above sales price. However there are instances where appraisals come in below sales price. In today’s market this is more common due to limited inventory.

Real Estate Appraisals Balance

Consumers are entering “bidding wars” on homes. Driving up prices which will often times lead to lower appraisals. Real Estate agents, lender and appraisers are aware of these cases and often times address this with the client/buyer up front so they understand options if the appraisal comes in low. In the event the low appraisal is NOT anticipated and the buyer/seller believe this is an error or factual information was missed by the appraiser then the client can request a “dispute”. This is typically a 1-3 page form in which the buyer/buyers agent must provide factual data (recent sales, etc) to the appraiser. The appraiser then typically has 24-48 hours to respond and adjust pricing or leave it as is. Outside of this there are few options. Every now and then a bank will allow for a 2nd appraisal IF the bank believes the initial appraisal was done extremely poorly.

Now let’s address item #2 above. Repairs. If the house is in disrepair the appraiser will note these items and take pictures. Items can include torn carpet, holes in dry wall, HVAC not functional, hot water heater not working, appliances missing, etc. If this is the case AND you are NOT doing a rehab type loan then the underwriter will require that any and all items noted be repaired prior to closing. This means the seller will need to make the fixes. The appraiser will be required to go back out to the house prior to closing to verify all repairs have been made. It is important to talk to your bank/lender before making an offer if the house has some physical issues with it. Often times we can advise and let you know if we think the appraiser/underwriter will require any issues be corrected prior to closing.

As always…talk to your mortgage representative with ANY questions.
Feel free to contact:
Max Kallos
Visit His Contact Info Page

President Of Liberty Home Mortgages
400 Perimeter Center Terrace
Suite 900, Atlanta, GA 30346
Office: 770-771-6112
Direct: 404-277-5884