Every house on the market has to be sold twice; once to a prospective buyer
and then to the bank (through the bank’s appraisal).
In a housing market where
supply is very low and demand is very high, home values increase rapidly. One
major challenge in such a market is the bank appraisal. If prices are jumping,
it is difficult for appraisers to find adequate comparable sales (similar
houses in the neighborhood that closed recently) to defend the price when doing
the appraisal for the bank.
With escalating prices, the second sale might be even more difficult than
the first. And now, there may be a second issue further complicating the
appraisal issue.
The Mortgage News Daily (MND) recently published an article titled
Conservative
Appraisals Increasingly Mentioned in 2015; Did Something Change?
The article revealed that there was a “flurry” of comments on their website
from members expressing concern about…
“…a sudden increase in appraisals reflecting market values well below
what had been expected. In some cases the low appraisals had merely required
the restructuring of the loan, in others they killed the deal.”
The National Association of Realtors
revealed this month that 8% of the contracts that fell
through over the last three months were terminated because of appraisal issues.
MND decided to survey their members and ask why this sudden increase in
“short” appraisals could be taking place. Here is one result of that survey:
“Almost everyone we spoke to mentioned Fannie Mae's new Collateral Underwriter
(CU).”
Collateral Underwriter provides a risk score on individual appraisals which
will lead to a ranking of appraisals by risk profile, allowing lenders to
identify appraisals with heightened risk of quality issues, overvaluation, and
compliance violations. It went on-line on January 26.
Marianne Sullivan, senior vice president of single-family business
capability with
Fannie Mae believes that CU is not a problem for
appraisers. She
claimed:
“From an appraiser perspective, one of the lender's responsibilities has
always been to review the quality of an appraiser, and they have been using
various methods to do that forever. I don’t think appraisers will find this
tool to be disruptive.”
However, some think that CU has caused appraisers to become too cautious
with their appraised values. One mortgage professional in the MND article
explained it this way:
"My personal opinion is that appraisers are being overly
conservative in choosing comps because of CU. If CU questions the comps,
adjustments, etc., the appraiser would have to do a lot of extra work to
justify them. I had anticipated that CU would cause delays because of this
extra work, but it seems that appraisers are one step ahead and are being ultra
conservative, thus avoiding the extra work in the first place. I haven't spoken
to an appraiser about it; this is just my interpretation of what I am
seeing."
Ryan Lundquist, a Certified Residential Appraiser in the Sacramento area,
agreed:
“One of the unintended consequences of CU may be more
conservative appraisals.”
Bottom Line
Pricing a home right in today's market
requires skill, knowledge, and experience.
Call me today if you would like to know your home’s value.
Elizabeth
 |
| BE SAVVY...CALL THE SMART REALTOR |
Elizabeth Scott, Realtor®, Broker
Diamond Award – High Sales Volume
e-PRO,
Strategic Pricing Specialist
Fathom
Realty NC, LLC
Phone: 919.306.9699
http://www.thesmartrealestateagent.com/contact/
Email: Elizabeth@TheSmartRealEstateAgent.com
