APPRAISALS

THE APPRAISAL

Home Values

part one

It is my hope in writing this series you will be made aware of a number of things in the appraisal that can kill your loan, and how to avoid them. This series is based on years of trial, and lots of errors, in the mortgage business. Hopefully this will save you the heartache of a loan killed, when it could have been avoided.

From the side of the loan officer, there is nothing worse than losing a good loan because of an appraisal. I am not talking about a bad appraisal or a bad appraiser, but often due to a lack of communication between the homeowner and the lender, the loan gets turned down. Had some key questions been asked and honesty answered, the loan could have moved forward and funded. So, what are some of the issues that can ruin a good loan? Most of my experience in the industry was with refinance loans so that is what I will focus on in this article.

Home Value: In my experience this has been the number one killer of the deal. Everything else can be perfect, then you get the appraisal back and it comes in sixty thousand less than what was expected. The key here is, 'what was expected?' Make sure you and your borrower are speaking the same language. You may both be talking about comps (comparable sales) and in his mind he is thinking a out houses for sale, and you are thinking about houses that have sold. Most lenders what to see a bracketed value based on homes that have sold recently, as in three to six months. Most lenders are reluctant to use comps from homes that are still for sale. By bracketed I mean that there is are two sales less than a mile from your house, in the same neighborhood, where one sold for a little less that your house and one sold for a little more. Your house falls in the middle somewhere.

And what about, like neighborhoods? If you live in a normal neighborhood and there is a private gated community of upscale homes nearby, you cannot use those home values on your appraisal. Those homes are not truly comparable to yours. Believe me, I have been caught on this before.

“But Mr. Underwriter, that house was a block away from my borrower.”

“Yes but is your borrowers house in the multi million dollar secluded private, celebrity neighborhood?”

A little exaggeration there, but you get my point. The house has to be LIKE yours. Hopefully the size of the lot is too, although that may not be a deal breaker. Your house will just be marked down a little due to having a smaller lot. There are limits though. If your house sits on a lot and a half, while the nearest comps houses are in two to five acre properties, yours is not comparable. Now you may think I am going overboard here, and this is common sense, but I assure you these are common issues. When in great need borrowers and mortgage professionals will go to just about any length to fund the loan.

Then I used to get the, “But I just put in a twenty thousand dollar pool, so my house has to be worth twenty thousand more.”

If every house in the neighborhood has a pool, therefore that is the norm, a pool is not going to elevate your house above your neighbors. You may get a few thousand more that you would have without the pool though.

If your wonderfully modern, fabulously big, house is in the middle of lot of humble one and two bedroom ramshackle homes your home value is going to be much less. Location, location, location.

So how do you figure out what your home is worth? There are a number of places you can go to see what your home may be worth. You should also get your mortgage guy to do some of the leg-work here as he will have access to resources that are not available to you.

One of the places you can go is Yahoo Real Estate. Just go to the yahoo home page and click on Real Estate. Next click on the home values tab at the top of the screen. A new page will open up and there will be a field for you to put your home address in, then hit the search tab. This will give you two tabs, one for recent sales and another for houses for sale. Click on the recent sales tab and you will see a number of homes and all the pertinent information: sales price, sales date, square ft., bed,bath, and distance.

There are numerous websites that can provide information on the value of your home. One such site is www.HomeGain.com. If you have a friend who is an Escrow Officer at a title company, they can get great info on home sales in your area. If you know an appraiser you may be able to get him/her to do a little research for you. Some people use the tax assessed value, however that is not always a good indicator for your homes value and I use that as a last resort.

After you and your loan officer have put your heads together and determined that you have enough equity in your home to refinance, you can move on to the next part of the appraisal.