Appraisals are UNDER ATTACK! Okay, I may be exaggerating, but I’ve been looking at blogs for the last week and I think I can probably give a high five when I say they’re being vetted.
As an underwriter, I understand why my fellow underwriter requests additional compensation, adjuster comments, and corrections. As a former loan processor, I understand the frustration of the loan originator and realtors. The appraisal represents the guarantee of the mortgage loan. The insurer can’t physically go to the property (although I’ve heard stories), so the appraisal is the only way to see it.
First let me say this: NOBODY IS PERFECT! This includes adjusters, underwriters, originators, processors, and agents. I have always subscribed to the philosophy that underwriting is part of the guidelines and part of COMMON SENSE, but the reality of the matter is that this is not true. Underwriting has become part guidelines, part past experience, part last week’s underwriting meeting, part “the last loan I undertook this way didn’t sell” and a LOT OF INSIGHT (from everyone! !).
I’m almost 100% sure I just pissed off half of my fellow subscribers!
For this reason, I have listed some questions to ask yourself when looking at your appraisal. Ask yourself these questions: before you submit it for subscription!
1. Are the compositions older than 12 months?
FannieMae/Freddie Mac guidelines call for builds no older than 12 months and appraiser comments for builds older than 6 months.
2. Are the compositions of the subdivision of the subject?
This may seem like an odd question, but the insurer is looking for value in the immediate area. When compositions are drawn from neighboring subdivisions, they should be close together and the property should be similar in style and design.
3. If the property is new construction: Did the appraiser obtain at least compensation outside of the new subdivision?
The reason the underwriter needs compensation outside of the new subdivision is because they are trying to determine market acceptance. They want to make sure there is a market for the property in question.
4. Was the appraiser more than 1 mile away from the subject? Urban/Suburban = 1 mile, Rural = 10 miles.
Properties in urban cities are typically less than a mile apart. Now, before I go through a dozen emails, let me say: there are exceptions. I can think of at least 2-3 small cities that are quite spread out and I also know that some urban properties are located on the outskirts of the city. These are obvious observations that can be seen on the map included in the appraisal. Which brings me to my next point…..
5. If the adjuster has exceeded the recommended mileage search, does the map support it?
There are no guidelines that say the adjuster CANNOT exceed a certain number of miles, the guidelines say that the adjuster has to document WHY you went over a certain number of miles. Tester feedback is great, but feedback and the map that supports feedback is even better!
6. Did the adjuster cross any major streets or highways?
The problem with crossing major streets, highways, and train tracks is that it can put you in a different neighborhood value. I’m sure my fellow real estate agents know exactly what I mean.