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Health & Fitness

Appraisal Myths and Misconceptions

The appraisal process can be different for each type of loan and its underwriting requirements.

Let me first say that I have a number of friends that are appraisers. Let me also say that I have been very critical of HVCC and Dodd-Frank, which governs the appraisal process through appraisal management companies, which for me goes against the free enterprise system and put some very good appraisers out of business.

Appraisals that are done are not an exact science. Let me share an example and why the system doesn’t work in the best interest of the consumer. All these rules are put in place to protect the consumer from themselves.

A couple of months ago, I took a mortgage application for a client that had been referred by a local Realtor. The property was being flipped by an investor that purchased and completely renovated the property. The sale price was $169,900 with the seller paying $5,000 toward closing costs. Because the property was being flipped, two appraisals were required, which is common in these situations.

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The first appraisal was done and came back with a value of $163.000. The two Realtors in the transaction both thought the appraised value was incorrect and contacted the appraiser with additional comparables showing a higher value. In the meantime the second appraisal came in $172,500. How is this possible? The appraisal process is not an exact science.

We requested the lender allow a third appraisal to be done, which they didn’t allow. The original appraiser would not adjust the value based on the information that was supplied by the appraisers. The lender came back saying the second appraisal could not be used and would only accept the first appraisal with the $163,000 value. Explain to me how this makes sense?

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The buyers could not come up with the difference, so the seller had a decision to make. In this case, accepted the lower price and took the $6,900 hit.  

The Top Myths and Misconceptions in the Appraisal Process Dispelled for Clients

By: Dione Spiteri

“An educated customer is your best customer,” the saying goes.

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