Appraisal Challenges.. one of the most discussed issues around the water cooler of a real estate office. Often the conversation immediately points to the incompetent appraiser who was assigned and all sympathetic Realtors give a nod of agreement.
Let's lynch the sorry appraiser, lets turn in him to the state for poor work, lets complain to the lender and get him/her out of the business .. all Realtors are now fired up to take action. Step back my friends and reflect on the issue at hand, is it the appraiser (now known as SOB) or could there be other factors contributing to the appraisal challenge?
There are many Red Flags that may wave on an appraisal report that may be the source of the problem.
- Comparable Sales - is your home so unique that there are no truly comparable sales to utilize in the report? This may cause the appraiser to go a distance, incorporate dated sales, make large line adjustments for varied points. All these may result to an underwriter's rejection to make the loan.
- Condition - the home may need some work and will not qualify for the loan type sought.
- Previous foundation work- loan my be denied if the process to correct the foundation did not meet the guidelines.
- Project not FHA Approved- big obstacle .. Realtors this is your job to check this out so awareness of the ability to obtain a loan or not is determined.
- Recent Sales- appraisers now have some strict guidelines that must be followed in the preparation of the report - time frame of comparables, distance, etc.
- Line Adjustments- where the appraiser recognizes value for varied amenites on the home. If your home has a great view and yet no sales have a view then a large adjustment will be made across the board on the report. Underwriters do not like this at all!
The best defense is to be prepared before the appraiser comes to look at the home.
- Be aware of any potential problems such as condition, lack of sales, etc.
- Have a packet of information to provide the apprasier regarding best sales, information about specifics on the properties that might give good insight to the appraiser.
- Provide a list of upgrades and time frames completed to the appraiser.
- Do your homework and warn the sellers upfront of potential issues that might arise.
- Be aware of the type of loan for the buyer, limitations of that type of financing, institution going through may also be a factor (we all know there are good ones and ones to avoid). Let the seller know of your upfront concerns about a buyer's lender choice as part of your discussion about the offer.
- Buyer has minimal down and a lot of seller costs .. underwriters get really picky with more at risk buyers.
As you have that cooler chat about the SOB just know that sometimes this situation could have been avoided. The best professional understands the importance of preparation and the value it gives our clients.