I recently commented on an appraiser’s blog and I have to admit I was hesitant at first. The relationship between appraisers and underwriters has always been a bit “strained,” to say the least. As Appraisers, their job is PROPERTY VALUE. That’s what they do, they appraise houses on a daily basis. The job of underwriters is to assess risk. The value of the appraisal may not be what occurs to the subscriber. Soon; the appraiser is looking at the neighborhood value and the underwriter is looking at the resale value (…you could almost say worst case). The insurer wants to know one thing. If this borrower defaults, what value can the “lender/investor/bank” get for him?
I want to make it very clear that if you go above these 12 points and submit your appraisal, there is still a chance that an outside appraisal company may lower or revise your appraised value. One of the required appraisal review steps that some of the larger lenders use is AVM (Automated Value Model). The appraisers I’ve talked to don’t like them very much.
They take the sales from the last 6-12 months and use a calculation unknown to any appraiser or underwriter and spit out a value (maybe spitting is a bit harsh, I apologize). I may be exaggerating a bit, but I think you get my point. I’ve had more verbal jabs from appraisers after admitting that the reason I ordered a field review on his perfectly good appraisal was because the AVM came out lower than his appraised value! I’m not saying AVM is a bad thing, I’ve had some very bad reviews and AVM gave me the compensation I needed to prove the value was wrong.
At some point we have to be able to make a decision based on the obvious, oh that’s right…we had that opportunity!…that’s why the market is where it is now (one-sided opinion, ugly outsider !)
One of the things I want you to know is that FIELD REVIEWS ARE BACK! Fannie Mae Desktop Underwriter even has a RED FLAG on her findings now that says:
“Desktop Underwriter’s collateral appraisal model indicates that the value estimate presented for this cash-out refinance transaction may be excessive. The lender should carefully review the appraisal of this transaction.”
The other two under Property and Appraisal Information are:
The property in question has been identified as being located in an area of declining home prices or in an area where it may be difficult to assess home values. The lender must carefully review the appraisal to ensure that the appraiser has analyzed it correctly. Lenders may order a field review or a desk review.
Property value trends and general market conditions to arrive at the provided value. The lender must request additional support from the appraiser if it determines that the appraisal does not accurately reflect current market conditions (for example, the declining property values field is not checked when market conditions suggest otherwise). See our Property and Appraisal Guidelines in Part XI of the Selling Guide. This is another finding condition that gives the lender the green light for a field review.
Now, no one will admit it… but these very wordy paragraphs actually mean: FIELD REVIEW!
Continued from Part 1 Review of pricing from the point of view of underwriters
7. Did you check the bedroom count?
The building sketch shows a diagram of the rooms in the property in question. Basement rooms are not counted as bedrooms. (Please note: one of your fellow AR appraisers can explain room count rules in detail…remember this is a list of general underwriting questions)
8. Proximity must show blocks or miles (not the same subdivision or street)
The proximity should show the actual number of blocks or miles. The same street or the same subdivision is not acceptable.
9. Is the subject being compared to a similar property?
Do you have a ranch with a parking slab versus a traditional two-story with an attached 2-car garage? Don’t laugh, I’ve seen it! Do you have 2 bedrooms compared to 4 bedrooms? If so, did the appraiser make any adjustments and comments?
10. Is anything obstructing the subject’s view?
Now this is difficult. The appraiser is taking a picture at the best possible angle, but as the underwriter, we have to see the full view of the house! Sometimes it’s ugly, but I have to go back to what I said in Part 1 of this blog… the appraisal is the only way the subscriber sees the property. They must be able to see the property from the photos provided.
11. Can you see the whole theme in the image or are there sections missing?
This is a red flag that subscribers are taught to spot immediately. If the insurer can only see part of the house, part of the street, half of the back of the house, etc., he or she will need additional photos. Now, some lenders may not contact the broker for additional pictures and may submit a field review, but whatever the course of action, make sure you can clearly see the front of the house, the back of the house and the street scene.
12. Are there broken windows, missing doors, etc.?
I strongly suggest you talk to your lender about broken windows, missing doors, and the like. Different lenders have different policies.
My suggestion: read my blog. Look for someone? If your company uses FannieMae or any other AUS (Automated Subscription System) that has a built-in AVM, as I said before, the system will flag ownership.
Let me just say this: AVMs are not accurate. I’ll say it again: they are not exact. They are a tool used by lenders to help them with the appraisal review process. In the past, Underwriters has pulled AVMs from appraisers that were questionable and back then we were looking at offsets, not value.
The last thing I want to encourage you to do is ask your lender what their review process is. They could tell you the truth.