Skip to main content

What Helps a Chicagoland Appraisal and its Comparables Survive the Scrutiny of Underwriting?


     Mention the words Appraisal and Underwriting together in the same sentence these days ... and you likely better stand back.  The reaction you receive could be fast and furious!

     In Mortgage Lending and Underwriting, nothing is taken
at face value.  Verification of everything is called for.  Re-checks and reviews are the norm.  And the Appraisal (the collateral for the Mortgage financing) is certainly a key component and focus of today's Underwriting.  

     Most Chicagoland Mortgage Lenders and Agents will tell you that they suffer a bit of anxiety regarding Appraisals currently.  That it's one thing to receive the Appraisal Report with a stated view of Value.  It's quite another thing for that Appraisal Report to stand-up to an Underwriter's review of the data and narrative contained within the Report.  

     Agent and Mortgage Lender both worry ... will the data contained on the Appraisal Report prove accurate and trustworthy?  Will the narratives and explanations make sense to the Underwriter?  And will any adjustments shown within the Report survive the Underwriter's scrutiny?

     While there are a number of important elements that make up an Appraisal Report, the heart of the Appraisal remains the Value Estimate.  On any Appraisal, an Underwriter is going to want to review and know:
  •  Was the Value Estimate supported by factual sales data?  
  •  Was that sales data relevant to the Subject Property?
  •  Were the "best" Comparables utilized?
  •  Were better or more relevant Comparables overlooked?
  •  Was the Appraiser "uninfluenced" by the transaction's Sales Price? 
  •  Was there a market for the use of "unique" properties to be considered?  
  •  And the list of considerations goes on and on ...      
     Much of what is commonly seen from Underwriters as "acceptable criteria" for Chicagoland Comparable Sales and Listings is below.  I don't pretend to be able to cover every possible scenario.  These days, I can't even come close.  But I've included some basics I think might help when considering how Appraisers and Underwriters may eventually view a Listed Property:
      
     A Search for Chicagoland Comparables should include:
  •      Sold and Closed properties within the last 6 months.  Some cases as recent as last 3 months.  

  •      Stable or Increasing Value Markets are likely okay at 6 months out, sometimes even up to a year ... IF PROPERLY EXPLAINED OR JUSTIFIED BY THE APPRAISER. 

  •      Declining Value Markets will require sales data within 3 months (possibly 6 months).  Again this is subject to the local market activity and proper narrative as to the frequency of Comparable properties coming on the market.
      Properties generally should be:  

     A.  Within a 1-Mile Radius of the Subject Property
     B.  In the same City, County (if rural), and School District, if at all possible.
     C.  Within the geographical boundaries of the Subject Property, as defined in the Appraisal Report by the Appraiser.  (Boundaries are often Rivers, Highways, City Limits, School District lines, etc.)
     D.  Of the same or similar construction quality, design, style, age, and room counts.
     E.  Living areas (Square Feet) should be within a 300-500 square foot variation from the Subject.  Bedroom counts should be similar (thoroughly explained when not).  Amenities such as Basements, Garages, and options should be similar, as well.
     F.  Ownership Types should match.  This is especially important when Condominiums and Townhomes are being Appraised.  Comparisons should be apples to apples, not mixed.  Example:  Condos should be compared to Condos.  Not Townhomes that are P.U.D.'s, and vice versa.
     G.  Comparables ideally will *"bracket" the estimated Value, before and after adjustments are made for differences between the Subject Property details and those Comparables used in the Appraisal Report.  (* Bracketing, is defined as: “A process in which the an Appraiser determines a probable range of values for a property by applying qualitative techniques of comparative analysis to a group of comparable sales. The array of comparable sales may be divided into two groups – those superior to the subject and those inferior to the subject. The adjusted sales prices reflected by these two groups limit the probable range of value for the subject and identify a bracket in which the final value opinion will fall.”)
     
     In other words, an Underwriter should see and clearly understand the information presented, along with any adjustments made, when viewing the Appraisal Report.  

     What helps promote that understanding? Properties that sold for less than the Subject Property should be inferior in size, quality, condition, room counts, amenities.  If not, the reason must be clear and supportable as to why a Seller discounted a Sales Price. 

     Likewise, properties that sell for more than the Subject Property must possess superior features to the Subject.  And ideally, the Comparables Sales utilized within the Appraisal Report must occur within a market of properties in the same price range as the property being Appraised has sold for, or is valued at. 

     H.  Unique Properties create the biggest concern for Underwriters, Appraisers, Lenders, and Agents alike, and for mostly the very same reason because the question is raised:  What's the property truly worth?  Are there any like properties to conclude what the market is for the Subject Property, let alone its Value or Sales Price?      

     When in doubt, consider what defines a Comparable: "Is the Sale or Listing "like" your Property"?  I add that 2 questions regarding this definition (and the thought process surrounding it) should be asked as well.  #1.  Has the Appraiser accounted for all factors that may affect the value of the Subject Property within their Appraisal Report?  And, #2.  Would the Comparable appeal to the same Buyer that is considering the Subject Property?

     What Helps a Chicagoland Appraisal and its Comparables Survive the Scrutiny of Underwriting?  If an Appraisal Report addresses and clearly makes the case supporting the facts and opinions it offers, Underwriters viewing the Report will raise fewer questions.  And that is what we ultimately ALL seek, whether Buyer, Seller, Agent, Mortgage Lender, or Appraiser.   



     *  Looking to Buy a Home or Refinance in the Lincoln-Way Region, Will County, DuPage County, or elsewhere in the Chicagoland area?  Contact Me.  I will put my 36 years of mortgage experience and appraisal background and expertise hard to work on your behalf.  Both will help you find and realize the success you seek.
     I can be easily found at the following:
Direct:  815.524.2280
Cell/Text:  708.921.6331
eFax:  815.524.2281
Click HERE for a FREE Chicagoland 
Mortgage Consultation! 
Ready to Apply for your Chicagoland Mortgage?
        

               

Comments

Popular posts from this blog

Property Addresses: Gettin' Down to the Nitty Gritty

Property Addresses:   Gettin' Down to the Nitty Gritty

Take just a second and read through the following statements ...


“The devil is in the details” 
... "in life, it is often the tiny details that end up 
being the most important"

"Get Down To The Nitty Gritty"

“Little details have special talents in 
creating big problems!” 

“Sweat the details”

"Success is the sum of details"

Details ...Details ... it's all about the details ...
     And I'll admit it, I'm a bit of a nerd about them.  My whole family is.  Details, the intricacies, the little things ... they matter to us.
When I was growing up, a typical conversation (and argument) between my brothers and myself at the dinner table or in the backyard centered around "details".  It didn't matter what the topic was, it was the minor differences ... the details about the topic ... that we argued about.  I'm sure we drove our parents crazy.  
Sports statistics and games ... minutiae rega…

Ready for Fall? It's Arriving Soon

Ready for Fall?  It's Arriving Soon

Friend ...

Maybe it's because football season has started. Maybe it's the kids being back in school. Or because the night air is cooler. But a sense of Fall has arrived here in Chicagoland ...

The Fall Season brings changes with it. Changes in temperatures. Changes to the clothing we wear. Our focus seems to shift with the coming of shorter days, falling leaves, and crisp air.

Fall can be the perfect time to do a multitude of things. You can prep your home for the upcoming winter weather ... or for Fall listing and sale. 

But whether you're moving on or staying put, Fall is a great time to declutter and organize your home inside and out ... and your finances too.

I've googled like crazy to find interesting articles filled with Fall info, ideas, tips, and photos. Articles that will help you usher the Fall Season in at your house. I hope you enjoy reading the articles offered below and that they inspire you to make any needed changes.

Rem…

Paper or Paperless billing? Which serves YOUR needs best?

Paper or Paperless billing?  Which serves YOUR needs best?


These days, companies are under pressure to go "green" and become more environmentally friendly.  As a result, an increasing number of businesses are offering their customers a paperless option with which to receive and pay their bills. 

There are obviously many positives to be found within these paperless services:


Trees are saved  Reduced postage costs  Less paper documentation to organize or save/storePossible rewards for switching to paperlessPayments can often be made/posted same-dayAutomated payments can be set-upMore
But I can tell you from my vantage point as a Chicagoland/IL/WI Mortgage Originator, there are also negatives to be found within paperless methods.  For some of my mortgage clients, the choice of going "paperless" just hasn't worked well.

 For some, an email or text reminder regarding payment of bills has not been enough. They NEED a paper billing to arrive in their mail. 

Their paper bil…