In Today's Real Estate Appraisals:
Information is King, Data is Available
In this automated day and age, a huge amount of real estate sales data is readily available to professionals ...
With a few clicks and the entry of a few parameters, a
Real Estate Appraiser can create an instantaneous list of data for their viewing and use. Appraisers can realistically and confidently expect that they have a reliable process of finding the most recent, most proximate, most similar property types, featuring the most similar functionality and amenities for their Appraisal Reports at their disposal.
In addition, most Assessors post property records online to capture more reliable data on square footage of living area. Not that pictures tell every story perfectly, but many times the Appraiser has access to interior photos of sales and listings, to get a better "feel" for a property's condition.
Add to that, Fannie Mae and Freddie Mac have come up with specific property condition ratings for Appraisers to "qualify" the condition of the Appraised Property.
If you've not seen a copy of a Mortgage Lender's Appraisal Report recently, you'll find those ratings below, their corresponding "conditions", or amounts of updating/remodeling/maintenance, that define each rating:
- C1: The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.
- C2: The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.
- C3: The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.
- C4: The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.
- C5: The improvements feature obvious deferred maintenance and are in need of some significant repairs, rehabilitation, or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.
- C6: The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.
At the end of 2013, in an attempt to further eliminate mistakes and/or fraud ... and to also improve the quality of Appraisals (and therefore the reliability that Lenders and Servicers of Loans can place on them) ... Fannie Mae developed the "Appraiser Quality Monitoring system" (AQM).
Bottom line is, automation and the already in place "Uniform Collateral Data Portal" (UCDP), has built a "track record" and "library" for not only individual Appraisers, but also individual properties. There is less and less room for mistakes by Appraisers, or reporting a property selected as a Comparable in a favorable or unfavorable status in order to "manipulate" adjustments during the course of an Appraisal.
A couple of examples of this system have already come to lite, according to Fannie Mae. Examples of an Appraiser's inconsistencies:
- In one Appraisal: Reported a Comparable to have Sold for $200,000 in one report, but in another report, cited the Sales Price as $175,000
- In another case: Classified the Same Comparable to be in C4 Condition, but on another assignment used the same Comparable, but rated it C3 for its condition.
In other words, Appraisers will be held accountable for their work, not only to their own standards, but by Appraisal Organizations, Underwriters, and "big sister", Fannie Mae, as well.
So the next time you think an Appraiser on a listing is being less flexible, there could be a valid reason for their stance. We can all hope that Reports are a fair and honest effort by the Appraiser and they are letting the Data "speak for itself". Objectivity is slowly being ruled out.
* Hoping to Buy, Refinance, or Construct a home in New Lenox, another Lincoln-Way Community, Will County, or elsewhere in Chicagoland? Contact Me Today! I'll put my 36 years of Mortgage experience and expertise hard to work on your behalf.
I can be easily found at:
Cell or Text: 708.921.6331
Click HERE for a FREE Mortgage Consultation!
Ready to Apply for your Mortgage?
Gene Mundt, Mortgage Lender, a Lender with 36 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL.