Skip to main content

The Unicorn of Real Estate Transactions: The "Perfect" Appraisal

The Unicorn of Real Estate Transactions: 
The "Perfect" Appraisal  



     Did you know that ...

     According to a survey performed by the National Association of Realtors (NAR), 1 out of 5 Real Estate Contracts (20%) are delayed prior to Closing as a result of disagreements and problems within the Appraisal Report.

     Even with all the info and data available to Appraisers ... as well as Underwriters, Lenders, and Regulatory Organizations ... this fact remains:  


     Performing the perfect Appraisal remains an unattainable goal.  The perfect Appraisal simply doesn't exist.


     It's like the mythical unicorn ...


     Why?


     Despite all the automation and software programs available and in use, Appraisals are still conducted and written by humans.  Humans working within an industry that doesn't and can't possibly provide a manual for a "one-size-fits-all" Appraisal Report.


     Just like no 2 properties are alike, no 2 Appraisers view a property the same either. Even when presented the exact same data.  It's much like a Realtor giving an opinion in a CMA (Comparative Market Analysis), or a Broker's Opinion ... human factors must be considered and figured in.


     While the Mortgage Industry has continued to monitor Appraisals very closely, entities like Fannie Mae have developed programs like CU (Collateral Underwriter), as tools for Underwriters and Lenders to use as a "guide".  Remember, Underwriters, and LOs/Lenders are not Appraisers.


     Since the inception of Fannie Mae's and others' "Valuation Models", the goal has always been to reduce risk by avoiding what is the "over-valued" property Appraisal, whenever possible. 


     The process of reviewing the quality of Appraisals breaks down for Underwriters when conflicting data ... or unusual Adjustments ... are found within an Appraisal Report.  Either can result in the need for additional conditions or comments from the acting Appraiser that will help defend their position and thought process taken within their Appraisal Report.  


     In cases where the Appraisal Conclusion (Final Estimate of Value) is found questionable, Underwriters may lean towards taking caution. 


     Underwriters will ask that one of the following be pursued regarding the Appraisal Report:




  • Better/more narrative from the Appraiser explaining discrepancies or inconsistent adjustments made, or why certain Comparables were used (or omitted).
  • Additional Comparable Sales or Listings be presented to better represent the Value Estimate provided.
  • Require a Desk Review or Field Review (2nd Appraiser involved) to assess the quality and accuracy of the first Appraisal performed.  (This is a worst-case scenario)

     In each of the cases above, delays in obtaining what is the ultimate goal ... a final Loan Approval ... will occur, as the Appraisal Review remains a critical part of today's Underwriting Process.


     As unicorns are said to be elusive, so is the "perfect Appraisal".  And as a result of 20% of Appraisals causing issues/delays within current Real Estate transactions, we must remain prepared to address questions raised by Underwriters regarding them ... 


*  Hoping to buy a home in the greater Chicagoland area?  Contact me today.  I'll put my 37 years of mortgage experience and expertise hard to work on your behalf.

     I can be easily found at:

Gene Mundt

Mortgage Lender  -  NMLS #216987  -  IL Lic. #0006220  -  WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656

Direct:  815.524.2280
Cell/Text:  708.921.6331
eFax:  815.524.2281


You're Invited to Follow Me at:

 Twitter Account of Gene Mundt, Mortgage Lender   LinkedIn Account of Gene Mundt, Mortgage Lender   Facebook Acct. of Gene Mundt, Mortgage Lender   Pinterest Acct. of Gene Mundt, Mortgage Lender   
 Trulia Acct. of Gene Mundt, Mortgage Lender   Zillow Acct. of Gene Mundt, Mortgage Lender   Gene's Chicagoland Blog/Gene Mundt, Mortgage Lender 

Gene Mundt, Mortgage Originator, an Originator with 37 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. 

Your Referrals are Greatly Appreciated!
     

Comments

Popular posts from this blog

Love Your New Construction .. But Educate Yourself About Future Tax Bills

Love Your New Construction ... But Educate Yourself About Future Tax Bills

*I want to preface this article by saying it's geography specific to the Chicagoland Area and its collar counties ...


So you've opted for building or buying a newly constructed home ... 

You've decided you'll invest most, or all, of your savings to cover Down Payment and Closing Costs.After all, it's a new home, you hopefully won't need money for repairs or improvements for quite a while, right?  

Plus:  The property taxes for your newly constructed home will initially be lower, as they'll be based upon the vacant lot on which your new home is built.  (The new home wasn't completed yet for the previous tax year's bill.) 

But how does this affectyour future tax bill and the tax portion of your monthly mortgage escrow payment?

When obtaining financing:  During your first year of a new construction occupancy, the real estate tax portion of your escrow account is based upon the last av…

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…