Friday, November 11, 2011

The mortgage appraisal process and what you need to know

  It has been almost 18 months since the implementation of the HVCC appraisal process.  It feels like its been 18 years.  I understand the idea behind it-reduce the influence of outside sources (loan officers and mortgage brokers) on the apprasiser so the appraisal can be as objective as possible.  Certainly, there was a lot of that going on among the worst elements of our business, but for those of us that are above board and have always acted with integrity, unduly influencing appraisers was not in our lexicon.

  The problem is multi fold and I want to tackle them one by one:

1.  Too much bureaucracy:  The system requires that an appraisal management company that works with the bank chooses the appraiser.  In some instances, there is a vendor management company AND an appraisal management company.  Let me give you one example that speaks volumes.  I have a borrower that wants to refinance her co op in Manhattan.  I process the loan with the bank and give them the contact information for the managing agent so the appraiser can obtain the required information in order to complete the appraisal.  2 weeks go by and I hear nothing so I decide to pick up the phone and find out what is going on.  I call the appraisal vendor company and ask for a status update.  Logic would dictate that the vendor appraisal compnay can talk to the appraiser, right?  Wrong.  The vendor management company puts me on hold and calls the appraisal management company.  The apprasisal management company is told we need a status update so they place the vendor management company on hold and call the appraiser.  Remember, that I am not allowed to call or speak to the appraiser.  Invariably, they cannot get the appraiser on the phone so they leave him a message to call them back.  They hang up with the appraiser, take the appraisal vendor company off hold and tell them they left the appraiser a message.  The appraisal management company hangs up with the vendor management company and the vendor management company takes me off hold to tell me that a message was left with the appraiser.  This all takes about 10 minutes.  This type of exchange goes on about 3 times during the course of the appraisal process.  So when my client asks me what is going on with the appraisal, how do I explain this to them?

2.  The apprasiers:  I cannot confirm this as fact but I have been told by an appraiser that I know and trust with an impeccable reputation that the appraisal management companies choose the apprasiers based on lowest price and they "beat them up" to get their prices as low as they can.  This speaks volumes.  I have also seen instances where apprasiers are chosen who are located very far from the home to be appraised. Familiarity with the area is crucial for understanding values.  Especially in NYC with co ops and condos.

3.  The variation of values: There are some banks that consistently have very low appraised values and some that are more reasonable.  I have seen instances where one bank will appraise a property for one value and another bank, not a few weeks later will appraise it several hundred thousand higher.

4.  Lost money to the borrowers:  Before HVCC, if a borrower called me to refinance or buy a property and was concerned that the appraised value was not where it needed to be, I could call any one of my trusted appraisers and ask them to do a comp search and give me a good ballpark on the value.  Of course, the true value could not be done without an inspection but I knew it would be a good educated guess.  I would then order that appraisal and it would be usable at almost every bank.  Now, with HVCC, we are flying blind on the appraisal.  I have had many client pay for an appraisal, have it undervalued and thus, it kills the deal.  If my client starts with one bank and something in the process goes awry, I cannot take that appraisal to another bank.  We must order a new appraisal with the new bank.  Lost money for the borrower.

  By the way, there are banks that still allow us to at least choose from a list of appraisers or if the value is below a certain number, we can choose the appraiser.  But this is not typical as most banks require the use of HVCC.  Its a tough time in the business and its difficult to close loans.  The appraisal process only makes it that much worse.


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