You need a good appraiser who really knows the market, if you are considering purchasing a new home with a mortgage or are refinancing! With the total number of sales dropping +-40-60% in downtown Boston's historic neighborhoods in the past three quarters, it is becoming increasingly difficult for all appraisers to perform this very important task. Your choice of lender & the appraiser is paramount to getting your  best loan...let me know if you would like my assistance and meet your appraiser at your property?

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Whether buying, selling, or refinancing, you need a smart appraiser who can accurately judge the value of a home. Here's how to make sure you get a fair deal. Drive-by appraisals are gone. So are the days of cozy relationships between lenders and appraisers, when the necessary property value would magically appear with a wink and a nod.  The current economic crisis and past risky mortgage practices have changed the way appraisers do business.  Appraisals now typically involve more work under tighter deadlines, for the same fee. Single-sentence descriptions of market conditions sufficed during the boom in 2005.  Today, a description can read like a treatise, documenting everything from average list prices to absorption rates (a marketing gauge of supply and demand).  More comparable (known as “comps”) home sales are also required.

For better or worse, appraisers stand on the front lines of both the real estate crisis and the credit crunch.  And everyone -- buyers, sellers, refinancing homeowners, lenders -- is paying more attention to what appraisers do and how they do it.  While the appraisal process can be worrisome, you are far from helpless.  Whether you're buying, selling, or refinancing, you should get involved in the process -- it's the only way to know that the property is appraised at a fair amount.

Nationwide rules for appraisals changed May 1st; knowing your role in the process is more important than ever.  Whenever possible, work with a local lender or mortgage broker when buying or refinancing.  If you go with an out-of-state lender for a better rate, request that the lender hire an appraiser who specializes in your community.  Just as a Midwestern lender may lack a grasp of the Boston landscape, an appraiser from Worcester may not really know much about the South End. A folder filled with comps and copious notes does not always indicate expertise, especially in a community where dramatically different markets may be separated by blocks.

On May 1st, the new Home Valuation Code of Conduct changed the way appraisers work. The code of conduct was created to shield appraisers from pressure to reach certain home valuations necessary to close loans.  While the intended benefit -- appraisers free from the outside influences of lenders, mortgage brokers, and realtors -- will be achieved, critics say there will be unintended drawbacks.  Under the new guidelines, appraisal management companies (AMCs) will act as middlemen between mortgage companies and appraisers and hold greater influence over the entire process.  "We think it's going to hurt the quality," says Peter Vadala, president of the Massachusetts Board of Real Estate Appraisers.  "These AMCs put pressure on the appraisers to do two things: Do an appraisal cheap and do an appraisal quickly."

The National Association of Mortgage Brokers filed a lawsuit against the Federal Housing Finance Agency in late February, arguing that proper contact among mortgage brokers, lenders, and appraisers helps ensure high-quality, cost-effective, efficient appraisals. Appraisal firms make a similar case.  "The essence [of the new code of conduct] was ‘doing good’," says one company president.  "It was to take the pressure and intimidation off the appraisers. " But for appraisal management companies, he says, "the goal isn't to find the most competent appraiser to make sure the value is right.  The companies look for the appraiser who can turn it around in a day for the cheapest price.  What do you think you get for that?  You get what you pay for."

Whether refinancing, selling, or buying, make sure you (or your realtor) meet the appraiser at the home and that you are ready to point out the special features that will affect value.   Make a list of the improvements to the property and, if possible, when those improvements were made.  These features can include such things as custom molding, top-of-the-line appliances, remodeling projects, and a prestigious school within walking distance or a convenient subway/bus stop.   

"I want to hear about the details they feel matter," said a local appraiser,  "it's not that what people say about the details will change my opinion of value, but there might be one nugget in there.  People fall in love with certain aspects of homes.  Sometimes those aspects are in the details. . . . I don't make the numbers.  The market does.  And the buyers and homeowners are the market.  I have to listen to the market."

If you're the homeowner, make sure the details you value are not obscured by such distractions as peeling paint or piles of old newspapers.  Appraisers don't go through homes with white gloves, but before they show up, it would be wise to de-clutter, make beds, and do whatever will make your home look as tidy and well maintained as possible.  Condition ratings play an important role in every appraisal and offer homeowners the most direct way to affect valuation.  Since appraisers are trained to view each property as buyers would, a home in good condition with up-to-date amenities and nothing in need of repair is worth more than a comparable home in average condition with work to be done.

When it comes to upgrades, the appraiser's information is often only as accurate as what the homeowner provides.  In general, appraisers don't need receipts, but they appreciate honest, full disclosure.  A competent appraiser will note all changes.  If the lender sees the value has rapidly increased, those notes help appraisers defend their opinion of value.  "Any help you can give the appraiser is help," says one appraiser.  "We're only human.  We do make mistakes.  We do miss things.  Logistically, refinancing owners have it easiest when it comes to accompanying the appraiser, but sellers shouldn't excuse themselves from the process.  If worried about an appraisal, sellers should be present or enlist their realtor as a proxy.”  People should give input,” says one customer.  "Communicate. Don't feel like you're being a pest. Your house is an investment. Don't just sit back, especially in an area that has a declining housing market.  You should take action.  Things you think might not be a big deal may be a big deal."

If you’re refinancing and receive an appraisal that you feel is too low, you may feel trapped by the system.  That shouldn't stop homeowners (or buyers, for that matter) from investigating an unexpectedly low appraisal.  While homeowners typically view their property as more valuable than it actually is, they can call real estate brokers, scan listings, and attend open houses to develop a more realistic opinion.

Analyzing and finding new comparable sales might be the most difficult part of disputing an appraisal.  Fannie Mae and Freddie Mac prefer that comparables be within 1 mile of the subject property and that they were sold within the previous six months.  Many banks impose tighter restrictions, frequently looking for similar homes sold no more than three months ago. With sales down, it can be hard for appraisers to meet those standards, never mind the average homeowner.   "Owners are going to see some sales that may not look like theirs [on appraisals]," says an appraiser. "They need to look at the sales comparison grid and at the type of adjustments that were made.  If they think the appraiser missed the perfect sale, they need to put that in writing."  If appraisers are presented with information that indicates good comparable sales were missed, he would hope that they're "big enough" to acknowledge the mistake.  He adds: "A good appraiser will change a value if they get something wrong. They're not frowned upon, because it's not an exact science."

 

Source:  Boston Globe