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I recently commented on an appraiser’s blog and I must admit I was hesitant at first. The relationship between appraisers and underwriters has always been a bit “tense”, to say the least. As Appraisers, their job is PROPERTY VALUE. That’s what they do, they appraise houses daily. The job of the underwriters is to assess the risk. The appraised value may not be what the underwriter comes up with. Soon; the appraiser is looking at the value of the neighborhood and the insurer is looking at the resale value (…you can almost say the worst case). The insurer wants to know one thing. If this borrower defaults, what value can the “lender/investor/bank” get for him?
I want to make it very clear that if you go over these 12 points and submit your appraisal, there is still a chance that your appraised value may be reduced or revised by an outside appraisal company. One of the required appraisal review steps used by some of the larger lenders is AVM (Automated Value Model). The appraisers I’ve talked to don’t like them very much.
They take the sales for the last 6-12 months and use a calculation unknown to any appraiser or underwriter and spit out a value (maybe spitting is a bit harsh, I apologize). I may be exaggerating a bit, but I think you get my point. I’ve had more verbal jabs from appraisers after admitting that the reason I ordered a field check on their perfectly good appraisal was because the AVM came out lower than their appraised value! I’m not saying the AVM is a bad thing, I’ve gotten some really bad reviews and the AVM gave me the compensations I needed to prove the value was wrong.
At some point we have to be able to make a decision based on the obvious, oh that’s right…we had that chance!…that’s why the market is where it is now (unilateral and established opinion). outside the subscriber!)
One of the things I want you to know is that FIELD REVIEWS ARE BACK! Fannie Mae Desktop Underwriter even has a RED FLAG on her findings now that says:
“The Desktop Underwriter’s collateral valuation model indicates that the estimate of value presented for this cash-out refinance transaction may be excessive. The lender should carefully review the valuation of this transaction.”
The other two under Property and Appraisal Information are:
The subject property has been identified as being located in an area of declining home prices or in an area where it may be difficult to assess home values. The lender must carefully review the appraisal to ensure that the appraiser has analyzed it correctly. Lenders may order either a field review or a desk review.
Property value trends and general market conditions to arrive at the provided value. The lender should request additional support from the appraiser if it determines that the appraisal does not accurately reflect current market conditions (for example, the property’s declining value field is not checked when market conditions suggest otherwise). See our Ownership and Appraisal Guidelines in Part XI of the Selling Guide. This is another find condition that gives the lender the green light for a field review.
Now, nobody will admit it… but these very wordy paragraphs actually mean: FIELD REVIEW!
Continued from Part 1 Appraisal Review from the Underwriters’ Point of View
7. Did you check the bedroom count?
The building sketch shows a diagram of the rooms in the subject property. Rooms in the basement are not counted as bedrooms. (Please note: one of your fellow AR appraisers can explain the room count rules in detail…remember this is a list of general underwriting questions)
8. Proximity must show blocks or miles (not same subdivision or same street)
The proximity should show the actual number of blocks or miles. Same street or same subdivision is not acceptable.
9. Is the subject compared to a similar property?
Do you have a rancho with a parking slab versus a traditional two-story with an attached 2-car garage? Don’t laugh I’ve seen it! Do you have 2 bedrooms compared to 4 bedrooms? If so, did the appraiser make adjustments and comments?
10. Is anything obstructing the subject’s view?
Now this is hard. The appraiser is taking a picture at the best possible angle, but as an insurer, we have to see the full view of the house! Sometimes it’s ugly, but I have to go back to what I said in Part 1 of this blog… the appraisal is the only way the underwriter sees the property. They must be able to see the property from the photos provided.
11. Can you see the whole theme in the image or are there sections missing?
This is a red flag that subscribers are taught to spot immediately. If the insurer can only see part of the house, part of the street, half of the back of the house, etc., he will need additional photographs. Now, some lenders may not contact the broker for additional pictures and may request a field review, but whatever the course of action, make sure you can clearly see the front of the house, the back of the house and the street scene.
12. Are there broken windows, missing doors, etc.?
I strongly suggest you talk to your lender about broken windows, missing doors, and the like. Different lenders have different policies.
My suggestion: read my blog. Look for someone? If your company uses FannieMae or any other AUS (Automated Underwriting System) that has an AVM built in, as I said before, the system will flag ownership.
Let me say this: AVMs are not accurate. I will say it again: they are not exact. They are a tool used by lenders to assist them with the appraisal review process. In the past, Underwriters pulled AVMs from questionable appraisers and back then we were looking at compensation, not value.
The last thing I want to encourage you to do is ask your lender what their review process is. They could tell you the truth.