Home Appraisal for the Greater Good
Most people think of a home appraisal as a lenders tool when loaning money. However, an appraisal can serve a greater purpose in protecting you as the homeowner. If you’re a homeowner in 2018, you must stay abreast of the true market value of your home. It is not a choice. If government policy and regulation were truly about consumer protection, then that would be a requirement. Let us not look at Politics for answers, none of us have that long to live.
The mortgage world today looks similar to the days of the pre-2008 financial meltdown. History is being repeated. We have a bull market, money is flowing freely in the mortgage arena and the news of big box bank corruption is starting to surface. Yet, if you end up upside down in your mortgage in the next melt down you simply should’ve known better. The financial games of yesteryear, which will greatly benefit few and financially ruin many are back in play. The Suze Orman’s of the world will buy another house in the Bahamas from all the loot they’ve gathered and take another hiatus. Meanwhile, you and I scramble for jobs and housing.
Be skeptical of anyone with a financial interest in your property.
Agents and Lenders may refer to it as “your” house, but when you are buying, selling or refinancing, they have a keen financial interest in the house as well. However, their interest lasts till they cash those commission checks or for a lender to pass along that mortgage to the secondary market. Then it is “your” debt. With such a significant financial interest at stake, make sure you do your homework.
There are some extremely ethical agents and loan officers out there, but can you be sure you have a good one? Like President Reagan said, “Trust but Verify”.
Why should I trust an Appraiser?
I couldn’t personally know 80,000 or so appraisers, but based on the couple hundred I know fairly well I can generalize that they are analytical, hardworking and of good character. However, that’s not the entire story. Appraisers are held to very high Professional Standards and excessive oversight. They are acutely aware that their appraisal reports are reviewed by every party involved, with different lenses and biases and for many years to come in the secondary market. Also, when you, as the homeowner engage the services of an appraiser, they are now clear from any undue influence (bullying) from other parties that may have a temporary financial interest in your home. The appraiser’s fee is also not based on the value of your home. They earn a flat fee for their work and expertise, no matter what the outcome of your home value.
When do I need an Appraisal?
Home appraisals are performed for Purchasing, Selling, Refinancing, Estate Settlement, Divorce, PMI Removal, Bankruptcy and property disputes.
In order to mitigate the risk of owing more than your home is worth, you need an appraisal each and every single time you attempt to buy, sell or refinance your home. Does that sound ridiculous? It’s probably the best advise you’ve ever received. So like Maui would say “your welcome”.
Upon finding that approximately 37% of appraisals were inflated, FHA has recently started requiring second appraisals for loans flagged as high risk. Its called checks and balances. You can and should exercise the same level of caution to mitigate your risk.
Purchasing or Refinancing
When you are purchasing or refinancing a home the lender will order an appraisal. The lenders appraisal is to protect their asset. Apart from community based Independent Mortgage Bankers, the big box lender that’s originate your loan will most likely turn around and sell it to the secondary market. What happens a few years later when that lender is exposed for undue pressure on the appraisers? Who is going to pinpoint that your appraisal was one of those inflated and come knock on your door to make reparations? Or do you just have to deal with owing thousands of dollars more than what your home is truly worth.
Here’s the controversial part, you get an appraisal and the lender gets their appraisal and the values don’t match. What now? I would say, then there’s a problem to be solved. Is the discrepancy within a reasonable range? Can the banks appraisal reviewer explain to you why there is a difference. Solving the problem is securing your financial interest.
Moving on to when you are considering selling your home. Have you heard of a Pre-listing appraisal? Before you turn on the circus of selling your home, order an appraisal and find out the true market value of your home. You will save on excessive marketing time, additional mortgage payments, marketing costs, instill confidence in potential buyers and avoid at least some hiccups during closing. Check out the previous blog – The one thing you must know before hiring a Real Estate Agent.
Isn’t that a lot of Appraisals?
Yes. In today’s world if you choose to be a homeowner it is a necessity.
When it comes to your most important financial interest it is your job to do your due diligence. It is only by you, the consumer, taking control of the reigns of your homes true value that we will avoid another financial melt down and remove third-party undue influence on appraisers. You have to lead the charge for a healthy real estate market.
No one can tell you for sure whether there will be another melt down. Yet, in so many ways its business as usual in the real estate world and per Henry Ford “if you always do what you’ve always done, you’ll always get what you’ve always got”.
What is the Cost of a Home Appraisal?
As a homeowner or buyer, you shouldn’t need a full appraisal like the lenders require on Fannie Mae forms. A General Purpose or Desktop Appraisal will suffice and cost you considerably less, starting around $200. So, do the economy a favor, utilize the services of an independent local value expert in your area and make sure you don’t borrow more than what your home is truly worth.
What are your thoughts on the current economy and mortgage lending practices today?
Certified Residential Appraiser, Gynell has a diverse appraisal background covering Commercial, Residential, Rural, Complex and Luxury Properties as well as National Appraisal Review work in the secondary Market. She began her Appraisal training in Oklahoma in 2001 covering Rural and Commercial Properties. With several years as a National Review Appraiser at Fannie Mae and other big banks, Gynell has keen insight into the secondary market guidelines and requirements.