Here is another great article by Mary Ellen Kohut on the role of appraisers in real estate transactions.
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Appraisals have become the grizzly bear in the zoo of lending. New York Attorney General, Andrew Cuomo, determined the housing crisis was caused by appraisers and their relationship with real estate agents and lenders. Legislation was passed to keep lenders, agents and borrowers all separated from the dangerous and evil appraisers. In addition new tweaked guidelines to determine value have eliminated the “most beautiful house on the planet” key and replaced it with foreclosure and short sale trends. The sellers that think their house is worth more because it is not a bank owned property better think again. Appraisers are now required to note recent REO’s and short sells in their report. If the neighborhood is foreclosure challenged, more than just one bank-owned in a neighborhood, the appraiser will be chastised if they try to bring the value up by using comps outside the subdivision...or the lender may just require a second appraisal at the buyer's expense. Builders will no longer be able to direct business to their “chosen” appraisers specifically used for their communities. The underwriter’s sworn duty to the bank making the loan is to scrutinize appraisals as well as the credit worthiness of the buyer. They now have an automated system to help confirm value. Most conventional loans are requiring a desk review or a field review. A desk review is the process of the underwriter sending an appraisal over to an independent appraiser to validate the report. A field review is a completely new appraisal. Having a strong borrower or putting an obscene amount of money down will not weigh into the decision. Back in 2005, if the buyer agreed to pay the sales price offered by the seller, the appraiser typically would make it work and with the trend at that time for rapidly appreciating housing values, underwriters rarely questioned the reports. With the combination of enforced underwriting guidelines and the current trend of declining housing values, the lending process can get knarly. Trying to get the value up by screaming and yelling or holding your breath until you pass out does not work, lord knows I’ve tried. Today’s lending environment is a different animal and we are going to have to wrestle through it until the economy turns.

FYI: Lenders were scratching their heads in amazement when FHA announced Wednesday that they would allow buyers who qualify for the $8000 First-Time Home Buyer Tax Credit, to use it toward the 3.5% required down payment. The government did away with the down payment assistance programs in October due to the number of foreclosures for buyers that did not have any skin in the game. And now they would allow Uncle Sam to gift the money? As quickly as the mortgagee letter appeared it was yanked from the web site with an “oh, never mind.” Stay tuned to see if reappears.
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Yours to Count On,
Erika Madsen
Real Estate Consultant
Re/Max Power Realty
"Your Advisory Team" Founder/Manager
480-695-6572

p.s. if you or anyone you know is considering a move in the current real estate market- you deserve an agent who has a strong knowledge to help you succeed! Visit http://www.PhoenixAreaMls.com/ to learn more about Your Advisory Team & Our Performance GUARANTEES!!