I have been a Realtor almost a year now in one of the toughest real estate markets in history. It has been a challenge putting buyers and sellers together and making deals happen. But I have been doing well and my hard work is starting to pay off. I am busy, my phone is ringing, I am getting listings, receiving offers and then suddenly one of my deals falls through because of the new appraisal laws that have been implemented to prevent mortgage fraud. I can't believe that this new law meant to protect the general public is now back firing and people are losing out on the "American Dream" of home ownership. Not to mention all the hard work the professionals; seller's agents, buyer's agents and mortgage brokers are put into trying to get the deals to close.
Two months ago my sellers accepted an offer on their second home in North Port Florida. They were so excited that they were finally going to be able to move on and not have to maintain this second home of theirs and may be enjoy life a little with the proceeds from the sale. This was the buyers "first home" and they could not have been more excited. The buyers were already approved for financing (USDA Financing). They worked really hard to find the perfect home. The buyer's agent told me that over the course of several months she must have shown her buyers over 60 homes before they put an offer in on my seller's home.
Then the appraisal came in $15,000 short of the contract price. My sellers disappointed but agreed to lower the price to the value of the appraisal and the closing was scheduled. A few days before closing we were notified that the lender was not able to close in time. They just were too busy to get it together to close and so my sellers agreed to a 15 day extension. We are now a month and a half into this and 2 hours before the scheduled closing I am notified by the title company that the mortgage company is not ready to close again. The lender apparently pulled "AVM" comps 4 days prior to closing and the comps did not match the appraisal. The mortgage broker and buyer's agent both told me that they had 9 supporting comps and are going to resubmit to the lender for approval and to be patient. Based on this information my sellers again agreed to sign another extension for 10 more days.
This time, three days before closing we were notified that the lender won't close. The lender will not accept manual comps submitted by the mortgage broker. They will only accept the comps they received from the appraisal management company. These computerize appraisals are using distressed properties (short sales and bank owned properties) to determine their values. I have read that some of these appraisals are over 30% off on their values. This has been extremely difficult for all involved. The sellers want to sell their home, the buyers who have been working so hard to own their first home are devastated and all the professionals involved do not get paid.
The new rules meant to put a wall between mortgage lenders and appraisers are hurting home sales in Venice Real Estate Market and will single handedly cause our home values to drop like a rock. This is, and will be, contributing to many deals lost and is bringing down the market as a whole. All the efforts made by the government to spur the recovery of the housing market will be lost if something is not done soon.
Contact Kari A. Battaglia, licensed Realtor® in Venice Florida at 941-270-1851 to list your home, answer questions or to help you in your search for homes for sale in Venice Florida. I currently serve customers in Venice Florida, Englewood Florida, Nokomis Florida and Laurel Florida communities. I also have Tennessee properties available in the Chattanooga area. Call me to receive a list of Tennessee properties available for sale.
Contact me by email at Kari@DiscoverVeniceRealEstate.com. Need information fast, call me direct at 941-270-1851. Copyright©2009. By Kari A. Battaglia. All Rights Reserved.
Kari A. Battaglia, GRI - Realtor®, Broker Associate - Coldwell Banker Residential Real Estate - 331 W Venice Ave., Venice, FL 34285 - 941-270-1851 direct - 941-484-9715 - office 800-969-1990 toll free - Kari@KariBattaglia.com
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I'm hoping for the 18 month moratorium that they're proposing. We'll see.
The intent was for the lenders to not have undue influence on the appraisals by not being able to select the individual appraisers so they can't push through bogus loans and have the same mess happen all over again in the mortgage industry.
But they didn't think this one through well enough to the point where the random selection of appraisals is leading to funky appraisals.
I've had deals fall through as well. yet I can't say that is the norm. In many of our subdivisions, we now have over 66% of the homes under contract. They are flying off of the shelves and it truly is shocking. Hopefully this trend will continue and the appraisers will not be reticent to give higher appraisals, thus not killing the deals in our markets.
And the saddest part it that both sellers and buyers who are both ready, willing and able are hurt by this. ~Rita
They used to throw lenders and appraisers in jail for falsely valueing property to high. It is just as bad to value a property to low. They should look into this now.
I am looking at offers and looking at who is lending or brokering the deal in the negotiations of the deal. I did this in the 80's and during the dot com boom, and now. There are ways, somewhat, around the rules that benefit direct lenders. It is not fair, but it is what it is until the government changes its philosophy. We are in a government controlled environment for the next several years, so we have to either complain, do something about it or both. I have a lender who is going by the guidelines by creating an appraisal pool city to city. I had two deal last month that were to close in 3 weeks, and both did......one was a bit under 3 weeks. All appraised above the sales price and I could not even comp the sales price. Look around and shop. You may lose your favorite mortgage person for a bit, but we have to cover our tail. When an offer comes in you need to determine if it is lender or a broker. Do you know them? Call them to gain a feel if they REALLY know what they are doing. It takes a bit of work, but you can make a bad situation much better.
Best to ya........
We're not trying to rain on anyone's parade here folks. It is apparent to me, after reading many posts, that AMCs are hiring appraisers who are inexperienced, and/or unfamiliar with the area in which a subject property is located and/or just plain lazy. This is unethical.
If the appraiser is not familiar with the area he or she can educate themselves by reading, speaking with other appraisers who have experience in the area, and also by talking with realtors who are experienced in that particular market. There's nothing wrong with taking this tack. If, on the other hand, the appraiser does not know the area and does not take the time to educate themselves, then they have no business appraising property in that market. What they're doing is both unethical, and, illegal in all fifty states. If this happens to you complain, (in writing), to the AMC who contracted for the appraiser's services. If the AMC doesn't immediately make it right, file a formal complaint against the appraiser with the appropriate governing body in your state. You guys have to do this every time this happens. This will cost the AMCs money, which is all most of them are about. If it becomes more expensive to fight these cases, they will relent, and take the action necessary to avoid these occurrences in the first place, (i.e. use competent appraisers even though they may cost more). Appraisers are legally liable here and if enough formal complaints are filed, it will no longer be cost effective for the bad apples to cut corners or cheat. You guys have the power to stop this stuff dead in its tracks - use it!
Please remember, we appraisers have some very specific sets of rules we must play by. I can't stress this enough - we must choose comparables which are representative of the market. If the market is dominated by REO sales, then we must use REO comps. If it is dominated by short sales, then we must use short sale comps. By dominated, I mean a majority. Whichever type of sale is prevalent in the market - straight, REO or short, is the type we must use, because whatever type of transaction is dominant defines that particular market at that point in time. We don't get to choose the type of sales we utilize in this regard - the market defines the dataset for us.
We're not out to "underappraise" properties. Killing your deals does not benefit appraisers in any way - strong markets are just as good for us as they are for you.
If you think you have a valid case against an AMC, or an unethical, dishonest or incompetent appraiser, but are having a hard time figuring out where to start, feel free to contact me - I'll help if I am able. I may not be familiar with the particulars of your market, but I do have a firm grasp on the principles involved, and have an extensive forensic and litigation background and a 100% win ratio over the span of nearly a quarter century. Good luck to all!
HVCC isn't helping anybody but the management companies doling out the appraisals to anybody willing to work for almost nothing. They don't drive by the areas, sometimes they don't even know the areas. Literally mailing it in and not caring what happens knowing full well that nobody is going to call them. It's a mess!
Larry - Me too.
Ralph - I agree.
Dan - Our activity is picking up here as well. We have sold triple this month then the same month last year. There has not been a realtor I have spoken with that has not had a deal fall through due to this new ruling.
Rita & Brian - It has been very difficult for all involved. Everyone loses in this situation except the appraisal management company.
Terry - Right ON! (Do they say that anymore)
Tim - Glad to hear you have figured out a way to navigate around the system.
David - I would love to lodge a formal complaint against the appraisal management company. My problem is, I am told, that the name of the management company can not be revealed. How do fight someone who is unknown to you?
Ed - I am told that the appraisal company does not drive by the home at all. All they did was do a computer generated comp using software to do the work for them. Any reputable appraiser would never give a comp without knowing what they are doing. Where is the accountability.
Kari,
Here's one possible tack you could take: Item II of the HVCC stipulates that the borrower is to be provided a copy of the appraisal report "promptly upon completion at no additional cost to the borrower, and in any event no less than three days prior to the closing of the loan." This means that the borrower is guraanteed to receive a copy of the appraisal - it's not at the lender's discretion. Next, tell the lender you want to know which AMC was used to engage the appraiser. Item III of the HVCC is the part that insures segretation of the involved parties. All you'd be doing here is asking for proof of compliance with this section of the HVCC - unless they have something to hide and are not in compliance with this section they had better give you the name of the AMC.
Each bank typically accepts appraisals that were ordered by either one, or two different AMCs, one of which they own, so guess where their appraisals usually come from? The AMCs have raised appraisal fees, drastically, (usually), cut the amount the appraiser receives, and make a bunch more money for the bank - works for them!
Now you will know what AMC ordered the appraisal, and, you will have a copy of the appraisal - all the ammo you need to take down the bad guys, (assuming, in fact, that the appraisal is either substandard or intentionally biased).
Good luck and let me know if I can help.
David - You are AWESOME! Thanks so much for the advice. Knowledge is power!