Dennis' Mortgage Blog

Below is email I sent to several agents in the Southern California area today regarding appraisals and the impact their statements in the Multiple Listing Service has on them.
 
We are one year into the Home Valuation Code of Conduct appraisal process and while the process and quality of most of our appraisals has improved, and given the way it started how could they not, we are still experiencing challenges with appraisals.  Some of our challenges can be more easily overcome if the real estate agent community were more active in policing the Multiple Listing Services.  More specifically if inaccuracy on posted listings were corrected before they become comparable sales.
 
Our recent appraisal challenges seem to becoming not in the values received from the appraisers, but rather the conditions and questions by underwriters and appraisal reviewers once an appraisal has been submitted.  Despite the requirement of HVCC providing a "clean" appraisal to the lender, many underwriters are taking it upon themselves to pull comps for a property where the appraisal is at sufficient value and requesting appraisers address why comps with lower sales prices or listed values were not used.  Essentially they feel there are comparable properties in the market place that could justify a lower appraised value than what is in the file.  
 
Recently I have assisted several of our originators with such issues by pulling the properties on the MLS and determining why a comparable may not have been used by the appraiser.  Fortunately in each instance thus far we have been able to mollify the underwriter; primarily because of the comments on the MLS from the listing agent.  However there have been a few properties where some puffery by the listing agent has come close to torpedoing a value.
 
  • "Home needs a lot of TLC as owner lived here 40 years and never upgraded anything."
  • "Long time owner died in property several months ago, sold as is."
  • "Kitchen, family room and fireplace are not permitted."
 
Comments like these help us very much when we are showing why a comparable sale with a significantly lower sales price than our subject property was not used by the appraiser.
 
Not so helpful are comments that state "property in move in condition!" sure once it has been fumigated, had all the carpets removed and burned and been scrubbed and painted top to bottom.  Or "kitchen and baths have been remodeled," yes they were, once since the property was built in 1952, by the current owner when they bought the avocado Amanna side-by-side in 1976.  Thankfully we were able to contact selling agents who were kind enough to provide statements, in one case an appraisal with pictures, showing the MLS was not accurate in describing condition of the properties and therefore were not "top of the market" comparables but rather properties in poor condition that were the reason they sold below the market.
 
If you see comments on the MLS that are an over-exaggeration of the condition or features of a property it is in everyone's best interest to have the comments changed to accurately reflect the true condition of the property.  Those inaccurate comments can come back to hurt your client's transaction if an appraiser, or underwriter, rely on it as the basis of value for your transaction.
 
To paraphrase Shakespeare in "Hamlet," agent to thine own self be true.  Be active and diligent in policing the MLS and ensuring accurate information is available.
 
If I can be of service to you or your clients please do not hesitate to contact me.  Rates are maintaining there historic lows as economic and political turmoil continue in Europe, let me help your clients take advantage of this market.
 
 
Dennis C. Smith
Broker/Co-Owner
Stratis Financial
CA DRE Broker's Lic #00966315
Direct (562) 472-1118
Mobile (562) 243-6912
Fax (562) 684-4316
DennisCSmith.com

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Posted by Dennis C. Smith on May 11th, 2010 11:31 AMPost a Comment (0)
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