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SD Realtor.
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August 10, 2007 at 7:47 AM #72673August 10, 2007 at 7:47 AM #72792
Bugs
ParticipantIt is at this point that things start getting “interesting” with the appraisals. Fully half the residential appraisers we have right now have no familiarity with a declining market because they haven’t been at it long enough. A couple of the lenders are now requiring listing and pending sales in their appraisals and the underwriters are giving the appraisals much closer scrutiny than they were even a year ago.
The era of the stupid appraisal is (mercifully) coming to an end – for now anyway. Those appraisers who don’t straighten out are gonna get kicked out.
This crackdown will have some collateral damage – there will be a few legitimate sales contracts that will not appraise out because of the combination of fewer sales and extenuating circumstances with some of the sales that do close. That’s life during a declining market.
August 10, 2007 at 7:47 AM #72800ParticipantIt is at this point that things start getting “interesting” with the appraisals. Fully half the residential appraisers we have right now have no familiarity with a declining market because they haven’t been at it long enough. A couple of the lenders are now requiring listing and pending sales in their appraisals and the underwriters are giving the appraisals much closer scrutiny than they were even a year ago.
The era of the stupid appraisal is (mercifully) coming to an end – for now anyway. Those appraisers who don’t straighten out are gonna get kicked out.
This crackdown will have some collateral damage – there will be a few legitimate sales contracts that will not appraise out because of the combination of fewer sales and extenuating circumstances with some of the sales that do close. That’s life during a declining market.
August 10, 2007 at 8:23 AM #72694SD Realtor
ParticipantIronic that two days after the sale closed I got another call from a homeowner in Park East. Pretty much an exact situation as the Discovery owner. However the Discovery owner was a bit more accepting of the market the Park East owner is not. I will keep the board updated as to how this one plays out.
Oh yeah his daughter owns a unit as well…
SD Realtor
August 10, 2007 at 8:23 AM #72815ParticipantIronic that two days after the sale closed I got another call from a homeowner in Park East. Pretty much an exact situation as the Discovery owner. However the Discovery owner was a bit more accepting of the market the Park East owner is not. I will keep the board updated as to how this one plays out.
Oh yeah his daughter owns a unit as well…
SD Realtor
August 10, 2007 at 8:23 AM #72819ParticipantIronic that two days after the sale closed I got another call from a homeowner in Park East. Pretty much an exact situation as the Discovery owner. However the Discovery owner was a bit more accepting of the market the Park East owner is not. I will keep the board updated as to how this one plays out.
Oh yeah his daughter owns a unit as well…
SD Realtor
August 10, 2007 at 9:18 AM #72728SHILOH
ParticipantIs there any recourse in the fraud you are describing?
August 10, 2007 at 9:18 AM #72846ParticipantIs there any recourse in the fraud you are describing?
August 10, 2007 at 9:18 AM #72853ParticipantIs there any recourse in the fraud you are describing?
August 10, 2007 at 10:18 AM #72753no_such_reality
ParticipantA couple of the lenders are now requiring listing and pending sales in their appraisals
So they want to see what else is for sale. Makes sense, but also, since the majority of what is for sale is listed at wishing prices, do they discount them to come up with a number?
August 10, 2007 at 10:18 AM #72873ParticipantA couple of the lenders are now requiring listing and pending sales in their appraisals
So they want to see what else is for sale. Makes sense, but also, since the majority of what is for sale is listed at wishing prices, do they discount them to come up with a number?
August 10, 2007 at 10:18 AM #72879ParticipantA couple of the lenders are now requiring listing and pending sales in their appraisals
So they want to see what else is for sale. Makes sense, but also, since the majority of what is for sale is listed at wishing prices, do they discount them to come up with a number?
August 10, 2007 at 10:34 AM #72759ParticipantIt hasn’t happened yet but pretty soon some of these listing prices will be LOWER than some of the closed sales. Trust me when I tell you that when REOs comprise 30+% of the closed sales the competition between these lenders to underprice their competition will be significant.
During an increasing market an appraiser should be weighting pendings and listings if they can establish the relationship between the list prices and the closed prices. This is particularly true when bidding wars are common. The appraisers can see there is a trend toward increases and they have no way of knowing how high it will go. Well, the same applies – only in reverse – when the market is declining. The (lower) pending sale prices point the direction and the appraisers are supposed to be appraising toward the ever-reducing lower end of the range. That’s what I meant when commenting about how many appraisers have never operated in a declining market.
What this means is that even though a lender might allow 6-month old sales data in an appraisal report, they’re not going to allow those sales to be given undue weight because the market conditions then were better than they are now. A lot of loan originators and agents are going to be shocked when they start seeing this. They may find that exceptional buyer and come to a contract price and they may think that based on sales from a few months back that the loan is a lock, right up until the lender cuts the loan amount back because of current listing activity.
Lenders really only pay attention to appraisers and support the use of appraisals when the markets are in decline and it’s their money that’s on the line.
August 10, 2007 at 10:34 AM #72881ParticipantIt hasn’t happened yet but pretty soon some of these listing prices will be LOWER than some of the closed sales. Trust me when I tell you that when REOs comprise 30+% of the closed sales the competition between these lenders to underprice their competition will be significant.
During an increasing market an appraiser should be weighting pendings and listings if they can establish the relationship between the list prices and the closed prices. This is particularly true when bidding wars are common. The appraisers can see there is a trend toward increases and they have no way of knowing how high it will go. Well, the same applies – only in reverse – when the market is declining. The (lower) pending sale prices point the direction and the appraisers are supposed to be appraising toward the ever-reducing lower end of the range. That’s what I meant when commenting about how many appraisers have never operated in a declining market.
What this means is that even though a lender might allow 6-month old sales data in an appraisal report, they’re not going to allow those sales to be given undue weight because the market conditions then were better than they are now. A lot of loan originators and agents are going to be shocked when they start seeing this. They may find that exceptional buyer and come to a contract price and they may think that based on sales from a few months back that the loan is a lock, right up until the lender cuts the loan amount back because of current listing activity.
Lenders really only pay attention to appraisers and support the use of appraisals when the markets are in decline and it’s their money that’s on the line.
August 10, 2007 at 10:34 AM #72886ParticipantIt hasn’t happened yet but pretty soon some of these listing prices will be LOWER than some of the closed sales. Trust me when I tell you that when REOs comprise 30+% of the closed sales the competition between these lenders to underprice their competition will be significant.
During an increasing market an appraiser should be weighting pendings and listings if they can establish the relationship between the list prices and the closed prices. This is particularly true when bidding wars are common. The appraisers can see there is a trend toward increases and they have no way of knowing how high it will go. Well, the same applies – only in reverse – when the market is declining. The (lower) pending sale prices point the direction and the appraisers are supposed to be appraising toward the ever-reducing lower end of the range. That’s what I meant when commenting about how many appraisers have never operated in a declining market.
What this means is that even though a lender might allow 6-month old sales data in an appraisal report, they’re not going to allow those sales to be given undue weight because the market conditions then were better than they are now. A lot of loan originators and agents are going to be shocked when they start seeing this. They may find that exceptional buyer and come to a contract price and they may think that based on sales from a few months back that the loan is a lock, right up until the lender cuts the loan amount back because of current listing activity.
Lenders really only pay attention to appraisers and support the use of appraisals when the markets are in decline and it’s their money that’s on the line.
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