Appraisal Valuation Issues Persist

Many home sales have fallen apart due to home valuation issues. Rapidly changing home prices and evolving regulations have impacted appraisals. We have seen buyers wait 6 months for a successful short sale approval only to have their hopes dashed by a low appraisal from their own lender. We have seen sellers move out of their homes and commit to other properties only to see the sale fall apart due to a low appraisal. Don’t let a questionable appraisal derail the dreams of your family.

Why Appraisals Are Important
Home loans are contingent upon appraisals. Lenders need to determine the underlying value of a home before agreeing to make a loan. The purpose of a Residential Appraisal Report is to develop a credible opinion of the value of the improved subject property as defined by the Uniform Standards of Professional Appraisal Practice. The report contains supporting data, a final opinion of value, photographs and comments on market conditions.

A Conservative Approach
The melt-down in the mortgage markets caused many lenders to appoint Chief Risk Officers and take measures to limit the overall risk inherent in their loan portfolios. As lenders analyze their risk profiles, they may be hesitant to fund another Florida loan unless the appraisal valuation is very conservative. Once the appraisal is complete, it may need to go through underwriting, a lender’s appraisal review committee, and the PMI company for approval. A bank’s appraisal standards may penalize the valuation by 10% in areas with soft or declining market conditions. They may request two appraisals on a subject property, or may require buyers put between 10-20% down.

The Impact of HVCC
The Tampa Bay area has many excellent appraisers who face a rapidly changing business landscape. The HVCC (home value code of conduct) is a Fannie Mae and Freddie Mac requirement that prohibits a lender from choosing the appraiser – either directly or indirectly. The rule is designed to shield appraisers from any pressure to hit the values needed for the sales contract. Lenders now place orders for appraisals with Appraisal Management Companies who retain a sizable percentage of the appraisal fee for overhead. The actual appraisers may receive less than half of the appraisal fees they collected in the past. As a result, many experienced appraisers have left the business. We have seen the proliferation of “appraisal mills” who send appraisers from as far away as Lakeland who lack knowledge of local builders and neighborhoods. Appraisers who commit to lower fees and faster turn around times are winning more business, but they are more likely to produce problem reports. While there are many qualified and excellent appraisers in the area, this new middle-man has caused home valuation to be more of a wild-card. While the US Senate is discussing changing HVCC regulations (see H.R.4173, the Wall Street Reform and Consumer Protection Act of 2009), the law remains in effect. Once an home has been appraised, challenging the valuation has become nearly impossible.

FHA Appraisals
As the average sales price of Tampa Bay homes has fallen, a greater percentage of homes now qualify for FHA loans. Appraisals on FHA loans pose a significant risk for a homeowner, as an FHA appraisal will set the value of the home for anyone else using an FHA loan for 6 months. Appraisals using the Fannie Mae 1004 form and Freddie Mac 70 form, also known as the Uniform Residential Appraisal Report (URAR), are stored in a database for 6 months and must be used for any buyers during that period.  New FHA regulations similar to HVCC have been implemented by the government-sponsored enterprises (GSEs) to ensure appraiser independence. The Department of Housing and Urban Development (HUD) has implemented ML-28, whereby FHA-approved lenders are prohibited from accepting reports prepared by appraisers who are selected, retained or compensated in any manner by a lender or mortgage broker.
An appraiser will contact the listing agent for access to the home and a copy of the contract. While Realtors should not attempt to apply pressure, we can provide background information about the neighborhood, builders and comparable sales. Agents can communicate knowledge about the condition or circumstances of recent sales that may impact values. We can suggest near-by homes or neighborhoods with similar characteristics. Realtors can also convey information about pending sales, active listings and the absorption rate. Team Bohannon also details any upgrades to the subject property that help justify the sale price. And finally, we describe the marketing of the property and disclose multiple offer situations. The best practice is to communicate this information the day before the appraisal to allow time for comparable selection, planning and photos before the appraisal.

Realtor’s Role

Experience is a hard teacher. Don’t let your Realtor obtain on-the-job training at your expense. The average Realtor completes less than 4 transactions per year and may lack the experience required to manage the appraisal process. Contact Team Bohannon for an experienced team, a repeatable contract-to-close process, and an automated transaction management system to provide the peace of mind you deserve.

Why Buy Now – The Impact of Waiting

Business Week has an article that explores the case for buying now based on low interest rates. The article discusses the financial impact that interest rates have on the cost of buying and paying off a home. “Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed.” If you are waiting for Tampa Bay home prices to fall further, click here for the article.

Here is a quick excerpt:

You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is “more stable” and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.

If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.

What I’m trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime. full article.

Did You Pick The Right Home? The Contract-to-Close Process.

Congratulations, your offer to buy the home was accepted – now what? Did you really pick the right home? Does your Realtor have a “Due Diligence Checklist” to help determine if this is truly the right home to match your needs across the four fundamentals of home buying? You need a proven process to ensure that you take advantage of every negotiation opportunity that arises during the inspection, appraisal and closing process. The goal is to confirm if this is the right home, reduce unpleasant surprises, and save you money by going way beyond what a traditional agent would offer.

Manage the Process
Once the home is under contract (in escrow), our team and system manage all the details. Using our tested Home Buying System, we coordinate the timelines, escrow, inspections, repairs, survey, warranty, appraisal, financing, home insurance, title and other aspects of the closing.  There are over 125 steps, a multitude of variables, and several companies that must communicate and execute perfectly to close the transaction on time.

Fall Out Rate
National statistics show that 34% or more of transactions fall apart during the contract phase. While we cannot control every aspect and every company involved in the transaction, our system pro-actively manages the variables to ensure that you are buying the right home at the right price. When turbulence arises, you can have the confidence to know that we have encountered this situation before and have an alternate flight plan. Here are some examples of unpleasant mortgage surprises, but there are others for inspections, repairs and title issues.

Are you tired of agents who “wing it? Have you been left in the lurch before? Call today to experience a team with a repeatable business process that consistently produces raving fans.

Home Buyers Beware: Avoid these 12 Unpleasant Mortgage Surprises

Don’t be left at the alter without a loan! The Tampa real estate market is seeing a high percentage of transactions fall apart during the contract process due to financing issues. One thing we have learned over the years holds true: “Promises and personalities do not ensure success, process does”.

To avoid the pitfalls below, Team Bohannon used a Home Buying System to ensure the lender has the processes, performance guarantees, and communication in place to protect against these 12 Unpleasant Mortgage Surprises.

– The loan program you were quoted is no longer available.
– The loan was not locked interest rate floated above your approved rate.
– The Good Faith Estimate doesn’t match the final fees.
– Closing Costs were not estimated based upon local customs.
– Neighborhood CDDs were not figured into closing costs.
– The home does not appraise for the purchase price.
– The appraisal is late.
– The loan isn’t approved on time.
– Unreasonable last minute requests for buyer documentation.
– Underwriters do not approve financing at the last moment.
– Contributions toward closing costs are disallowed at the last moment.
– The company goes out of business during the transaction.
– Key personnel leave the company delaying the approval process.
– The conditional loan commitment was mistaken for a full loan approval.

When a lender examines your credit, they are assuming that your credit score will not drop between initial preapproval and final underwriting. They are also assuming that you will not be making any major purchases such as furniture or cars in between contract and closing.

What steps can you take to avoid these issues? For starters, do not make the mistake of selecting a lender based solely on the interest rate or by passing acquaintance. As part of our value added services, we walk you though qualitative and quantitative comparisons of loan options for your new Tampa Bay home. While we cannot control every company and person involved in the loan approval process, our Home Buying System is designed to pro-actively manage all the variables that could signal trouble.

For the quantitative analysis, our system  uses the a Lender Comparison Matrix to analyze the Good Faith Estimates (GFEs) from leading lenders. The LCM provides a detailed costs comparison that can help uncover hidden costs. This organized and systematic process helps remove the guesswork and select the best loan for your overall goals.

For the qualitative analysis, we focus on the track record and business practices of the loan officers and their lending institutions. Low interest rates are great, but can they deliver on time, without surprises, and will they call you back? Is the processor and underwriter based locally, or are you at the mercy of a far off processing center? How much knowledge and experience does that loan officer have? What are the chances the company will still be in business by closing, or the contacts will still be at the company?

Contact Team Bohannon today at (813) 979-4963 for a information on obtaining the best loan.

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