Conventional Loans and Appraisals – What you need to know!
Over the past couple of months, due to changes in lending regulations, getting a conventional appraisal in a timely manner has gotten more difficult. Here’s the way it used to be:
Buyer: Mr. Loan Officer, we have an accepted offer on a house and the home inspection came back fine! Let’s get this thing rolling!
Loan Officer: Great News! I’ll call the appraiser now and get him set up to go out there ASAP.
Appraiser gets out there within a day or two, completes the appraisal, and has everything back to the lender within 24 hours or so after that. Seems pretty smooth, right? Well, it is, but like everything else in this world, a small group of people have to screw things up for everybody else. Some lenders abused this process by having “their appraiser” get values on homes, and others had “too much influence” on the appraisers. This all resulted in appraisers in large markets to feel pressured to extend the values of homes past what they thought they were to keep up with rapidly appreciating markets. Now, places like Florida, California, and Michigan are feeling the wrath of their mistakes.
So, how is the process any different now? In a word, VERY. Now, this is a little more like how things go:
Buyer: Mr. Loan Officer, we have an accepted offer on a house and the home inspection came back fine! Let’s get this thing rolling!
Loan Officer: Great News! I’ll call the 3rd party review company and let them know we are ready for the appraisal. At that point, the 3rd party will assign your appraisal on a random rotation of appraisers. Hopefully, the first one they assign it to will take it, because the appraiser has about 2 days to decide whether they want to do your appraisal or not. Oh, and I hate to tell you this, but because of these new regulations, the average cost of an appraisal has gone up about $75-$100. Anyway, they will get that process started. When the appraiser is finished, he will send it back to the 3rd party to do a review on the appraisal, you know, to make sure things look good. When they finish the review, they’ll finally send it to us.
Buyer: Wow, that sound like much more hassle.
LO: Yes, it really is. Let’s just hope we don’t have any problems with the appraiser or getting them any info they need.
Buyer: Why?
LO: Well, we’re not allowed to directly talk to the appraiser any more. We could be fined up to $25,000. All communication to and from the appraiser has to be sent through the third party.
Buyer: Damn.
Yeah, it’s really that bad. Now look, I understand the concept behind the new regulations. I think that it’s actually a good CONCEPT. The EXECUTION, on the other hand, is terrible. There are much better and more efficient ways of doing this, but for now, this is all we have. Thank goodness for FHA and VA loans!
