Once more the appraisal industry is being put under question as to why they are important for the home buying and selling process. Currently, the FDIC, Federal Reserve, and the Treasury Department issued a joint proposal that would eliminate the need for an appraisal on mortgages for less than $400,000.
This proposal is being sold to consumers as a way to save money and time. This sounds appealing, however, the price of an appraisal is minimal compared to the what the loan officers and banks are making and as for the appraisal process there are various factors that could be changed that could shorten the time involved significantly, such as use of the Appraisal Management companies (AMC’s) being eliminated.
Why an Appraisal is Important
Unbiased Opinion- The appraiser is an unbiased opinion of value in the mortgage process, all other parties involved are affected by the outcome of the value. Agents and loan officer’s salary is based on the closing of a home. The appraiser payment is a flat fee that is not affected by any aspect of the sale. This makes the appraiser unbiased and able to determine the market value without having to worry about receiving payment if the deal does not close.
Consumer Advocacy- Currently, the appraisal process is in place not to help the buyer but rather to protect the lender to minimize financial risk. The lender will have the option to use an Automated valuation model (AVM) which will not provide an accurate market value but will be able to help them determine their financial risk, so they do not lose money.
The AVM will help protect the lender but what about the buyer? Without the appraisal an accurate market value will not be determined and therefore it is unknown if the buyer is paying to much for the property. The appraisal process is a way for everyone involved to be protected by determining the unbiased market value.
Realtor Accountability- The real estate agent can provide protection to the agent and brokers. The Property Inspection Waiver (PIW) has become a new tool that mortgage lenders are advocating for. The PIW allows the buyer to waive the full appraisal and instead use the AVM. It should also be mentioned that by signing the PIW the buyer signs away their right to bring any legal action against the lender and Fannie Mae. Again, we come back full circle to the fact that the AVM will not provide a true market value. This is the only accurate way to determine if the contract value is equal to the market value. Without the appraisal process you run the risk of over paying for the property.
We want the agents to realize that if the buyer determines they overpaid for a property without having an appraisal done the liability transfers to the agent and the insurers and lawyers will have a new person to blame.
Consumer Trust- Appraisers have provided a reliable and accurate way to determine the market value of a home and which has increased the confidence of consumers during the home buying experience.
Although the appraisal is currently used to protect banks it also protects the consumer by making sure they are not over paying for the property. If the PIW is utilized and the home is valued using AVM which will not be an accurate measure of the value. What will happen if they buyer needs to sell quickly after the purchase? What if the home is worth less than what they purchased it for? In these scenarios the buyer has the potential to lose money due to taking a loss on the resale of the home.
By eliminating the appraiser, you are removing a protection for the buyer and we may end up in a similar situation as we were in 10 years ago, don’t forget how we got there in the first place.
Please contact our office with any questions you may have or to schedule your appraisal appointment at 760-741-7699, brandlinappraisal@yahoo.com or use our contact page on our website.
Brandlin Appraisals Inc. specialize in helping people who need appraisals for estate purposes, divorce, date of death, bankruptcy, FSBO’s and more throughout San Diego county. For more information please contact us at (760)741-7699, or visit our website at Brandlinappraisals.com, or email us at admin@brandlinappraisals.com
Mike Brandlin
San Diego, CA // Real Estate Appraiser
www.brandlinappraisals.com
(760) 741-7699
San Diego Real Estate Appraisal Services For:
* Divorce Appraisals / Marriage Dissolution
* Bankruptcy Appraisals
* Bail Bonds Appraisals
* Estate / Date of Death / Retrospective Appraisals
* Financial Planning & Trusts
* PMI Removal Appraisals
* Pre-Foreclosure & Short Sales
* Tax Assessment Appeals
* Pre-Listing, Pre-Purchase, FSBO’s
* Probate Appraisals
