We all know that a great deal of the Real Estate market crash was due, at least large in part to, irresponsible lending (and borrowing). That inflated property values certainly played a role, is no secret and indeed, something had to be done to change things. BUT, wait until you see just how far the pendulum has swung to the opposite but equally insane side of the spectrum. As a follow up to our last blog Appraisal Rebuttals; The Cure for a Schizophrenic Market I will outline how appraisals used to be ordered and how they work (or don’t) now. If you own property, plan on owning property, or at all have a stake in the real estate market, this will be of interest to you.
When Lending Changed Forever
It used to be that your real estate professional, either the lender direct or an agent working closely with a lender, could steer the appraisal process to the provider of their choice. Industry pros knew which appraisers had a good working knowledge of a given area and who would get the job done a timely manner. One could even place a call to their friendly neighborhood appraiser in advance of writing an offer, to “run a price” by them in order to be sure one was not wasting the buyer’s (or borrowers) time and money. This was all legal and considered to be a good practice of fiduciary duty to ones client. And that was the innocent side of the “free market” appraisal process, but brewing not so deep was the more sinister side; fraudulent appraisals. Most agents and appraisers DID NOT commit fraud, but unfortunately those who did changed the face of lending forever and with it, the appraisal process. And here is where the story goes from one kind of nuts, to another.
Imagine that you work in a particular field; perhaps you are a doctor of podiatry or a German auto mechanic. You are familiar with feet- or BMWs; your area of training and practice. Well now imagine that you are suddenly expected to know hearts and brains, Fords and Teslas. The podiatrist and mechanic alike could not possibly know all of the areas of their respective industries. Nor can an appraiser know all areas of SoCal, but that is EXACTLY what being asked of them. This is happening routinely in the loan industry and this is how; your lender puts in the request for appraisal and that order is sent to a central clearing house. Yep, a pool of random appraisers. Almost roulette wheel style your appraiser is picked to determine your property’s value, and the crazy part is that appraiser probably does not live in, nor know your area. Furthermore, they might not routinely, if ever do appraisals there! You might get a call from an appraiser with a 909 area code and not think much of it, but really, how well can an appraiser from San Bernardino know your canyon neighborhood?
Two Important Appraisal Tips
So the last time we talked about the Appraisal Rebuttal and how to use that tool to increase the value of a low appraisal. Now I have two more tips for you to use, and one you should implement before the process even starts. First, ask for an area specialist . No, actually, demand your lender use one. Malibu is one of the most varied and complex areas to value and you have every right to have an appraisal performed by someone who understands that. When the appraiser calls, ask where they will be coming from; if it aint, Malibu then tell ’em “thanks, but no thanks” and call your lender or agent immediately!
Second, be present at the appraisal and be prepared. Your loan agent can’t speak with the appraiser, but you can! When the appraiser shows up, be prepared with as many recent and similar comparable sales to your property as you can find (here it comes, the shameless plug for our site) – use the C2OZone.com to search out comps or contact us here for advice, and then hand copies of them to the appraiser. Be sure to succinctly discuss the two best comparables with the appraiser. Being respectful of the appraisers time, have notes on each of the sheets for them to take for use later when they are doing their report. Be polite, friendly and remember, the appraiser can be a friend or foe. Present yourself as trying to be helpful and be really careful not to come across as pushy or that you are at all telling them how to do their job. By the way, most appraisers hate this new system as much, if not more than we do!
Send us your appraisal stories to post. Remember, we are all a community and each personal success is a little more growth and value to all of us in Malibu and beyond!
Check in periodically and “Stay in the Zone” for your all important appraisal rebuttal tools, sales and other great information. You can also click here to contact us for a referral to a banker who can help you with your refinancing or purchase needs. Kelly@c2ozone.com.