Appraisers Not Responsible for Low Appraisals

The appraiser organizations recommended four specific areas of guidance to mortgage lenders and financial institutions

RISMEDIA, October 20, 2009—Responding to recent testimony before the House Small Business Committee, the Appraisal Institute, one of the nation’s largest organizations of real estate appraisers, reminded the Committee’s leaders that appraisers are not responsible for so-called low appraisals.

The Appraisal Institute joined the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers in a letter reacting to recent testimony by National Association of Home Builders President Joe Robson. The four appraiser organizations, representing more than 35,000 members, urged Committee Chair Nydia Velazquez, D-N.Y., and Ranking Member Sam Graves, R-Mo., not to “shoot the messenger.”

“It is important for the Committee to understand that appraisers do not create value in the housing market; they report on what is occurring in the market,” the letter stated. “The fact that some home sales have failed to close is largely the result of the housing market we are in today. Accordingly, we urge caution in connection with those who would prefer to ‘shoot the messenger’ rather than face the realities of today’s distressed market.”

Robson’s testimony to the Committee alleged the improper use of foreclosed properties and properties from distressed sales as comparables in determining values of single family homes where no adjustment had been made to reflect the relative condition of the properties. His testimony also suggested that a high number of new home sales have fallen through because the appraisal reflects a value below the contract sales price for the property.

“Professional appraisers fully understand and agree that if foreclosure and/or distressed property sales are used as comparables, they must be treated carefully,” the letter stated. “Appropriate adjustments must be made by a qualified appraiser to reflect the physical condition of such properties as compared to the subject property. This is common practice. It is the professional real estate appraiser’s responsibility to be aware of these conditions and analyze the market, considering all relevant data and applying proven techniques and methods.”

The letter also stated that, “Given the complexity of this issue in today’s market, the competency and qualifications of the real estate appraiser is of critical importance in our system of real estate financing. Lenders or their agents–including appraisal management companies–would be well served by retaining the services of highly qualified appraisers where such conditions exist.”

The appraiser organizations recommended four specific areas of guidance to mortgage lenders and financial institutions:

-Seek out the services of highly qualified appraisers for complex appraisal assignments.
-Recognize that sales concessions are as important as the condition of a property to the credibility and reliability of the appraisal.
-Provide sufficient time for the real estate appraiser to conduct the proper analysis of the subject property and comparables used.
-Promote communication between appraisers, builders and real estate agents.

Read more: http://rismedia.com/2009-10-19/appraisers-not-responsible-for-low-appraisals/#ixzz0UPslnTQi

Posted by Mark Gipple on 10/19/2009 in Home Buying Tips, — Add a Comment

Finding Your Dream Foreclosure: What to Know When You’re Buying an REO Property

Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be hard.

By Amy Hoak Print Article
RISMEDIA, October 5, 2009—(MarketWatch/MCT)—Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge.

“The vast majority of the banks don’t want us to advertise them as ‘bank-owned’ because it comes with a negative connotation,” said Ryan Melvin, co-owner of More Realty Group in Las Vegas.

That means no sign on the front lawn indicating the home is anything other than a traditional sale. A buyer probably won’t find a property advertised as a foreclosure on marketing materials, said Melvin, who specializes in real-estate owned properties, or REOs, those that have been reclaimed by a bank, typically after an unsuccessful foreclosure auction.

Plus, in some markets, including Las Vegas, foreclosure inventory is actually down compared with last year as government programs attempt to keep owners in their homes and banks aren’t putting as many homes on the market, Melvin said. That’s making it harder for buyers to snag a foreclosure, and those paying with cash often win a bid over someone who needs financing.

If you’re considering the purchase of a home that is now owned by a bank, it’s also important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.

Those looking for the best deal probably shouldn’t rule out non-foreclosure properties, either, said Mark Goldman, a mortgage broker with Cobalt Financial Corp., and a real estate lecturer at San Diego State University. Sometimes, people set their sights on bank-owned properties “like the word ‘foreclosure’ equals ‘good deal,’” he said.

And that’s not always true.

One option for finding foreclosure listings: Go straight to the bank.

Lender Web sites, such as those operated by Bank of America, Chase and Citibank, will list the properties the financial institution has reclaimed when borrowers defaulted. To find a list, simply do a Web search for REOs and the name of the lender. Contact information for the property’s listing agents is usually provided for each entry.

For a fee, other sites will hunt down properties for you. RealtyTrac.com, which helps people find foreclosure and pre-foreclosure properties, charges $49.95 a month, after a free seven-day trial. The company also recently launched BankHomesDirect.com, which charges $19.95 per month and lets people search just for REOs.

Foreclosures.com charges $49.95 per month, after a free seven-day trial.

Otherwise, you might want to enlist the help of a realty agent. Someone who works regularly with REOs might be able to track down the properties more easily than a traditional agent. Melvin is a member of the National REO Brokers Association, nrba.com, which has a searchable database of brokers on its site. There’s also the REO Network, reonetwork.com, which connects buyers with those who specialize in selling REOs.

Lenders aren’t held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn’t occupied the home to notice leaks or other problems. For that reason, an inspection is crucial.

“If there are lessons out of the last couple of years, it’s certainly buyer beware,” said Dan Steward, president of the home inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.

“We have all heard the stories of people ripping the copper pipe and wiring out … people have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall,” Steward said. Some have ripped out toilets and kicked in walls or left water faucets running before they left the house, often out of anger.

You don’t need to be told the toilet is gone, but an inspector can tell if there is damage 20 feet down the water line because of the way that toilet was ripped out, he said.

Other issues could pop up due to the property being vacant. Large banks will often hire a field service to cut the grass, shovel the snow and winterize a home, yet when homes aren’t occupied it’s harder to catch small problems before they become big ones.

“When we live at home or drive the car, if something is off we notice it. We notice it and we deal with it,” Steward said. When a place is unoccupied, pests could become an issue. If you were living in a home, a nest of raccoons probably wouldn’t be able to find a home in your crawlspace—not for long, anyway.

A neighborhood environmental report might also be worthwhile, he said, which could reveal if the property was the site of a drug lab, for example. When a meth lab is operating in a home, air quality issues can arise; when a home was used for growing marijuana, there is a tendency for mold problems from the high humidity, Steward said.

The time it takes to complete the sale can vary from lender to lender. In some cases, the process goes smoothly, Goldman said. Other lenders are disorganized.

“It really depends on who you’re doing business with,” Goldman said.

But for your best chance at having an offer accepted and for a quick closing process, have everything in order before making the offer, said Duane Andrews, CEO of Clear Capital, a company that provides valuation products for the mortgage and lending industries. That includes having the financing firmed up and writing a clean offer — for example, asking for new oven racks as part of the deal could peg you as a demanding buyer who will be annoying to deal with, he said.

“What this tells the seller is this guy is going to be a pain and they don’t have time for this pain,” Andrews said.

In fact, most bank-owned properties are sold “as is,” so if there is something you want fixed, it’s best to just factor that into the price you’re offering, Melvin said.

But don’t expect to bargain the listing price way down, Melvin added.

Banks typically price their properties at a 20 percent to 30 percent discount anyway, he said. If the property has been on the market for a week or two, don’t expect the bank to drop the price; if the listing is older, you might have more power, he said.

Also, don’t be surprised if the bank that is selling the property asks you to get an approval from its mortgage operation; you often don’t have to take the loan from their company, but they may want to get a closer look at your finances to make sure you’re a solid buyer, Melvin said.

Above all, make sure to follow directions when submitting the offer, he said. That likely includes having an approval letter from the bank and the correct amount of earnest money.

“Most listing agents will have instructions how we want buyers agents to submit the offer,” he said. Delays can occur when instructions aren’t followed exactly.

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

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Read more: http://rismedia.com/2009-10-04/finding-your-dream-foreclosure-what-to-know-when-youre-buying-an-reo-property/#more-40681#ixzz0T5EhfdTZ

Posted by Mark Gipple on 10/05/2009 in Home Buying Tips, — Add a Comment