Gene's Bit of Blogging

Appraisal changes

Multiple Offers and Appraisals ... Learning to Co-Exist Successfully

Gene Mundt, Mortgage Lender: Posted on Wednesday, May 16, 2012 8:03 AM

Multiple Offers and Appraisals.

Learning to Co-Exist Successfully

We are presently in the time of year when Appraisers, Realtors, and Mortgage Originators ... as well as Home Buyers and Sellers are often "anxious". Both good anxious and bad anxious.

This Spring, many of us find ourselves anxious, but hopeful, that our housing market is reviving itself after a long winter. This is especially true in the Midwest region where I live. Weather makes home sales somewhat more seasonal here.

This year's anxieties are accompanied by the good-to-have-problem of rising house prices. In many areas, we are presently seeing multiple offers placed on strategically-priced properties. RISING home prices shouldn't be a problem, right??? Welllllll ... they can be ...

Take the anxiety out of your mortgage financing! Contact Gene Mundt, Mortgage Lender today

As an example, let's consider what the prior 6 months of property sales were in the Chicagoland region. Again, those months are typically the slower sales season in this region, but most certainly they have been even slower because of the health of the housing market this last year. This particular 6-month period showcased a housing market trying desperately to gain traction and stability.

Now as someone that's a former Appraiser, it's my opinion that there are going to be some real challenges ahead for current-market Appraisers ... and those challenges will trickle-down to Agents, Brokers, and Mortgage Originators. And I most likely need to include Mortgage Underwriters in this mix too.

Where are these challenges coming from?

Many potential Home Buyers are now having to actually compete for homes in this spring's market. They've been caught a little off-guard at the return of a bewildering phenomenon ... multiple-offer bidding wars. If they are a Home Buyer that has been disappointed one or more times because of bidding wars, what happens the next time they begin a new home search?

My local referral partners are telling me that the fear of getting outbid again is motivating these potential Home Buyers to aggressively pursue and price their next offer to purchase. Contracts are being signed AT or ABOVE the asking price of a home.

Let's see ... new Home Buyers are securing a historically low interest rate. The Sellers have sold their home (more quickly and for perhaps higher than they had envisioned). Agents have helped facilitate and secure a successful contract. Mortgage Lenders have been called into action. The wheels are turning ... all cause for celebration. Right?

Again, yes and no. Things couldn't be that simple!! What's the issue??

Remember I mentioned the previous 6 month time-frame above? Well, during that period, sales were slower or stagnant. Most times, housing prices were lower. And now?? A home has been sold. And an appraisal must be ordered and completed to facilitate the mortgage financing. But finding Comparables to support the sales price of the home might prove tricky.

The question becomes ...

Choose to work with a true mortgage professional, Gene Mundt - Mortgage Lender

At what point do Appraisers recognize market changes that seem to be taking place in many housing markets? When do they choose to support and make adjustments reflecting these new trends for home sales prices?

JMO, but not only do Appraisers need to recognize this trend, but so do Underwriters who eventually REVIEW, approve the Appraiser's work, and ultimately "bless" the final Opinion of Value. But therein lies the possible problem ...

Consider this current scenario: As an Agent, you've priced a new listing via your MLS, supported data, and info. You've worked hard. Potential Home Buyers are now actively pursuing your listing. You've generated offers.

One Buyer, a veteran of bidding wars, has made a solid, aggressive offer. They want this home! But the Sales Price on the home is at the high end of the previous 6-months' supported data, or higher. Question ...

Are the Closed sales from that previous 6-month sales period, (November, December, January, February, etc.), going to support that newly-arrived-at-much-anticipated Sales Price you just received? How are Appraisers going to approach it? If not, what can be done to facilitate and safe-guard the sale?

First ... let me qualify what I think is an important bit of information. EVERY HOUSING MARKET IS DIFFERENT. Those differences must be taken into consideration.

That said, Listing Agents experiencing a healing, "correcting" housing market must be well-prepared to go to battle. They must be willing and capable to provide Appraisers current listings, pending sales, and March-April-May Closed Sales information that is relevant and comparable to their Subject Property.

And very importantly ... Appraisers must be willing to accept and utilize valid, "fresh" sales and info from that period, as well. Add mortgage lending Underwriters into that mix.

Securing successfully closed transactions for our clients must be ALL of our goals. If we don't get on the same page during this transitional period, if we don't work hand-in-hand, we will disappoint often.

An unwillingness to broaden the scope of properties considered via Appraising and Underwriting ... and the data accepted and utilized within transactions ... will sink transactions completely. That will hurt our clients and further delay the healing of our housing market and real estate industry.

This is going to call for a bit-of-a-shift in mentality. My guess, but there is probably going to be a bumpy adjustment period ahead regarding appraisals. Challenges to be sure.

This particular situation once again provides strong proof that ... the choice of real estate and mortgage professionals working on any transaction is vitally important. Experience, knowledge, and past successes should and must count greatly for clients when making those choices.

Being anxious to buy. Being anxious to sell. Being anxious to celebrate ... to move ... to decorate ... to landscape. Those are all positive. But being anxious over whether you can seal a deal with a property appraisal certainly isn't ...

* Contact me today to work with a mortgage lender that has 35+ years of education and experience to assist you throughout your entire home buying and mortgage financing transaction.

I can be found at any of the following:

Direct: 815.277.4036

Cell/Text: 708.921.6331

Email: gmundt@thefederalsavingsbank.com

Website: http://www.genemundt.com

Convenience @ Skype: 630.219.1316

Via Mobile: m.genemundt.com

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The Appraisal Process ... Chances to Learn More, Share, and Be Happy When the Stars Align

Gene Mundt, Sr. Vice President - Chicago Bancorp: Posted on Monday, January 23, 2012 1:01 PM

The Appraisal Process ...

Chances to Learn More, Share, and

Be Happy When the Stars All Align

This last week, I attended my local Three Rivers' Association of Realtors (Serving Will and Grundy Counties) Learning Lunch. I was very impressed by the great turnout.

I believe the topic being highlighted at this luncheon greatly influenced members' decision to attend ... as it was a topic that touches upon all of us within our industry frequently. The topic in question??

Appraisals!

Three Rivers had arranged for 3 local, independent Appraisal firms (one of which is on my Chicago Bancorp "approved Appraiser" list) to be on-hand and provide presentations regarding the current market, the challenges presented by the lack of sales, and the "type" of sales occurring and needing to be appraised.

One Appraiser addressed the recent changes to the Appraisal report itself. He talked of the "exactness" that is required in certain categories where adjustments are made. He drove home the point that Realtors can help Appraisers greatly by providing detailed information within their listings.

How does that more detailed information help the Appraiser? It was pointed out that it most certainly assists from an accuracy standpoint ... but it also greatly improves the ability of the Appraiser to provide a more timely turnaround on the completed Appraisal too.

The second Appraiser discussed the need to satisfy mortgage lenders' Underwriters with detailed and accurate reporting ... sometimes with as many as 6, 7, or 8 Comparables being utilized within an Appraisal report. All the Appraisers on-hand for the Learning Luncheon agreed that 4 Closed Sales and 2 Active Listings were the starting point for most of their Appraisals.

When asked if they avoided using "Short Sales" or foreclosures as Comparables, to a person they said, "no one wants to have to use "distress" sales, but name a housing market that is "free" of them? This is especially true when needing to use Comparables that SOLD in the last 6 months, were in the same neighborhood or marketplace, and were similar to the Subject Property."

Many of the Realtors in attendance wanted to know the "magic formula" that Appraisers use to "adjust" for all the above factors? Unfortunately, the reply was, "There is none".

Again, all 3 Appraisers stated that only adjustments for true differences in the properties were being allowed. Condition of the Comparables, if inferior or superior to the Subject Property, could be considered and adjusted for. But there should NOT be expectations that a Comparable that was sold as a Short Sale or Foreclosure should ... or would ... get a "bump up" in value because of the terms of that Sale ... ESPECIALLY if there were no "traditional" market sales to be found.

Of much interest to those in attendance, was the discussion of the new Appraisal Requirements recently enacted. Discussion regarding those ratings of C1 to C6 (Best to Worst), and Quality of Construction Ratings, also from Q1 to Q6 (Highest to Lowest), with specific definitions for these ratings from 1 to 6, raising many questions for clarification.

All of the Appraisers indicated that the time involved in completing an Appraisal had doubled or tripled in the last few years. They noted that the ability to satisfy a Mortgage Lender or Underwriter has become increasingly difficult in recent times. Someone wondered aloud, "Why is that"?

A variety of answers were provided by the Appraising viewpoint, but I (as a Mortgage Lender) believe the real answer is: that Appraisals, which are the support for the Value Estimate arrived at, and the "completeness" and "accuracy" of the Appraisal Report, remain the biggest hurdle for a Loan Originator and Underwriter to get past when a loan file gets SOLD in the secondary market. You simply must have a logical, defensible, and solid Appraisal Report to satisfy Quality Controls of End Lenders ... Fannie Mae, Freddie Mac, and independent loan servicers.

The end result of the Appraisal itself must be that the Buyer pays a fair price for their home. But the Mortgage Lender must retain the right to know the "true market value" of the property being purchased or lent upon. And thirdly, the "Agencies" themselves need to know that the value was arrived at without any undue pressures or influences.

These days that happens when the stars are all aligned ... a truly beautiful thing to behold when it occurs.

The Three Rivers Association of Realtors is to be commended for hosting this important and timely topic for discussion and education at this month's Learning Lunch. The more everyone involved within our industry knows and understands of each other's contributions to the process of buying, selling, and financing homes, the better. It makes the entire transaction flow much more smoothly and easily toward successful conclusion. And ultimately is what we all want ...

* Looking for an experienced Mortgage Lender within the Will and Grundy County Area? Or a Referral Partner that has the expertise, knowledge, and wide program of services to satisfy and successfully close the transactions of your clients? I have over 35 years of mortgage lending, appraising, and financial planning service and expertise that will accomplish that and more.

Contact me today ... I'll love hearing from you and also cherish the opportunity to earn your trust and mortgage business.

I can be contacted through any of the following means:

Direct: 815.277.4036 Cell/Text: 708.921.6331

Email: gene@chicagobancorp.com

Website: www.genemundt.com

Skype: 630.219.1316

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FHA Appraisal Changes Coming January 2nd, 2012

Gene Mundt, Sr. Vice President - Chicago Bancorp: Posted on Tuesday, December 20, 2011 11:34 AM

FHA Appraisal Changes

Coming January 2nd, 2012

Following Fannie and Freddie's lead taken this last Fall, (September 2011), as of January 2, 2012, FHA (Federal Housing Administration) will be asking Appraisers to rate Condition of Property and Comparables from a pre-determined range of existing conditions.

These existing conditions will be rated from 1 to 6, (1 being new construction - to 6, being in need of total rehab and unacceptable condition).

The same will be true for ratings of Quality of Construction, and other identified factors. Utilization of these ratings will bring uniformity and objectivity to the Appraisal process when viewing FHA properties.

Collectively, all the above-mentioned changes now being demanded within Appraisals made by Freddie, Fannie, and FHA, will allow for a national data bank to be formulated, which will offer consistency of reporting practices by all Appraisers, something that (IMO) has long been needed, and overdue ... both from the Appraisal recipient's and professional Appraiser's view.

Below you will find the rating system to be utilized within all these Appraisals ... and the definition that corresponds with each rating:

C1: The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.*

*Note: Newly constructed improvements that feature recycled materials and/or components can be considered new dwellings provided that the dwelling is placed on a 100% new foundation and the recycled materials and the recycled components have been rehabilitated/re-manufactured into like-new condition. Recently constructed improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (i.e., newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).

C2: The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs.

Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

C3: The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.

C4: The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

C5: The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

C6: The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

* Work with a mortgage lender with a complete and thorough understanding and knowledge of the appraisal process. Contact me, Gene Mundt at Chicago Bancorp, today. With over 20 years of experience and expertise as an IL licensed real estate appraiser, I can assist you, or your clients, in navigating today's challenging appraising and mortgage issues and processing.

I look forward to working with you throughout Chicagoland via any of the following methods:

Office Address: 1823 Centre Point Circle, Naperville, IL

(Joliet and Chicago offices also)

Direct #: 815.277.4036 Cell/Text: 708.921.6331

Email: gene@chicagobancorp.com

Fax: 312.624.6738 Skype: 630.219.1316

Website: www.genemundt.com

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