I recently commented on an appraiser's blog and I have to admit, I was hesitant at first. The relationship between appraisers and underwriters has always been a little "strained" to say the least. As Appraisers their job is PROPERTY VALUE. That's what they do, they appraise homes daily. An underwriters job is to assess risk. The value of appraisal may not be what the underwriter comes up with. In short; the appraiser is looking at the neighborhood value and the underwriter is looking at the resale value (...you can almost say the worse case scenario). The underwriter wants to know one thing. If this borrower defaults, what value can the "lender/investor/bank" get for it.

I want to make it very clear that if you go over these 12 points and submit your appraisal there is still a chance your appraised value could be cut or reviewed by a third party appraisal company. One of the required appraisal review steps used by some of the larger lenders are AVM (Automated Value Model). Appraisers that I have talked to are not very fond them.

They take the sales from the last 6-12 months and use some calculation unknown to any appraiser or underwriter and spit out a value (maybe spit is a little harsh, I apologize). I may be exaggerating a little bit, but I think you get my point. I've had more verbal beat downs by appraisers after admitting the reason I ordered a field review on their perfectly good appraisal was because the AVM came back lower than their appraised value! I'm not saying the AVM is a bad thing, I've received some very bad appraisals and the AVM gave me the comps I needed to prove that the value was not right!

At some point we need to be able to make a decision based on the obvious, oh that's right......we had that chance!....that's why the market is where it is now (one sided opinion a laid off underwriter!)

One of the thing I want to be known is FIELD REVIEWS ARE BACK! Fannie Mae Desktop Underwriter even has a RED FLAG in their findings now that says:

"The Desktop Underwriter collateral assessment model indicates that the submitted value estimate for this cash out refinance transaction may be excessive. The lender should carefully review the appraisal for this transaction"

The other two under the Property and Appraisal Information are:

The subject property has been identified as being located in either an area of declining home prices or in an area where it may be difficult to assess home values. The lender should carefully review the appraisal to ensure that the appraiser has appropriately analyzed- the lenders may order a field review or a desk review.
Property value trends and overall market conditions to arrive at the value provided. The lender should request additional support from the appraiser if it determines that the appraisal does not accurately reflect current market conditions, (e.g. the declining property values field is not checked when market conditions suggest otherwise). Please refer to our Property and Appraisal Guidelines in Part XI of the Selling Guide- This is another finding condition that gives the lender the green light for a field review.
Now, no one will admit it...but these very wordy paragraphs actually mean: FIELD REVIEW!

Continued from Part 1 Appraisal Review from an Underwriters Point of View

7. Did you check the bedroom Count?

The building sketch shows a diagram of the rooms in the subject property. Rooms in the basement are not counted as bedrooms. (Please Note: One of your fellow AR appraisers can explain the room count rules in detail...remember this is a list of general underwriting questions)

8. Proximity should show blocks or miles (not same subdivision or same street)

The proximity should show the actual amount of blocks or miles. Same street or same subdivision is not acceptable.

9. Is the subject compared to a similar property?

Do you have a ranch with a parking slab compared to a two story traditional with an attached 2 car garage? Don't laugh I've seen it! Do you have a 2 bedroom compared to a 4 bedroom? If so did the appraiser make adjustments and comments?

10. Does anything obstruct the view of the subject?

Now this is a hard one. The appraiser is taking a picture at the best possible angle they can get, but as an underwriter we have to see the entire view of the house! It's ugly sometimes, but I have to go back to what I said in Part 1 of this blog....the appraisal is the only way the underwriter sees the property. They have to be able to see the property from the photos provided.

11. Can you see the entire subject in the picture or are there sections missing?

This is a red flag underwriters are taught to catch immediately. If the underwriter can only see part of the house, a partial street scene, half of the back of the house, etc.. they will need additional pictures. Now some lenders may not contact the broker for additional pictures and may send out for a field review, but what ever the course of action is make sure you can plainly see the front of the house, the back of the house and the street scene.

12. Are there any broken windows, missing doors etc...

I strongly suggest you talk to your lender regarding broken windows, missing doors and the like. Different lenders have different policies.

My suggestion: Read my blog Comp Search Anyone? If your company uses FannieMae or any other AUS (Automated Underwriting System) that has an AVM embedded in it as I said before the system will flag the property.

Let me say this: AVM's are not accurate. I'm going to say it again: They are not accurate. They are a tool being used by the lenders to assist them with appraisal melbourne property reviews process. In the past Underwriters pulled AVM's on appraisers that were questionable and back then we were looking at the comps not the value!