A friend of mine named Jennifer, who I had helped with a home mortgage in the past applied to refinance her current mortgage so she could decrease her interest rate into
the mid 4% range and tap the equity in her home to pay off a home equity line
We locked in Jennifer’s interest rate, ordered an appraisal of her home’s value and submitted her mortgage application to the underwriting department for review.
The refinance was moving along well until we received the appraisal report for Jennifer’s home.
Based on the location of Jennifer’s home in the River Bend neighborhood of New Orleans, its square footage and the number of bedrooms and baths, we estimated the value to be $200,000.
The appraiser’s opinion of the property’s value was a whopping $164,000!
It was difficult to believe that an objective appraiser could have such a low opinion of Jennifer’s home.
Of course, Jennifer wanted to know how this low value would affect her refinance.
Due to loan level price adjustments charged by Fannie Mae and Freddie Mac, Jennifer’s costs would increase by about $650.
Once her home’s appraised value was lowered, the loan to value of her mortgage was raised, triggering a price adjustment.
Unfortunately, the Home Valuation Code of Conduct (HVCC), implemented in 2010 to provide a buffer between appraisers and loan officers, often leads to poor appraisals.
The HVCC requires that for profit appraisal management companies maintain lists of approved appraisers, who receive appraisal orders on a rotating basis.
More often than not, appraisers on management companies’ lists do not have experience in the markets they’re engaged to appraise homes.
What do you do in this situation?
When you feel that the appraiser’s opinion of your home’s value is inaccurate, it is imperative that you alert your mortgage professional.
Jennifer and I researched recent sales of homes comparable to hers and found that the sales prices of multiple homes were in excess of $240,000.
I selected comparable sales to replace those used in the initial report and drafted a narrative about why the appraiser’s use of a comparable sale ‘in need of renovation’ was not acceptable.
Upon studying our appeal, the management company decided our arguments warranted that an appraiser review the appraisal.
The appraisal review noted that the appraiser had underestimated the home’s value by more than $30,000!
The management company’s policy required that a new appraisal be ordered at the company’s expense.
Within a week, the new appraisal report valued Jennifer’s home at $205,000!
This was great news!
Her home’s value had been redeemed and Jennifer would not be required to pay $650 in higher fees.
Jennifer was grateful that I spent the time to defend her home’s value which preserved her improvements and eliminated the need for her to pay higher refinance fees.
Please send your contact information to email@example.com or call me at (504) 939-1704 if you, a family member, friend or coworker is planning to buy or sell a home or refinance a
current mortgage and would like to receive the same quality service as my friend Jennifer.