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  • Writer's pictureJesse Ledbetter

Common Misconceptions

I occasionally get questions that are reasonable, but have a misconception at the heart of the query. Here we'll address a few of these.

Agent: "I get why you're asking me for comparables and the house improvements, you're trying to keep me honest."

Me: No. I assume you're a real estate professional who is deeply invested in this transaction, and may have data that I don't, or may have discovered information that I should know. I ask for information before I ever inspect the property in order to get another person's perspective... not to test you.

Homeowner: "So, after we do these FHA/USDA/VA/FNMNA required repairs, how much will the appraisal be then?"

Me: When repairs have to be made to a home as a part of a loan, the original appraisal is written based on the assumption that those repairs have already been made. So, the appraised value reflects the value of the home after all of the repairs that need to be made.

Loan officer: "We can pay appraisers whatever the lowest appraiser quotes."

Me: No. That's a Federal Crime with a price tag of $10,000 for the first offense and $20,000 for each one after that. The Dodd Frank Act says the following:

"Lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised. Evidence for such fees may be established by objective third-party information, such as government agency fee schedules, academic studies, and independent private sector surveys. Fee studies shall exclude assignments ordered by known appraisal management companies."

For example, the VA panel fee for an appraisal is $600 with a turn time of one week.

Lender: We don't like Appraisal Management Companies, but we have to use them!"

Me: NO, we don't. These organizations are unnecessary. The Dodd Frank Act requires that lenders not influence appraisers, threaten to withhold payment or blacklist appraisers for not "hitting the number." However, if a lender is willing to take the effort to maintain appraiser independence, then an AMC is un-needed.

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