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Do appraisal orders for purchase money mortgages come with any special parameters or instructions or are they all strictly, "here's the address and contract and we need a fair appraisal"? For instance, does a low down payment loan get a different approach to a large down payment loan? Is there any kind of influence in any manner coming from the lender or have the appraisal management companies removed all that? Thanks in advance.
The appraisal is done dependent on the type of financing being obtained, not based on how much money is down. And FHA/VA appraisal is different from a conventional appraisal. An investment property appraisal is different from a primary residence appraisal as it needs a rental analysis. A rehab appraisal is different... etc...
The appraisal is done dependent on the type of financing being obtained, not based on how much money is down.
I'm familiar with FHA/VA appraisals and their peculiarities and the supposed Chinese wall between the lender and the appraiser. However, recent appraisals have me suspicious. Do you know for a fact that LTV ratio has no bearing on a conventional mortgage appraisal? No secret "wink/wink, be extra tough on this one" stuff?
I'm familiar with FHA/VA appraisals and their peculiarities and the supposed Chinese wall between the lender and the appraiser. However, recent appraisals have me suspicious. Do you know for a fact that LTV ratio has no bearing on a conventional mortgage appraisal? No secret "wink/wink, be extra tough on this one" stuff?
From what I'm told by my lenders, they don't get to speak with the appraisers at all. Now, the appraisers will speak with the agents. Many listing agents will tell the appraiser what happened if they had multiple offers and how many were cash vs financing and how many were above asking price, and by how much. So, the appraisers do get information about "demand" to help him evaluate compared with a sale that happened a couple of months ago vs today. They are allowed to adjust for market conditions, and a house in high demand will be adjusted. Other than that, appraisers don't speak with the lenders.
Do appraisal orders for purchase money mortgages come with any special parameters or instructions or are they all strictly, "here's the address and contract and we need a fair appraisal"?
My question is "Who is ordering the appraisal--and why?" If the Seller is providing the financing, are they concerned that they won't have adequate security for their loan?
I suspect that a Buyer may want an appraisal...but that has little bearing upon what a Seller may provide in financing. A Seller may dictate their own terms for a loan (within legal limits, of course).
Appraisals, in this instance, determine the market value. Nothing more.
Appraisals aren't really market value, though.
The market value should be the accepted offered price, since that's what's someone is willing to pay for the home. The appraisal determines what the lender is willing to provide to the purchaser; so, at least for a lender-ordered appraisal, it's more an extension of their risk management, not a measure of the market value of the home.
Appraisals aren't really market value, though. The market value should be the accepted offered price, since that's what's someone is willing to pay for the home. The appraisal determines what the lender is willing to provide to the purchaser; so, at least for a lender-ordered appraisal, it's more an extension of their risk management, not a measure of the market value of the home.
Not quite.
Appraisals are estimates of market value.
A sale price--an agreed upon price between Buyer and Seller--is NOT necessarily the market value. True, an arms-length transaction is a market price but, again, it is NOT necessarily the market value of the property. People pay more--or less--than a property is truly worth all of the time.
As an extreme example, no one could ever be accused of swindling someone else in a deal if "sales prices" were always considered to be the "market value". By the same token, no one could ever get a "deal" by paying less than market value. Think about it.
Last edited by jackmichigan; 05-30-2014 at 11:16 AM..
A sale price--an agreed upon price between Buyer and Seller--is NOT necessarily the market value. True, an arms-length transaction is a market price but, again, it is NOT necessarily the market value of the property. People pay more--or less--than a property is truly worth all of the time.
As an extreme example, no one could ever be accused of swindling someone else in a deal if the "sale price" was always considered the "market value". By the same token, no one could ever get a "deal" by paying less than market value. Think about it.
Appraisals are someone's opinion of what a home is worth, in comparison to other similar properties nearby. They're entirely subjective and can have a lot of variance; true market value is what two parties agree to on a deal for the home.
I think where we disagree is that I don't define what a property is worth as market value; to me, market value is what someone is willing to pay for something and what they've then agreed to with the seller. Value, in my opinion, is much more subjective whereas worth can be somewhat more objectively defined.
Appraisals aren't really market value, though.
The market value should be the accepted offered price, since that's what's someone is willing to pay for the home. The appraisal determines what the lender is willing to provide to the purchaser; so, at least for a lender-ordered appraisal, it's more an extension of their risk management, not a measure of the market value of the home.
DANG! I've been doing it wrong for the last 31 years.
Market value is defined as "the most probable price". Many years ago, it was defined as "the highest price". So, you have a slight hint about what value is, but in reality your opinion today of "market value" is extremely outdated and misleading. And therefore completely invalid.
Appraisers must abide by the law, and your opinion doesn't come close.
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