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The appraiser does know the price. They receive the contract and every addendum.
The appraisal must meet or exceed the price of the house, and the value must be As-Is. Any deficiencies that result in the value being at or above the price, but "SUBJECT TO" various repairs is an issue that can be mitigated several ways.
You would forward the comps to your Lender. They can then forward to the Appraisal Management Company, who would then forward to the actual appraiser.
Interesting, I figured with all the reforms designed to stop appraisers from “meeting the number” that they would not be given the contract price.
Wellll…
There is "Making It Work, 200.7," and then there is "Making It Work, 201.8."
I don't want an appraiser to calc an opinion at 90% of contract price on a $400,000 deal to "Make It Work."
But, if raw figures come in at $399,540 on that $400,000 contract price, I would hope the appraiser would feel it reasonable to go out on that $460 limb and support the contract price.
There is "Making It Work, 200.7," and then there is "Making It Work, 201.8."
I don't want an appraiser to calc an opinion at 90% of contract price on a $400,000 deal to "Make It Work."
But, if raw figures come in at $399,540 on that $400,000 contract price, I would hope the appraiser would feel it reasonable to go out on that $460 limb and support the contract price.
If the highest number on either the adjusted or unadjusted (top or bottom) numbers is $399,540, the appraiser can go out on limb to hit $400,00. But, the underwriter may cut off the limb. UAD warnings go off if we hit above (or below) either the top or bottom numbers. Hit $399,000 and it will sail through, go to $400k and underwriter may drop it to $390 or $395.
If the highest number on either the adjusted or unadjusted (top or bottom) numbers is $399,540, the appraiser can go out on limb to hit $400,00. But, the underwriter may cut off the limb. UAD warnings go off if we hit above (or below) either the top or bottom numbers. Hit $399,000 and it will sail through, go to $400k and underwriter may drop it to $390 or $395.
Thanks for that input.
I need to spend more time on the appraisers' forum, I guess.
that' some acronyms and info of which I'm unfamiliar - and would appreciate understanding better bigW - but it really burns me up that an underwriter several states and possibly timezones can change what a licensed appraiser says.
that' some acronyms and info of which I'm unfamiliar - and would appreciate understanding better bigW - but it really burns me up that an underwriter several states and possibly timezones can change what a licensed appraiser says.
Most lending appraisals today are done on the Uniform Appraisal Dataset (UAD) forms. These forms have standardized responses for many boxes on the forms, making it easier for a computer to read. It allows the computer to track data from all appraisals completed using the form.
On the sales grid, there is the address of the comparable. Right below that is the sales price of that comp. This number at the top is the unadjusted value, meaning the actual sales price, before making any adjustments for differences between the subject and the comp.
Next is the grid where adjustments are made for difference in size, condition, amenities, etc. Once the +/- have been made you have the number at the bottom, the adjusted sales price.
After you have the adjusted sales price, the appraiser must pick a number that falls between the highest and lowest adjusted prices. And, should be between the highest and lowest of the unadjusted prices.
For example, 3 sales identical to the subject, sales prices $380,000, $385,000 and $389,540. No adjustments, so the appraised value MUST be between those numbers. Not $379,900 and not $389,541.
Now take the same 3 sales and add $10,000 each because they don't have a pool and the subject does. So, now the adjusted values are $390,000, $395,000 and $399,540. This gives you the new range of where the value can be. However, any number in that range is now higher than any of the unadjusted sales prices ($380, $385, and $389).
Now, underwriting comes in. Some lenders will accept an appraised value that is higher or lower than all the unadjusted sales. But, it requires an explanation from the appraiser. Some lenders won't accept it, so they require a comp with an unadjusted sales price higher than the appraised value. If the appraiser already picked the three highest comps, there's nothing left to use.
Next is UAD. Each appraisal is scored based on a variety of factors, such as distance of comps, the amount and number of adjustments that were made and numerous other info gathered by the computer. The example above raised 2 red flags, 1. Value not bracketed by unadjusted prices and 2. Across the board adjustment because there was no comp used that had a pool, like the subject. Back to the appraiser to explain and/or add an additional comp.
Get too many red flags and a number of things can happen. UAD not only scores the appraisal, but it also gives an estimated value and 20 or 30 alternate comps. Back to the appraiser to explain why 3 or 4 other, lower, sales weren't used. The appraiser has to have a good answer why they weren't used, or put them in and drop the value.
Another option is the appraisal is sent out for review. Now, you have another appraiser who will put a value on the property. This can get dicey as the majority of reviews are drive-by only. So, all the upgrades, and overall quality and appearance that makes the home at the top of the market aren't seen. The Reviewer can agree with the original appraisal (OA) or use other comps and reduce the value. The Reviewer may not be very good, not know the area, or, some appraisers think that they have to find fault with the OA or they're not doing their job.
Now, take the same scenario with the pool, but instead of a $10,000 adjustment, a $15,000 adjustment is used. That now makes the adjusted values $395, $400, and $404,540. Now, the $400 sales price falls within that range and I hit the number. But, wait, here comes UAD and I have to explain why I used a $15k pool adjustment when I used $10,000 in previous appraisals in the area. Or, my peers used $10,000 pool adjustment. Hint: I wanted to hit the sales price is not an acceptable answer.
Hitting a number on an appraisal is the easy part, the hard part is getting it accepted in underwriting and by UAD. Just because I put a number on an appraisal, it doesn't mean that it will be accepted by those who have the money. Sometimes, missing the sales price by a little is a whole lot better than letting it get caught up by UAD.
I realize you were probably looking for a short and sweet answer, and I wrote a novel, but appraising these days is complex and multi-faceted and I didn't want to make assumptions about what info you wanted.
I believe it only needs to appraise for at least your loan amount?
No...because a loan that requires "x" percent down pmt, is still needing there to be that much equity in the house. So if you are doing a conventional loan with 20 percent down on a 200k home, if home is for sale for 200k, and loan amount is 160k, then if it only appraises for 180k, you still need to either buy it for 180k, and put 36k down, or 200k, and put 56k dn.
But don't sweat the appraisal. If it doesnt appraise, the listing agent will normally dispute it, and provide comps and justification for the sale price. I've never had one that i couldnt successfully dispute appraised value.
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