LendEd: A Mortgage Lender Education Seminar

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WCCI Real Estate Appraisal Management Services now include LendEd, a lender education seminar on the processes and regulations surrounding real estate appraisals, as well as the challenges appraising in today's market.

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LendEd: A Mortgage Lender Education Seminar

  1. 1.
  2. 2. Standard 1004<br />
  3. 3. Subject & Contract<br />Standard 1004<br />
  4. 4. Neighborhood<br />Standard 1004<br />
  5. 5. Site<br />Standard 1004<br />
  6. 6. Improvements<br />Standard 1004<br />
  7. 7. Standard 1004<br />Sales Comparison<br />
  8. 8. Standard 1004<br />Sales Comparison<br />
  9. 9. Reconciliation<br />Standard 1004<br />
  10. 10. Sales Comparison Summary<br />Standard 1004<br />1. How are the rates determined when making adjustments for SF & why do they differ?<br />Answer: The SF adjustments are based on market reaction, and vary report to report often due to home quality differences. Adjustments can also be made under quality of construction. This is considered part of the “art” of the appraisal process. The end value is an “opinion of value” not a mathematical result.<br />2. How do adjustments on the comparable sections help get the appraiser to a value, from a mathematical aspect?<br />Answer: Appraisers adjust for differences in comparison to the subject. Math does occur to arrive at the indicated value at the bottom. The adjustments are supposed to reflect the market reaction to features. <br />
  11. 11. Sales Comparison Summary<br />Standard 1004<br />3. How does an appraiser determine the “market reaction?”<br />Answer: Market reaction is determined traditionally by a paired sales analysis. <br />
  12. 12. Comments<br />Standard 1004<br />
  13. 13. Cost & Income Approach<br />Standard 1004<br />
  14. 14. PUD Information<br />Standard 1004<br />
  15. 15. Condominium 1073<br />
  16. 16. Difference w/ Condo Reports<br />Condo 1073<br />Please Note: Cost Approach is typically NOT included in condos because they include partial interests in often substantial common structures/areas.<br />
  17. 17. Market Conditions Addendum<br />
  18. 18. Market Research & Analysis<br />MC Form<br />
  19. 19. Condo / Coop Projects<br />MC Form<br />
  20. 20. The Appraisal ProcessFrequently Asked Questions<br />
  21. 21. The Process<br />FAQ<br />1. Does the appraiser have a good idea of what the property will appraise for prior to physically seeing it?<br />Answer: No, that’s what the appraisal process is for. An appraiser can research the property, but may not know what it entails until the physical inspection. Properties can change so it’s poor practice to go off tax assessor’s descriptions & other online databases.<br />
  22. 22. The Process<br />FAQ<br />2. When values are low, homeowners complain that the appraiser wasn’t there long enough to know the value, can you explain?<br />Answer: Most of our appraisers have been around long enough to recognize styles & updates fairly quickly upon viewing the home. Different appraisers have different methods of appraising, they may inspect the home for a short amount of time and come in with higher values as well, but you just won’t hear complaints about those.<br />
  23. 23. The Process<br />FAQ<br />3. How are appraisers assigned?<br />Answer:<br />1. WCCI reviews the report type.<br />2. We look at the current load of our trusted panel of appraisers to see who is available to meet the deadline as well as who is most qualified to complete that specific type of report.<br />3. WCCI will send the report out to the three most qualified appraisers who are also closest to the subject to ensure timely acceptance. In cases where we are sure deadlines can be met, the assignment will be sent directly to one staff appraiser.<br />
  24. 24. The Process<br />FAQ<br />4. How often do appraisal disputes result in re-visiting the value? If there is a re-evaluation what is the average adjustment?<br />Answer: This depends on the significance of the error made in the report. Sometimes disputes occur as a result of a homeowner’s lack of knowledge about the appraisal process. However, if actual errors are made or new information is available, an appraiser is more likely to re-visit the value on the report. For example, if there was a potentially comparable property that did not come up on an MLS or other search, but is known by a homeowner, an appraiser would be likely to consider the new sale, which could result in a change in value.<br />
  25. 25. The Process<br />FAQ<br />5. What’s the difference between a 1007 form and a 216 form?<br />Answer: A 1007 is a Rent Schedule, it determines market rent, what the rent COULD be.<br />A 216 is an operating income statement. The 1007 helps feed info needed for the 216, however the 216 is based off the actual income (math) that a property brings in. <br />
  26. 26. Upgrade Costs &Return on Investment<br />
  27. 27. Upgrade Costs & ROI<br />FAQ<br />1. Which upgrades can add value to a property? <br />Answer: The ones the market responds to. The homeowner needs to evaluate the neighborhood to make sure that any potential improvements are desired by buyers in the market. Kitchen remodels (granite, updated appliances, etc.) seem to bring the most bang for the buck. Bathrooms are usually a good place to upgrade as well.<br />
  28. 28. Upgrade Costs & ROI<br />FAQ<br />2. Why don’t all upgrades translate equally into equity? For example if I spend $50,000 on granite why isn’t my home worth $50,000 more? <br />Answer: Improvements that are to a special or personal liking (that are not necessarily appealing to the mass market) are considered over-improvements or a “super adequacy” and won’t bring a dollar for dollar return on a sale.<br />Example: Swarovski Crystal Sinks that are $25,000 are not going to make the home worth $25,000 more. <br />
  29. 29. Appraisal Sources<br />
  30. 30. Appraisal Sources<br />FAQ<br />1. LA County Assessor: Verifying property details, taxes, etc.<br />http://assessor.lacounty.gov/extranet/default.aspx<br />
  31. 31. Appraisal Sources<br />FAQ<br />2. Zillow: Finding potential comps (MUST VERIFY ON COUNTY SITE!)<br />http://www.zillow.com<br />Warning: Zillow is a STARTING POINT, all information gathered here needs to be verified with alternate resources. Most appraisers don’t use Zillow, but it can be an alternate resource for lenders.<br />
  32. 32. Appraisal Sources<br />FAQ<br />3. MLS (Multiple Listing Service): Property/Comparable Research<br />http://www.socalmls.com<br />
  33. 33. Appraisal Sources<br />FAQ<br />4. MetroScan: Data Verification (comps, history, trends, etc.) <br />http://www.facorelogic.com/literature/metroscan.jsp<br />RESTRICTED TO APPRAISERS<br />
  34. 34. Open Q & A<br />

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