Warning!

The previous posted blog told of trouble appraising high end properties. However there is one more piece of information that everyone should know.. no matter the value of their property.

Firstly I have to explain one thing. Due to all the troubles in the real estate market we have something called AMC's (Appraisal management companies). Actually they have been around for a while. The most famous (infamous) are Landsafe (associated with Countrywide.. soon to be Bank of America) and Rels (associated with Wells Fargo). These companies are set up to separate the appraiser from the loan officer so that there is no undue influence (actually many do a lot more than this... but I am not going there for the purposes of this article).

These companies manage the appraisal order and assign it to one of their appraisers. The bank charges their client (you) an upfront fee for the appraisal. Nowadays that fee is typically $400 and up. Only a portion of that fee actually goes to the appraiser and the rest they keep. (Yes! banks are making gobs of money lke this).

Now here comes the WARNING to anyone who wishes to refinance and take advantage of the current low interest rates. I have from two very reliable sources that about 70% of all loans die at this point, because the value of the property will not allow the loan to proceed. Meaning that a homeowner, mostly likely strapped for cash as it is, has just shelled out $400+ for absolutely zip.

Be very careful when applying for a loan. You cannot ask an appraiser for his informal opinion, which is otherwise known as a "comp check"... especially me. So what do you do? Frankly I really do not know. One possibility is to ask a real estate agent and take of 10% of whatever they say. Another is to ask your loan officer if they have any automated valuation models.... most do. However they are notoriously unreliable. May I suggest both ideas plus any homework you can do yourself. Check out you local assessors website as some have recent sales figures (as do newspapers). Compare that sale which should not be larger/smaller than 10% of your home within the same neighborhood, similar lot size etc. (in an ideal world). Remember that most lenders require two sales within three months, one within six months plus two contingent/pending sales.

Just do your homework and do not come out with an off the cuff figure... it could burn a hole in your pocket and a bigger one in your heart.