Written By: Daniel Garcia
Last week we discussed several key items to look for when reviewing an appraisal for accuracy before submitting it your underwriter. This week we will leave you with several things to look for when reviewing the comparables for accuracy.
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Below we have included some questions that you can use in reviewing the sales comparison analysis section of the appraisal. In my opinion, this is the simplest and most efficient way of reviewing this section.
1. Are there any comparables that are older than 12 months from the date of the appraisal?
2. Are any of the comparables listings?
3. If property is suburban, are comparables over 1 mile?
4. Are there comparables priced over the predominant value?
5. Are there any comparables that seem substantially smaller or larger than the subject in size, room count or amenities?
6. Are there more recent comparables priced lower than the older comparables?
7. Is the sales data source for any of the comparables non-third party, such as builder or appraiser files?
8. Are there any line adjustments that exceed the 10% tolerance?
9. Are there any net adjustments that exceed the 15% tolerance?
10. Are there any gross adjustments that exceed the 25% tolerance?
11. Is there any indication the property is in fair or poor condition relative to the comparables?
12. Are there any negative comments by the appraiser in the comments section?
13. Are there any “across the board” adjustments?
14. Does the subject seem to be over improved relative to the comparable sales?
15. Did the appraiser omit any of the required information relating to prior sales or transfers?
16. Do the prior sales or transfer data indicate unsubstantiated increases in value or property turnover?
So when you begin your review, just answer the questions with a simple “Yes” or “No”. If you answer “Yes” on any of the items, you know automatically that this is a possible red flag and the chances of your underwriter questioning it, is likely.
It’s important to remember that as processors, we CANNOT directly communicate with the appraiser in regards to the valuation of the property. We can ONLY communicate with them in regards to the correction of objective factual errors on the report. So if an issue is noted, then you must have your third party contact the appraiser with your concerns.
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Hopefully the information provided to you today and last week helps you in reviewing your appraisals for accuracy as this is one of the biggest items that can make or break a deal.
So stay tuned for more tips and suggestions to make your job easier. Make it a great week!
About The Author
Daniel Garcia - As an NAMP® staff writer, Daniel Garcia is a loan processing instructor for Loan Processor University (www.LoanProcessorTraining.org). Daniel also currently works for a non-profit housing and community development corporation where he serves as a senior loan officer and heads up the organization’s homebuyer education program. Daniel provides consultation services to other non-profit housing organizations nationwide, training in the areas of mortgage qualification and processing, state and federal laws, adult education training methods, and credit/foreclosure intervention counseling and program setup. He has gained a variety of experience, from mortgage processing and loan originating to loan servicing and loss mitigation. If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.
