RESIDENTIAL APPRAISAL REPORT

The decision on whether or not to proceed with a loan request from an applicant is one of risk analysis. The lender, in concert with their investors wishes, must weigh the following factors; ability to repay the loan, willingness to repay the loan (as demonstrated by past credit timeliness) and the securing of a tangible asset as collateral for the loan, should the applicant decide not to repay. It is this last factor that is vitally important in making sure that even if everything goes wrong from a payment perspective, that the lender will be in a position to recuperate at least a good portion of their initial investment in the transaction.

Remember, if the borrower defaults on their loan, and forces the lender to foreclose on the loan, the lender will own the property in question until they can somehow dispose of it. Keeping this in mind, it becomes clear that the lender should want to be absolutely certain that they know the true value of the potential investment. That is why we rely upon the knowledge of the local appraiser.

The lender will provide the appraiser with the basic information about the property (i.e. address, contact person and legal description when available) and ask them to return as accurate and fair an estimate of market value as possible. The appraiser will then research the market, find homes of a similar nature within a reasonable distance, and use all available environmental data to arrive at a value that they feel accurately depicts what the home would sell for on the market today.

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CERTIFICATE OF OCCUPANCY AND/OR FINAL INSPECTION

Appraisals for proposed construction require a receipt of a final inspection performed by the appraiser and/or a certificate of occupancy prior to the closing of the loan.

An appraisal for existing construction should be based on the "as is" condition of the property as stated earlier. If minor conditions exist that do not affect the livability of the property, such as minor paint peeling or deferred maintenance, it is acceptable as long as the appraisers estimated value, reflect these conditions.

The property must be appraised subject to completion of specific alterations or repairs when there are incomplete items or conditions that do affect the livability of the property such as partially completed additions, renovations or physical deficiencies that could affect the structural integrity of the improvements. In these cases, the lenders will more than likely request that a final inspection is performed by the appraiser prior to closing.

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HANDLING APPRAISAL PROBLEMS

One of the biggest problems that arise in the mortgage process is when the applicant is blindsided by an appraisal problem. The best way to solve these problems is to inform the applicant what can go wrong with the process before the process begins. If they are prepared, they might still be disappointed, but their shock and anger will be greatly reduced. Listed below are sample introductory statements and questions that can be addressed upon initial customer contact and procedures for handling customer disappointment once problems have actually occurred. Use these as guidelines to help improve your relationship with the client. Remember, it is everyones job to help the customer!