A new law homebuyers and agents should be aware of: It could prolong your closing

new birmingham alabama appraisal ruleOn January 18th a new law went into effect that could potentially prolong loan closing dates because it will require lenders to provide a copy of the appraisal or other valuation tool used to make a loan decision to their customer as soon as it is completed or 3 days prior to the closing, whichever is earlier. At the current time lenders are obligated to provide the borrower with a copy of the appraisal, but only when they ask for it. Currently, any other valuation tool used to make the loan decision does not have to be provided.

This law is set up to provide transparency to the loan and appraisal process. As an appraiser I can say that we are under the gun as it is because lenders want the appraisal back as soon as possible. With this new law we may be given less time for the actual appraisal to be completed, which I am not for, or the 3 day time frame will need to be factored into the loan closing time frame thereby extending the process. After the report is completed the borrower will need time to look over the report and provide any feedback they might find necessary, especially in a situation where the home may not have appraised for the contract amount.

This makes it extremely important that everything be done to facilitate the process as smoothly as possible. A couple of things that real agent agents can do include pricing their listings correctly and verifying the qualifications of the appraiser working on the mortgage appraisal. Most agents I know are diligent when listing a home and they spend the time necessary to find recent sales when preparing their market analysis. I educate agents that when choosing their sales it is a good idea to attempt to follow the same process that appraisers use, following similar lender imposed guidelines and appraisal standards, so that the likelihood of a large value discrepancy is low. Since you have done the homework necessary to price the home correctly you should provide this information to the appraiser so they understand how you arrived at the price you did. In addition, any other information considered in the pricing such as repairs and renovations or value influencing items should be provided. They may or may not use this information in the appraisal but they should have it. Some of my blog posts that may help you understand this process are listed below. I realize that agents cannot do everything the appraiser does but I hope that this information will give you some insight and tips to help you in the pricing process.

  1. Can a Realtor give comps to an appraiser?
  2. What does the appraiser do when there are no comps?
  3. What is bracketing and why should Realtors do it?
  4. Clearing the air- A look at exactly what real estate agents and appraisers can talk about.

In addition to pricing the home correctly it is a good idea to make sure that the appraiser working on the assignment is competent to perform the job. I realize that some agents do not have contact with the appraiser, however if you ever do communicate with them it is a good idea to ask them if they are familiar with and have experience in the area. If the AMC (Appraisal Management Company) that the lender uses employs appraisers that are not experienced in the area they are working in this can cause problems with the appraisal and create instances that can prevent the loan from closing or result in it taking longer. Some information I have provided on my blog related to this issue is shown below.

  1. 5 questions a Realtor should ask the appraiser before setting up the appraisal inspection.
  2. Know Thy Market- The Importance of Geographic Competence in Appraising Real Estate.

The issues I have outlined here have always been critical in facilitating the appraisal process, however with the implementation of this new law either the time the appraiser has to do their job or the time frame of the loan closing will be affected. By helping the appraisal process go smoother there will be less delays in the loan closing.

Do you have any questions about this law or what can be done to help the loan closing process? If so leave me a comment below and I’ll do my best to answer it.

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Comments

  1. Rob Raskin says:

    Is the buyer obligated to provide the lender’s appraisal to the seller? As the buyer, we were not in agreement with the lender’s appraisal because the comps were not relevant properties, there were several subjective adjustments made by the appraiser, the homes were 2 story, on small properties with no Casitas whereas our property was a one-story on a larger property with a large Casita.

    The lender told us that we were free to order a second appraisal for negotiation purposes, so we called another appraiser with 30 years of experience and had him do a second appraisal which came in considerably lower. We instructed our realtor to present our offer with the second appraisal, which clearly states that we ordered it, and it was not the lender’s appraisal, on the front page, and that if the owner broker who represented the seller asked about the lender’s appraisal, to state that we felt that the lender’s appraisal was irrelevant for several reasons so we ordered a second appraisal.

    The realtor refused to present our offer, stonewalled the negotiations, and insisted on us providing the seller with the lender’s appraisal. As time was running out on our earnest money deposit, and as we wanted to purchase this home, we relented and provided the lender’s appraisal, which resulted in us paying a much higher price than we would have paid had we used the second appraisal only.

    Please comment on whether you feel that the buyer’s realtor erred by failing to present our offer using the second appraisal only, and instead coerced us to provide the lender’s appraisal in order to be able to continue negotiations with the seller.

    • It is hard for me to comment on what is typical for real estate agents to do. From an appraisers perspective, I will say that the lender’s appraisal is the property of the lender because they are the appraiser’s client, however, they are required to provide you with a copy of the appraisal for your records. In the case of the second appraisal, you are the appraiser’s client and you can do whatever you want to do with the report.

  2. It’s interesting that the appraisal is one of the very last items under the QM umbrella. That will certainly rush things on the appraisers end, but it can also mean the seller / buyer need to be quick too about making repairs or re-negotiating, etc… Good post, Tom.

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