How Much Can Lenders Get Away With Appraisal Cutting

It is common practice that an appraisal is requested during the process of purchasing or refinancing a house. Undertaken by a trained and licensed agent, the appraisal offers the agents opinion on the price of the property.

If the homeowner is looking to sell their home, they typically come to an agreed figure with the potential buyer beforehand. An appraisal is then undertaken and sent to the lender that is considering granting the buyer the loan. If the loan is granted, then it is often done so with this appraisal figure in mind.

When an individual looks to refinance their house, they are generally looking to raise funds to pay off existing debts, just to have some additional cash to spend, or a combination of both. Again, an appraisal is needed in this situation and a licensed agent is required to provide their opinion on the value of the home.

Appraisal cutting is the practice of the underwriter reducing the appraisal value given by the agent, which means that a loan of lesser amount will be granted.

This can lead to many issues for all parties concerned since the transaction amount is now less than what it was expected to be. A homeowner who was looking to sell their house currently finds them self in a position where they have to accept the lower amount or reject the sale. Often, a house owner would be seeking to buy another property after the sale meaning that accepting a lower value for their existing house means that they can no longer afford to buy the new house. This typically leads to the deal being cancelled, making it extremely inconvenient and costly for the seller, buyer and real estate agent.

In the case of re-financing their home, the house owner may find themselves in the position where they can\’t raise as much funds that they had originally thought. This could then mean that after re-financing their house, they can\’t afford to repay that loan after all, leading them to cancelling the deal or leaving them out of pocket.

The underwriter is not qualified to appraise the value of a property. They would have had no appropriate coaching on the matter, aren\’t licensed to do so and it\’s also highly unlikely that they have even seen the property in question. If the underwriter doesn\’t agree with the appraisal, then it is up to them to ask for a second appraisal from a licensed agent rather than just change the valuation themselves.

The great news for homeowners, buyers and real estate agents alike is that as from 1st September 2010, underwriters are now forbidden from altering the appraisal amount themselves. In an economic environment where several homeowners are in a situation where they require financial help through no fault of their own, this move by Fannie Mae is something that can give a little more economic security and peace of mind at a time when it\’s sorely needed.

We believe in creating products and services that can help serve our customers first. We\’ve been blessed to have success in the Real Estate investment and we want to use the experience that got us there to help you become successful too. To know more about us visit http://www.shortsaleology.com

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