4 ms·

This doesn't make sense to me. If the appraisal is just a formality then why wouldn't the bank just waive the appraisal entirely? This would save the cost of th

This doesn't make sense to me. If the appraisal is just a formality then why wouldn't the bank just waive the appraisal entirely? This would save the cost of the appraisal and delight the buyer that they don't have to wiggle around funds or negotiate with the seller to meet an appraisal gap.

toomuchtodo 5y ago
Sometimes they can depending on automated appraisals based on comparable sales history (which is public record). Depends on the underwriting guideline of the loan product (which is being packaged into a mortgage backed security). It’s common with conventional loan refinances when there’s already substantial equity in the property, but FHA loans mandate a human performed appraisal to protect the buyer (FHA appraisals are more stringent than conventional appraisals as well) as well as the US government (who is insuring the loan).
- _hyn3 5y ago
  > public record This is certainly not the case in all states. In Texas, the actual sale price is considered the private details of a private transaction (unless, of course, a public entity is party to the transaction). Companies like Zillow and Black Knight make a big part of their business by making educated guesses. For example, here's an article explaining that "Texas REALTORS® opposes all legislative efforts to require the disclosure of sales-price information": https://www.texasrealestate.com/members/government-affairs/legislative-affairs/sales-price-disclosure/ https://www.texasrealestate.com/members/government-affairs/l... Still, there's a substantial amount of data out there (such as the last publicly offered price and how long it took to close, so you can get a pretty good idea for how low the seller had to drop the price to close the deal). In Texas, appraisals (both tax and financing) are based, in part, on the estimates that companies like Zillow, Black Knight, Core Data, etc all provide. Since it is germaine to the article, it's interesting to note that none of these automated appraisal companies record the race or skin color of the current home owners.
dboreham 5y ago
It's not a formality. Failing to appraise for purchase price is possible and happens. The formality aspect is the apprised value number itself. Really it only represents 'greater than or equal to whatever the bank needs'. There's no reason for an appraiser to come up with a higher value but they may find a lower value. This is why appraisals for refinancing can lower- the financed amount is usually less than market value.
jrs235 5y ago
Because the bank wants to sell it to Fannie Mae which has certain document and procedural requirements. Then the risk is off their books.

toomuchtodo 5y ago

Sometimes they can depending on automated appraisals based on comparable sales history (which is public record). Depends on the underwriting guideline of the loan product (which is being packaged into a mortgage backed security). It’s common with conventional loan refinances when there’s already substantial equity in the property, but FHA loans mandate a human performed appraisal to protect the buyer (FHA appraisals are more stringent than conventional appraisals as well) as well as the US government (who is insuring the loan).

_hyn3 5y ago
> public record This is certainly not the case in all states. In Texas, the actual sale price is considered the private details of a private transaction (unless, of course, a public entity is party to the transaction). Companies like Zillow and Black Knight make a big part of their business by making educated guesses. For example, here's an article explaining that "Texas REALTORS® opposes all legislative efforts to require the disclosure of sales-price information": https://www.texasrealestate.com/members/government-affairs/legislative-affairs/sales-price-disclosure/ https://www.texasrealestate.com/members/government-affairs/l... Still, there's a substantial amount of data out there (such as the last publicly offered price and how long it took to close, so you can get a pretty good idea for how low the seller had to drop the price to close the deal). In Texas, appraisals (both tax and financing) are based, in part, on the estimates that companies like Zillow, Black Knight, Core Data, etc all provide. Since it is germaine to the article, it's interesting to note that none of these automated appraisal companies record the race or skin color of the current home owners.

dboreham 5y ago

It's not a formality. Failing to appraise for purchase price is possible and happens. The formality aspect is the apprised value number itself. Really it only represents 'greater than or equal to whatever the bank needs'. There's no reason for an appraiser to come up with a higher value but they may find a lower value. This is why appraisals for refinancing can lower- the financed amount is usually less than market value.

jrs235 5y ago

Because the bank wants to sell it to Fannie Mae which has certain document and procedural requirements. Then the risk is off their books.