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Home Refinance Shafted By Low Appraisals

The biggest problem for homeowners who want to take advantage of low interest rates and refinance their homes is the appraisal. Although many homeowners are not technically underwater in their current mortgages, they are unable to refinance based on their loan to value. A lot of mortgage loan lenders are complaining that the appraisals their clients are getting back are just too low to allow them to refinance their current mortgages. 
Because so many of the home sales used as value comparables in these appraisals are foreclosures and short sales, comparables are still a problem in a refinance right now. 
Although these borrowers aren't able to refinance and take advantage of lower interest rates, most of them are still sitting pretty in their current mortgages with their values holding steady. If you are a mortgage loan lender, what are some other reasons you are discovering for the low values coming back on your client's appraisals? Please share.

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  • September 10 2012 - US
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Answers (4)

I am a Realtor with a few houses - all financed through a local bank.
They offer a rate adjustment modification for 1%.
No application, no appraisal. Sign the form, give them 1% and your rate is adjusted down to their published online rate. Which is very competitive.
For one of my properties they added the 1% fee to the loan balance. A zero out of pocket refinance.....
Banks can do this with their internal loans, but mortgage lenders don't seem to be so willing.
  • September 10 2012
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f you are a mortgage loan lender, what are some other reasons you are discovering for the low values  
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I've yet to see a "low value", the appraisals I see are spot on. 

(oh, did you mean why aren't we seeing inflated, unsupported values?)


  • September 10 2012
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While I understand the public's frustration, let me add two comments.  First, due to the inflated appraisals identified in the aftermath of the mortgage meltdown, the guidelines have tightened with respect to the appraisal process.  But more important than that is the fact that low appraisals are a result of reduced values. Sadly, if a home is competing with several similar foreclosures, until those houses are absorbed, they are the market.  As an example of how tricky it can be, I was working with a homeowner who took issue with the appraisal of her home.  When we "boiled it down", the difference between her opinion and the appraiser's was 2%.  Statistically, those two people agreed.  The only precise way to judge the market value of anything is to offer it for sale and see what someone will pay.  Appraisers follow a specific process and apply their judgment.  And like any profession, there are varying levels of expertise. 
  • September 11 2012
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Appraisers are using foreclosures and short sales as comps because the lenders are being conservative: treating every home as if it too will eventually become a foreclosure or short sale.

This is the most conservative possible math lenders could be applying at a time when housing prices are low, homes are great investments, and the taxpayers just bailed out the financial sector with the expectation that they'd turn around and start lending to spur economic recovery.

Lenders are as irresponsible as they were before the crisis, they're just erring all the way on the other end of the spectrum now. It's hurting the economy and all the homeowners who are paying the full cost of the financial crisis these lenders brought about by being terrible at their jobs.
  • September 14 2012
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