More Scrutiny on U.S. Home Purchase Appraisals: Relocation Impact
Posted by: Meighan Dutt, Account Executive, Cartus Home Loans
Home buyers and sellers are frequently surprised that, even in a relatively good current housing market, a mortgage appraisal may not necessarily sail through to closing without a hitch. Appraisals can be problematic, and the reasons for that are complex.
What’s Going on With Home Mortgage Appraisals?
Due to past problems that led to the housing crisis, each lender has specific requirements that are imposed on an appraisal order. Here are a few areas you should know about:
- Markets in transition: Values alone may be difficult for an appraiser to determine and can come in low due to comparables, or comps, not catching up quickly enough in hot markets. Low appraisals will be common in any market in transition—either a market whose values are increasing or decreasing.
- Acceptance of comps: Appraisals utilize comps to support the subject property value, and these comps can come under scrutiny and cause an appraisal to be unacceptable. If a comp is too far away, sold in a non-traditional way (short sale or foreclosure), or is too old, then the comp may be deemed inadequate and unusable.
- Second review of appraisals:When the comps aren't acceptable, the lender may order a second review. This can be done as a ‘desk review’ or a ‘field review.’
- A desk review means the appraisal will get an extra look-over by an office-bound person.
- A field review will go to another appraiser who is tasked with reviewing the original appraisal, potentially re-inspecting the property, and conveying their opinion on the value and/or comps used on the original report.
- If the lender’s underwriting review finds that the appraisal is still lacking, despite the value being sufficient, a loan can be declined for lack of sufficient collateral in the property.
What Does This Mean for Your Relocation Program?
Relocating employees should be aware that the appraisal process may be slower because of the extra scrutiny and additional reviews that may be needed. Cartus and Cartus Home loans will counsel transferring employees and keep them apprised of any changes during the process and help manage expectations. It is also our recommendation to always use a destination realtor that is savvy about the relocation process. He or she will understand the importance of finding the comps to support a negotiated value on a new home.
Additional Resources for Relocation Managers
For more information on the latest relocation trends in the U.S.:
- Read Cartus’ blog post: Relocation in the U.S.: Home Sales Relax, Robust Job Growth, and Low Mortgage Rates.
- The National Association of Realtors® released their annual Profile of Home Buyers and Sellers. Among the findings is the growing pace of home sales over the past year has included small increases from from two key segments of buyers that have been missing in recent years: first-time buyers and single women.