For the first time, lenders are now required to disclose to you ALL the information they base their underwriting valuation on, including the appraisal report. But that’s not all. Lenders use much more than the appraisal for their final judgment on a property value.
Common Considerations in Determining Property Value
The following are often used to determine value and loan-to-value ratio:
- The Automated Value Model (AVM). For example, CoreLogic provides more than one billion AVM reports monthly to lenders and other clients. These reports estimate property value without having a human go out to see the actual house. Freddie Mac has their version, called Home Value Explorer (HVE). There are others as well.
- Broker Price Opinions. For a fee, some real estate brokers will provide a value opinion to lenders.
- Appraisal Reviews. This is when the lender pays a second appraiser to take a look at the first appraiser’s report and weigh in. You might have noticed an Appraisal Review Fee on your Fee Worksheet or Good Faith Estimate if the lender passes on this cost to their customers.
- The Appraisal Report. Before now, this is the only document that has been provided to you, the borrower.
You now have the right to receive all this information. The law dictates that the lender is to provide it to you “promptly” (however that vague term might be interpreted) after receiving it, and no later than three days before closing.
WARNING: If you sign the waiver form that is included in your initial disclosure packet, then you give permission for the lender not to provide you with this information before closing. So pay attention to what you sign. You can also ask your loan officer where this is in the packet if it’s not clear and obvious to you.
If your property value is inaccurate, unfair, and bogus, you should share the disclosures with your real estate agent and ask for his or her assistance in making a list and including good comparable properties. Then you have the right to dispute the value, using this list. Personally, I’ve found that lists are a more effective and efficient way to get a decision reversed than a long essay-type letter.
I would be interested in hearing about your experience with this new law, so please feel free to email me via my “Ask Carolyn Warren a Question” page in the blue banner at the top.