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PAA Collaborative Sharing of Real Estate Appraisal Information

 

If values are not declining, why are values continually declining?

The Professional Appraisal Associates (PAA) office performs numerous reviews every year, and has noted a trend amongst local appraisers marking appraisal reports with the "Stable" neighborhood housing trends check box, as opposed to the controversial "Declining" property value market conditions. This method helps further promote the appraiser’s reputation and image with brokers to encourage future work volume.

This begs a very simple question, if values are not declining, why are values continually declining?

There is still a continual downward trend, evidenced by repeated price reductions being noted on Active/Pending listings in the area. Our Active/Pending listing database must now be frequently checked due the significant price reductions being made each month. This continual depreciation is also reflected in wide area MLS statistical data, nationwide price surveys, and the appraiser's overall experience in the area. Declining property values have been consistently reported in Santa Barbara County by virtually all the major private and government nationwide price surveys including; Standard & Poor's (S&P)/Case-Shiller, Office of Federal Housing Finance Agency (FHFA), and the National Association of Realtors (NAR) housing market indexes.

Unfortunately, there is no evidence of any sustained price recovery occurring at this time, as much as we wish the contrary. Although a brief stabilization and slight increasing trend began to manifest within the last several months, this trend never really gained traction and was not sustained through back to back quarters and price reporting periods. It now appears that property values have once again began the trend downward here in Santa Barbara County.

Most Appraisal Reports today include the newly adopted 1004MC Addendum, which is a form of Market Conditions Summary. The primary intent of the required 1004MC Form/Addendum as described by the Fannie Mae Selling Guide introduction is for the appraiser to report on the primary indicators of market condition for properties in the subject neighborhood by noting the trend of property values (increasing, stable, or declining), the supply of properties in the subject neighborhood (shortage, in-balance, or over-supply), and the marketing time for properties (under three months, three to six months, or over six months) as of the effective date of the appraisal. Fannie Mae also expects the appraiser to provide their conclusions for the reasons a market is experiencing declining market values, an over-supply of properties, or marketing times over six months. To further enhance the transparency of the conclusions made by the appraiser related to these market trends and conditions, the Form 1004MC is now required for all mortgage loans delivered to Fannie Mae and is intended to support/justify the indicators of market conditions contained in the main appraisal report.

The 1004MC Form Market Conditions Addendum is a statistical data trend tool that relies on proper input data to yield reliable results with a high confidence level.

PAA routinely performs numerous reviews each year, and has noted that local area appraisers either inadvertently or deliberately manipulate the 1004MC input data collection process through control of the statistical sampling size and selected sample data points. By significantly reducing the statistical sample size and price range, you can quickly achieve the desired output results and create false trend indications. This can easily be achieved by specifically reducing and handpicking the sample population to a very minimal number to obtain a desired output/result. The 1004MC form is a statistical tool, and correct statistical data collection and input data is essential for accurate and meaningful results.

As opposed to using relevant and proper large data population sampling through the use of numerous comparable sales/data points and a larger statistical population, if you reduce the sampling size to very few sales/data points (Undercoverage), and then manipulate the observation sample to include only specially selected properties (Selection bias), a positive trend indication can easily be derived. This method also significantly distorts the months of housing supply and absorption rates as well.

Population size (sampling size), and an unbiased or random subset of individual observations is critical to accurate statistical analysis. The larger the sample size, the more accurate and higher confidence level that the results truly reflect the actual population. By using 1 and 2 specially selected sales/data points in the 1004MC for each given time period, the appraiser’s are able to project a stable or positive trend, even though we continue to face repeated sales price reductions and a continuing depreciation trend across markets when looking at the broader and most recent closed sale results. Appraiser’s also save the time and effort of performing broader area MLS data collection by simply manually entering only a few hand selected comparable sales in the form.

Per the Fannie Mae 1004MC guidelines, the appraiser is supposed to include the comparable data that reflects the total pool of comparable properties from which a buyer may select a property in order to analyze the sales activity and the local housing supply. There are typically many more than 1-3 total sales in a neighborhood for each given time period, but these numerous additional sales are simply excluded from the observation/sample to help bias the ultimate results. 1-3 data points are simply not a statistically relevant sample size to derive credible results with any degree of confidence.

This reduced 1004MC sampling technique helps further promote the appraiser's reputation in not checking the controversial and stigmatized “Declining” Property Value box, in an effort to gain increased volume of future perspective appraisal work from lenders/brokers or save data collection time.

We are your Santa Barbara County specialists for accurate market value analysis. For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.



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Posted by Susan Kraushaar - AR009243 on September 12th, 2010 3:00 PMLeave a Comment

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The numerous fires that have been burning in the Santa Barbara/Montecito and Southern California areas have displaced hundreds of people, burned countless thousands of acres, and have caused property damage in excess of $1 Billion. This is a far reaching disaster that has unfortunately impacted many people. For most homeowners, this is a devastating loss, and the thought of an Insurance Appraisal is the very last thing on their minds.

 

An Insurance Appraisal can be either retrospective (retroactive appraisal), or prospective, and is a replacement cost analysis which provides an accurate estimate of the amount of insurance required to replace each structure and/or amenity exactly as it was on the effective date of the report. The structure replacement cost and land values are clearly identified and divided, and this estimate helps provide an insurer with the most accurate structure replacement cost coverage or used to support a damage claim assessment.

 

When the decision is made to rebuild, a new construction loan and new construction appraisal will include a detailed examination of all the proposed construction plans, and a projection of both costs and an estimate of value at completion of the new home construction project.

 

Professional Appraisal Associates has been specializing in the Santa Barbara and Montecito areas for several years now, and has performed numerous appraisals on large-scale ranchette and multi-acre estate properties with values in excess of $25 Million.

 

Most recently, PAA has been performing special retrospective insurance appraisals and new construction loan appraisals for the unfortunate fire and flood damaged homes throughout Santa Barbara County. In addition, we have performed numerous California Wildfire property inspections and verifications, to ensure there was no damage to properties now in the underwriting/escrow process.

 

PAA is now using state of the art computer imaging and GIS applications including Satellite/Aerial viewing, the latest enhanced street mapping tools, and new GPS locating systems to assist in the most recent retrospective appraisals we have been performing for insurance companies for Santa Barbara/Montecito fire damaged properties. We are also using new state of the art engineering and construction cost data software programs to help project costs for the new construction loans.

 

We are your Santa Barbara County specialists for insurance fire damage, flood damage, and new construction loan appraisals for the California Wildfire damaged properties. For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.



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Posted by Susan Kraushaar - AR009243 on November 15th, 2008 9:20 AMLeave a Comment

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October 11th, 2008 4:54 PM

 

HOPE for Homeowners (H4H) Program

The HOPE for Homeowners H4H Program was created by Congress to help those at risk of default and foreclosure refinance into more affordable, sustainable loans. H4H is an additional mortgage option designed to keep borrowers in their homes.

 

The program is effective from October 1, 2008 to September 30, 2011.

 

As many as 400,000 homeowners could avoid foreclosure through this program over the next three years. If you are having trouble making your mortgage payments, HOPE for Homeowners may be able to help you, by refinancing your loan into a new 30-year fixed rate loan with lower payments.

 

How the Program Works

 

There are four ways that a distressed homeowner could pursue participation in the HOPE for Homeowners program

  1. Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program.
  2. Servicers working with troubled homeowners may determine that the best solution for avoiding foreclosure is to refinance the homeowner into a HOPE for Homeowners loan.
  3. Originating lenders who are looking for ways to refinance potential customers out from under their high-cost loans and/or who are willing to work with servicers to assist distressed homeowners.
  4. Counselors who are working with troubled homeowners and their lenders to reach a mutually agreeable solution for avoiding foreclosure.

If you are having trouble making your mortgage payments, both the new TARP and HOPE Programs for Homeowners may be able to help you by refinancing your loan into a new 30-year fixed rate loan with lower payments.

 

We have been performing both 1004 Full FHA Appraisals, and also Exterior Only FHA 2055 Drive-By Appraisals for the new HOPE for Homeowners (H4H) program that was recently enacted by Congress to help those at risk of default and foreclosure refinance into more affordable, sustainable loans. The H4H is an additional FHA mortgage option designed to keep borrowers in their homes.

 

We have been performing the FHA HOPE for Homeowners Appraisals since the program inception on October 1, 2008, so we are very familiar with all the special new requirements associated with this unique FHA program.

In addition, we are prepared for the latest Troubled Asset Relief Program (TARP) start, and the required TARP baseline appraisals needed for refinancing.

 

PAA - Professional Appraisal Associates has been performing high quality, comprehensive, and accurate FHA Real Estate Appraisals for several years. We understand all these new and special FHA loans, and can help streamline the appraisal process. For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.



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Posted by Susan Kraushaar - AR009243 on October 11th, 2008 4:54 PMLeave a Comment

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February 17th, 2008 8:35 AM

 

Choosing the Right Mortgage

There are many unique loan products available to borrower’s today, but just which option is best for you? The following is a brief description of just a few of the most popular loan products that are available to borrowers:

Federal Housing Authority (FHA) Loan

FHA loans are fully Government backed and insured, and were once very popular. Based upon the new economic stimulus package recently signed into law by the President, refinancing or buying a home with an FHA Loan may now make more sense here in California. This is particularly the case in Santa Barbara County, where the FHA loan value limit formula was raised to $729,750 based upon our higher Median Price. FHA Loans have relaxed credit and debt ratio standards, and you can obtain up to 100% financing with a combination of loans. The FHA rules are loosened, even though conventional /Jumbo Loan requirements have become far more stringent over the last several months. The FHA Rates & Terms are also far more competitive than the current Jumbo Loans, with rates typically a full 1 - 1.5 percent lower. This interest rate spread can save a typical borrower thousands of dollars each year. You may want to consider the more affordable FHA-backed mortgages quickly though, since the higher loan limit is scheduled to end in 2009.

Reverse Mortgages

The AARP definition of a "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

  • all at once, in a single lump sum of cash;
  • as a regular monthly cash advance;
  • as a "credit line" account that lets you decide when and how much of your available cash is paid to you; or
  • as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

Reverse Mortgages are becoming increasingly popular, and based upon the age limit are primarily suited for retired seniors.

Real Estate Equity Exchange Loans

Real Estate Equity Exchange provides you with money today that you can keep for up to fifty years without interest charges or monthly payments. In exchange, you agree to give the lender a right to a portion of the future value of your home. The company that founded this concept is Rex & Co., a Real Estate Equity Exchange Company. They provide a specialized REX Agreement, which is a real estate purchase agreement. REX & Co. pays the homeowner cash up to 15% of the value of the home for the right to share in an agreed upon percentage of the future increase or decrease in value of the home. If the future value of the home increases, REX & Co. will share in a portion of the gain. Unlike a bank, if the home declines in value, REX & Co. will share in the loss. The term of the REX Agreement is determined by the homeowner and typically lasts until the sale of the property, or 50 years, whichever occurs first. The cash a homeowner receives from REX & Co. can be used for any purpose. Because a REX Agreement is not debt, it carries no interest expense and does not require any monthly payments. You could save thousands of dollars in interest charges compared to a standard mortgage loan, home equity loan or credit card debt with this type of loan.

Mortgage Refinance

Many Mortgage Refinance options are available for you to do debt consolidation or accessing cash from equity that may have built up in your home. Refinance loans can be used to help with many personal financial situations such as reducing monthly payments, home improvements, college tuition and more.

Home Equity Loans

Home Equity Loans and Home Equity Line of Credits (also known as HELOC's or 2nd mortgages) are loans that come fixed or with variable interest rates for getting cash out of available equity in your home. This equity could be used for any purpose such as making home improvements, consolidate debt, vacations, or unexpected expenses.

New Construction Loans

This is typically a short-term loan program that provides funds for the construction phase of a new home. With many lenders, after construction is completed you have the flexibility to select a permanent mortgage solution that best suits your needs to establish permanent financing for the home. Construction home loans provide funding for all construction phases, and payments can also be disbursed directly to the builder saving you time. Many lenders give you the convenience of one loan with the stability of a 15 or 30-year fixed rate program that you lock in before the actual construction begins. These loans allow for a construction phase of up to one year, during which you make interest-only payments at an interest rate slightly higher than your permanent fixed rate.

Conventional Loans

Conventional loans are secured by government sponsored entities or GSEs such as Fannie Mae and Freddie Mac. Conventional loans can be made to purchase or refinance homes with first and second mortgages on single family to four family homes. A conventional loan is basically any kind of lender agreement that is not backed in full by the Veterans Administration or protected by the FHA (the Federal Housing Administration). All told, there are several broad categories of conventional loans. Fixed rate mortgages are simpler in some cases. A home borrower “locks in” at an interest rate, and he or she pays down the principal and interest on the mortgage every month at that rate.

Other so-called conventional loans include conforming loans. Basically, these are arrangements that meet stipulations set forth by Fannie Mae and or Freddie Mac, two very large mortgage trading companies.

While Fannie Mae and Freddie Mac don't actually approve or disapprove of loans, they buy and sell mortgages. Lenders who sign borrowers up with conforming loans may later sell these loans to Fannie Mae or Freddie Mac to get funds for other investments.

Jumbo Loans

Jumbo or Nonconforming loans are instruments which don't meet Fannie Mae or Freddie Mac qualifications, and are also considered a form of conventional loans. Jumbo loans fall outside of Fannie Mae eligibility, but are still considered conventional. A jumbo loan is a loan that's too large to be eligible to be traded by the two main loan purchasers (GSEs). The previous Fannie Mae guidelines for conventional homes put the maximum price for a conventional, conforming loan at just over $415,000 for a single-family arrangement. A larger loan limit has just recently been increased for California. Because jumbo loans are not funded by the government sponsored entities, they usually carry a higher interest rate and some additional underwriting requirements.

Summary

Choosing the right type of mortgage depends on many different factors, and one of the best ways to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences with a local mortgage professional.

PAA - Professional Appraisal Associates has been performing high quality, comprehensive, and accurate Real Estate Appraisals for many of the above mentioned loan products for over 25 years. We understand all these loans products, and can help streamline the appraisal process. For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.



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Posted by Susan Kraushaar - AR009243 on February 17th, 2008 8:35 AMLeave a Comment

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February 16th, 2008 8:26 AM

 

Time to take a new look at FHA Loans

Federal Housing Authority (FHA) loans may actually become popular once again! Based upon the latest economic stimulus package signed into law, refinancing or buying a home with an FHA Loan may now make sense in California. This is particularly the case in Santa Barbara County, where the FHA loan value limit formula has raised significantly due to our higher Median Price levels.

The Federal Housing Authority, Fannie Mae, and Freddie Mac now have the limits on the size of mortgages they can finance or buy increased up to $729,750. Even higher limits are now available for Multi-Family Units.

With this new reform package, the Federal Housing Administration is now more relevant in today’s housing and mortgage lending industry since they are expanding the agency, loosening underwriting standards, and most importantly have raised the original restrictive loan limits here in California and especially Santa Barbara County.

FHA insured loans may also be an option for borrowers who may be unable to make payments on their current Adjustable Rate Mortgages when their ARM interest rates reset.

Even if your credit is less than perfect, an FHA loan might still make sense since you may qualify despite any previous financial problems. With the new guidelines, FICO scores do not apply, and there are relaxed rules for people who have had a bankruptcy discharge or Foreclosure after 2-years. The FHA rules are loosened, all at a time when the conventional /Jumbo Loan requirements have become far more stringent in the last several months.

The FHA Rates & Terms are far more competitive than the current Jumbo Loans, with rates typically a full 1 - 1.5 percent lower. The typical FHA Loan has little or no adjustment to the interest rate, and the Mortgage insurance is funded right into the loan which is far less than Private Mortgage Insurance (PMI) premiums. Borrowers can also finance up to 97% of the purchase price, and if combined with other types of loans, your down payment may actually be zero. The allowable debt-ratios are also higher than the strict debt-ratio limits required for today’s conventional loans.

A recent HUD announcement states that the increase in loan limits will enable more working families to become homeowners and will help the FHA mortgage insurance program keep pace with the robust housing market. The FHA estimates that it may be able to help over 200,000 borrowers who are facing possible foreclosure with the new higher loan limits coupled with the loosened underwriting standards.

It might be time to reconsider the more affordable FHA-backed mortgages, but don’t delay since this is only a temporary increase in the loan limits, and it is scheduled by law to end in 2009.

We have fully approved HUD / FHA Roster Appraisers that were tested under the original stringent FHA guidelines/standards. We understand all the FHA requirements, and can help streamline the FHA appraisal and loan underwriting approval process.

For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.


 


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Posted by Susan Kraushaar - AR009243 on February 16th, 2008 8:26 AMLeave a Comment

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California Proposition 8 Property Tax Reduction and Tax Assessment Review Process.

Did you know that most property in California is over-assessed, and that most property owners pay too much in property taxes. If you own your home, it's likely you're paying too much in property taxes. The National Taxpayers Union estimates that 60 % of taxable property in the United States is over-assessed! Despite the declining values we are experiencing today, most people don't appeal their property taxes because they simply don't know how.

Proposition 8 Overview

State law (Proposition 8, Temporary Reduction of Assessed Value For Property Tax Purposes, passed in 1979) allows property values to be reduced if there is a decline in market values below the current assessed value.

Who is affected?

Property values have declined significantly over the last 3-Years. If you purchased your home between the years 2004 - 2006, your assessed value is probably much higher then the present market value.

How much can I save?

Properties in Santa Barbara County may have declined as much as $150,000 - $200,000, which represents a substantial negative decline. Based on the current Proposition 13 Tax Rates, if your home has not been reassessed in the last several years you could typically save from hundreds to even thousands of dollars each year. Your actual savings will depend upon the current assessed value, tax rate, and the prevailing market value, which can be best determined from a complete Real Estate Appraisal.

Will the Santa Barbara Assessor's Office lower my taxes?

As a result of Proposition 8 and Section 51 of the California Revenue and Taxation Code, all County Assessor’s in California are required to review and consider requests for value reassessment with proper evidence, and then they are required to reduce taxes correspondingly. A properly documented and supported assessment review form will ensure timely processing and acceptance.

How long will my taxes stay reduced?

Any Proposition 8 tax reduction is considered temporary, although some tax appeal reductions in our county have lasted for over 10+ years. As a minimum, your reduced tax rate will last one year. Realistically, based upon current market conditions and forecasts, the reductions will probably last for several years. Your assessment value and taxes will eventually increase back to the original Proposition 13 rules when the Assessor’s Office decides to reassess your area after the market values have increased. Your taxes will simply revert back to the original Proposition 13 amount upon reassessment.

Although no one has a crystal ball, based upon the current market and forecasts it may be several years before values actually return to the pre-2004 values.

Why should I bother?

Property values are declining, but the Proposition 8 laws can help you save significantly on your next property tax bill. Our clients can typically save from hundreds to thousands on their next Santa Barbara County property tax bill. You can pay only $350.00 today, and then save thousands for years to come.

Don’t delay, take advantage of this declining market before the deadline or values start climbing back up again by calling us for all the details. We can explain the Proposition 8 Tax Assessment Review process and our special program details. You have everything to gain, and nothing to lose by switching to a new lower Prop 8 assessed value.

For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.




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Posted by Susan Kraushaar - AR009243 on February 1st, 2008 7:03 AMLeave a Comment

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December 29th, 2007 10:05 AM

 

Good, Fast, and Cheap Appraisal Services

Most Santa Barbara County Real Estate Appraisers can provide three distinct levels of service; Good, Fast, and Cheap. You can usually pick any two. If it's Fast and Cheap, it's not Good. If it's Good and Cheap, it's not Fast. If it's Good and Fast, it's not Cheap.

With all kidding aside, the current mortgage industry trend places a tremendous amount of pressure on the Real Estate Appraiser to perform faster and cheaper than ever before, all while still maintaining the same demanding quality standards. There is a fundamental flaw with this premise, since a good-quality comprehensive Appraisal Report takes more time to research and develop, not less.

Many appraiser's offer rapid turnaround time, but appraisal quality will inevitably suffer. Some appraiser’s have even decided to capitulate to the latest pressures and routinely provide faster, cheaper, and extremely poor quality reports. As part of our ongoing appraisal business we regularly perform appraisal reviews, and are surprised and dismayed to find that that many of the recent appraisal reports are riddled with errors and hastily performed.

The next time you need an appraisal, Professional Appraisal Associates has a philosophy of providing the highest quality appraisals on the Central Coast. We do offer all three levels of service including Good, Fast, and Cheap, we just don't compromise and trade the quality for time.

Remember, Cheap isn't Good, and Good isn't Cheap, so give us a call and let us provide you with a quality Real Estate Appraisal at a best value price, along with a reasonable turnaround time to allow for the best quality.

For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.




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Posted by Susan Kraushaar - AR009243 on December 29th, 2007 10:05 AMLeave a Comment

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April 16th, 2007 9:20 AM

 

Long-Distance Appraising

A new trend in the industry is using long-distance remote control appraisers from out of the area. These inexperienced appraisers may travel hundreds of miles to areas they are not familiar with, nor do they have the legally required local source data that is needed for a USPAP compliant appraisal report. These appraisers are not familiar with the unique nuances and special aspects of your specific neighborhood, and typically they either significantly undervalue or overvalue your property due to this limited local knowledge. For all this inaccuracy, you usually pay a significant premium to cover the additional appraiser travel charges such as the automobile, gas, insurance costs, and may even foot the bill for an overnight hotel stay.

Areas in Santa Barbara County usually have many invisible subtleties such as school districts, geographic boundaries, water districts, unique areas, etc. and these can have a significant impact on the value of your property. Only a local expert who has a strong geographic familiarity will truly understand your property, and how to properly value these many nuances. In addition, a specialist who frequently performs appraisals in the area is very familiar with all the local comparables, and in many cases they have personally inspected and performed appraisals on most of the area comparable properties as well.

As part of our ongoing appraisal business, we perform numerous appraisal reviews each year, and find that many of the recent out of area appraisers significantly over and undervalue the properties, and the reports were fret with inaccuracies and missing required data due to the appraisers inexperience, unfamiliarity with the area, and lack of USPAP required supporting data. Some of these properties had to be reappraised at considerable cost, or the loan was simply rejected by the underwriter. The undervalued properties did not meet the qualifying value, so the unfortunate borrower/client ends up paying for an appraisal on a property that should have gone through the entire loan process, but was needlessly canceled from the outset.

Choose a true local expert for your next Real Estate Appraisal. PAA - Professional Appraisal Associates has been performing Real Estate Appraisals on the Central Coast since 1991. We have specialists that service Santa Barbara County exclusively, and are familiar with the many unique areas that comprise this special part the Central Coast. We maintain all the required source data, including comprehensive on-line access to Public Property Records, Zoning, Flood, and all Local Multiple Listing Service (MLS) Boards. Instead of wasting time and paying travel expenses for an inexperienced and unfamiliar out of area appraiser, give us a call and let a local expert perform a quality Real Estate Appraisal at a best value price.

For more information about Professional Appraisal Associates, visit us at our Website at:
ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.




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Posted by Susan Kraushaar - AR009243 on April 16th, 2007 9:20 AMLeave a Comment

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Appraisal Quality doesn't cost, it saves.

There's an old adage that states "you get what you pay for", and nothing could be more poignant and true than when it comes to a home Real Estate Appraisal. A poorly prepared, poor quality, and minimal effort appraisal costs everyone in the long run, including the originating Loan Officer/Mortgage Broker, the Appraisal Reviewers, the Bank Underwriters, and finally the borrower/client in the end.

There is a disturbing new trend in the industry towards faster, cheaper, and significantly limited and inaccurate appraisal reports in an effort to save a buck. This frequently back-fires when the loan deal falls through because the appraisal is rejected.

A poorly prepared appraisal and report will be quickly rejected by the initial reviewers or underwriters, which drives cost and delays the overall loan process. In some instances, Bank Underwriters are forced to require a special review appraisal be performed, or may even insist on a complete re-appraisal of the property again. Depending upon the review results, they may very well reject the entire loan package based on missing or inaccurate information. If the property was overvalued, many times the borrower/client is the one that ultimately loses in the end since the qualifying value could not be met, so they have paid for a worthless appraisal.

As part of our ongoing appraisal business, we also perform numerous appraisal reviews each year, and find that many of the recent appraisal reports are overvalued due to inaccuracy, or in some instances, out and out fraud, and all of these properties must be reappraised at a considerable cost. These reviews then go back to the underwriters, who must then face the loan cancellation dilemma.

PAA - Professional Appraisal Associates has been performing high quality, comprehensive, and accurate Real Estate Appraisals for over 25 years. Instead of wasting time and money, give us a call and let us help you save money up front by performing a quality Real Estate Appraisal at a best value price. For more information about Professional Appraisal Associates, visit us at our Website at: ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.




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Posted by Susan Kraushaar - AR009243 on April 16th, 2007 9:19 AMLeave a Comment

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April 16th, 2007 9:19 AM

 

Comp Checks

What is a Comparables or Comp Check? Typically, banks/lender’s are trying to determine the value of a prospective mortgage client property/home to confirm adequate equity exists for a loan.

Understand that Real Estate Appraisers are primarily governed by the rules and regulations from the Uniform Standards of Professional Appraisal Practice (USPAP). One of the key USPAP restrictions specifically prohibits an appraiser from accepting an assignment to appraise a property based on a predetermined value or range of values.

When responding to a Comp Check request to find out if a home will appraise for a certain value, we then cannot accept the assignment to do the actual appraisal. In performing a Comp Check, and even when verbally stating a simple value range, by the strict USPAP standards we have in essence performed a form of appraisal and are bound by requirements to maintain complete records showing how and when we arrived at the value that we provided with the Comp Check. In essence, a Comp Check is an appraisal.

The main intent of this important USPAP rule is to dissuade dishonest appraisers from over-appraising properties and "hitting the target." USPAP standards are trying to prevent predatory lending practices, and ultimately stop mortgage fraud in our industry.

In addition to the ethical dilemma, we are typically asked to do as many as 5-10 Comp Checks each week, and each request requires considerable research time and effort. The majority of requests we get are for qualifying values far in excess of the current prevailing market values. Property values can also vary significantly dependent upon condition, upgrades, views, etc. Since many of these Comp Checks reveal that the requested value is not feasible, these free Comp Checks result in many hours of lost work time and money.

It is truly not our intent to waste borrowers/lenders money on useless appraisals for loans that will not work, though at the same time we cannot determine nor state any actual property values without performing the complete appraisal process per the USPAP Standards and Guidelines.

PAA - Professional Appraisal Associates has been performing high quality, comprehensive, and accurate Real Estate Appraisals for over 25 years. Instead of wasting time and money on useless appraisals for loans that will not work, give us a call and let us help you use the free comp check tools available on the Web.

For more information about Professional Appraisal Associates, visit us at our Website at:
ProfessionalAppraisalAssociates.com or feel free to call us at (805) 688-5033.





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Posted by Susan Kraushaar - AR009243 on April 16th, 2007 9:19 AMLeave a Comment

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