Refinancing in Lamorinda? Some Tips to Think About…

An article in today’s Wall Street Journal is providing the stimulus for today’s post, as well as some very recent and highly mixed interactions I’ve had with appraisers in the Lamorinda real estate market.   With so many people refinancing their existing loans, the potential pitfalls of the appraisal process becomes very relevant to the achievement of your objectives.

On a fundamental basis, there are wide swings in the competence levels of appraisers, and the lender has does not control who does the appraisal.

My list of appraisal imperatives:

1.  Screen the appraiser when he/she calls for the appointment.  Make sure the appraiser is LOCAL and EXPERIENCED in doing Lamorinda real estate appraisals.  Even though the lender may think that a San Jose, Fremont, or Vacaville-based appraiser is “local”, they are not and they won’t be competent in our market.  If the appraiser does not meet this initial criteria, do not allow them to start the appraisal.  Ask your lender to resubmit the appraisal order and insist on someone who is truly from this area.

2.  First impressions can make a difference.  Put your home in as close to “show” condition as you possibly can.  You want the appraiser to “like” your home and believe that it stands above the “average” home he/she sees in the community.  If it has obvious deferred maintenance, weeds over-grown in the yard, and the rooms are overflowing with 20+ years of accumulated junk piles — your appraisal will reflect this.

3.  Sell your improvements.  If you don’t tell the appraiser what you’ve invested in your home’s improvements, they’ll never know about them.  This is not to suggest that you’ll see a return on all of your investments in improvements, but the knowledge of them can help to make your home standout, and may tip the scale in your favor during the final determination of value.

4.  Help your appraiser with the “comps”.  Appraisers are required to find “like” properties, ideally sold within the last 90 days and within a 1 mile radius of your home.  It always helps to go online and to pull sales data on homes that meet this criteria.  Even though Zillow’s “Zestimate” of value has little grounding in reality for homes in Lamorinda, the site does allow you to search public records for the needed comp info.  Consumers can utilize a wide variety of other real estate sites to find this information, too.  Since appraisers almost never see the interiors of the “comps”, any personal knowledge you may have about these properties should be shared IF it helps support a higher valuation for your home.

5.  Rigorously scrutinize the final appraisal.  Do not assume that the appraiser accurately completed the appraisal.  Last year, I had an appraiser almost cost a client $50,000 in a contract renegotiation when the appraisal came in that far under the price agreed upon between buyer/seller in the purchase agreement.  The appraisal had been subjected to two levels of underwriting review, but no one caught the computational error that I found when I reviewed the appraiser’s work.  As it turned out, the appraisal should have come in OVER the contract purchase price, NOT under it.  The appraisal was corrected and the transaction proceeded to a successful close.

Last month, a “local” appraiser was sent from Concord to appraise a client’s Lafayette property.  The appraiser passed the initial screening, and we provided him with a detailed set of comps, including written explanations of each property.  The appraiser ignored our comps, and decided to go OUTSIDE the Lafayette School District for two of his six comps, and then threw in two bank foreclosure properties for good measure.  No valuation adjustments were made for these factors.

The appraisal was absurdly completed and came in $100K under the purchase contract value.  I ended up spending hours writing a detailed rebuttal to the appraisal which ultimately helped set it aside, allowing the transaction to eventually close at the contracted purchase price.  It was an incredibly frustrating experience that could have potentially caused a client to lose their buyer or up to $100K in their sales price.

In the final analysis, it’s important to be your own advocate in the process.  Never assume that the appraiser will see the value in your home, nor accurately complete a competent appraisal.  A set of watchful eyes on the process is imperative.

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