When buying or selling a home, an appraisal is usually a necessary step of the process. In years past, appraisers would often perform inspections on multiple homes in a single day. Add another day to complete the report and the appraisal could be finished in a couple of days. However, times have changed and buyers and sellers who expect the real estate appraisal process to sail through without a hitch often get a surprise.
In San Diego, as well as the rest of the country, the real estate appraisal process changed drastically after the housing-bubble collapse and mortgage catastrophes of 2008-2009. Because of all the new rules and regulations, and tougher appraisal reviews from the lenders wanting additional information, the appraisal process often takes over a week. The appraisal process can take over a month for commercial properties.
How San Diego VA Loan Appraisal Process Works
The appraisal process has three components:
- An appraiser will physically examine the home.
- The appraiser will perform a “Comparable Market Analysis,” or a CMA, searching for recent sales of comparable properties in the immediate area of the subject property.
A report is created to justify the property’s value using the CMAs.
The appraisal process typically begins with the appraiser preforming both an exterior and interior inspection, looking at such things as the gross square footage, number of bedrooms and bathrooms, lot size, construction quality, current condition and location as well as amenities like a swimming pool, central AC, fireplaces and recent renovations. The appraiser assesses the buildings in the surrounding area, taking the same features into account. He or she will then confirm the tax data, zoning regulations and other sales in the area, typically getting this information from multiple sources such as public real estate records and Multiple Listing Services. After all of the data has been collected, the appraiser analyzes and adjusts all of the data to make what is called a “Highest & Best Value Analysis” of the property.
Two main issues responsible for slowing down the real-estate appraisal process from the years prior to the housing crisis are: the advent of appraisal-management companies and often seemingly never-ending requests for additional information.
Before the housing crisis, loan officers typically had a favorite go-to-appraiser they would use, but this is no longer the case. Lenders now work with appraisal-management companies to create a firewall between the appraiser and the loan officer who are no longer allowed to speak or have a connection with one another. This was done to, theoretically, eliminate any type of favoritism.
Requests for Traditional Information
Due to the new rules of the “Dodd-Frank Wall Street Reform and Consumer-Protection Act,” loan underwriters are now demanding more information during the appraisal process. While Dodd-Frank was passed to reduce the risks in the financial system, it created additional burdens. Rob Johnson, VP of mortgage company San Diego Funding in California, believes the increase in appraisal reviews is the result of new lender-specific requirements imposed because of the past problems with certain loans. For example, the lender might insist on greater scrutiny of an appraisal if the borrower has a less-than-perfect credit score, a high level of debt relative to income or if the property had been foreclosed and then flipped by an investor.