Why all the comp check requests? In case you are not aware, a loan can be funded with a list of sales under desktop underwriting guidelines.
- The lowest equity and worst credit borrowers get a URAR appraisal.
- The ones with more equity and better credit get the drive-bye appraisal and the ones with even better equity and credit get an AVM.
- Next is the list of sales.
- Last but not least is the “golden borrower” who is completely liquid and can obtain a loan with as little as a list of assessed values from the area.
Here’s why: a loan can be funded and points and fees collected with a comp check (or less) and no appraisal order.
The borrower may be charged for an appraisal but no appraisal fee is paid. So, who gets the money? It is split between the loan agent and their company. Loan agents are often paid up to half of all the extra fees they can pack into a deal, plus half of the overage that they get on the points. This is what RESPA is all about. Regulated lenders have paid out millions of dollars in fines for RESPA violations. Loan brokers are not regulated.)
Appraisers are so easily hood-winked into inflating values and enabling everything from property flips to predatory loans because they lack knowledge and understanding about the real estate and lending markets and the multiple levels of players in them.
We have no problem with comp checks. For $50, we will respond and do a residential search to the selection criteria the client provides and give them the results. This can be done by a clerk with no appraisal skill required. The trouble with most appraisers is that they do the search and select the criteria to be used. Now they are required to be in compliance with USPAP, which of course, they are not. So if a complaint is filed, these appraisers are in trouble.
Shifting Liability - Why do lenders even bother with a comp check or other appraiser input if they don’t need it to close the loan? I believe it is for reasons of liability. They want the appraiser to do the filtering and actually look for the sales that will make the deal work.
They certainly could call a title company and get a list of sales any time they want. So why call an appraiser, unless they want and need your special skills to help them out?
AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training 909-798-8855, fax: 909-798-0139