Maximum Value Appraisal Comp Check?
Recently, I had one of our clients request a “maximum value comp check” to help him determine if he would be able to make a loan to his customer. I understand that the loan agent cannot make the loan if there is not enough equity in the house, so both the agent and the borrower want “maximum value”. This is a very common request from loan agents and we do provide comparable sales information but they aren’t always what the loan agent had in mind.
Regarding “comp checks”, USPAP and logic set boundaries that the professional appraiser must stay within. I hope understanding these boundaries will help mortgage professionals better work with their appraiser.
- The appraiser cannot make a value judgment without going through the appraisal process.
- USPAP prohibits the appraiser from making a value judgment before completing the appraisal process. Appraisers who tell you if your estimated value will “work or not” are unethical and are at risk of losing their license.
- Logic prohibits anyone from making an accurate value judgment before obtaining all the facts. I.E. market conditions, location, condition, size, detriments, and the list goes on and on. How would you feel about your doctor if he told you, you needed an operation based on a phone conversation? Looking at a list of comparable sales and stating a value estimate sets the appraiser and the lender up for problems.
- The appraiser cannot take an assignment based on a “predetermined value”.
- AO-19 from USPAP states “If an appraiser is asked whether a specific property has a value (a point, a range, or a relationship to some benchmark), that request is for an opinion of value (an appraisal). Appraisers, obligated to comply with USPAP, must develop a real property appraisal in accordance with STANDARD 1. Communicating that value opinion must be accomplished in accordance with STANDARD 2.”
We send comps as an accommodation and are happy to do it as a service to our clients. However, we cannot make value judgments without doing an appraisal. We generally recommend doing an appraisal if there are comps that bracket the estimated value. We also suggest the borrower check the comps and decide if an appraisal is warranted. The majority of appraisal management companies will not do this for you nor will an appraisers directory.
Leeper Appraisal Services work with many loan agents and brokers on a daily basis. We offer free “comp checks” to give our clients more information to help them in their loan process.
…But please, do not ask us for a “maximum value comp check
Chas W. Leeper, SRA has been a real estate broker for over 35 years; a certified and designated real estate appraiser for over 24 years; an author, sportsman and grandparent. He is currently the CEO of Southern California Real Estate and Appraisal Inc. More information about Mr. Leeper can be found at : http://www.leeperappraisal.com/principalappraiser.htm
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