Mortgage News

What you must understand about appraisals: unacceptable appraisal practices

December 19th, 2014

Every time I receive the value of a property from the appraiser, I hold my breath. The result determines not only the value of the loan but also if the home has any issues/needs repairs before closing.

Basically, the appraisal is a big deal.

For more, read a recent piece in The Wall Street Journal called "When a Mortgage Hinges on Home Values."

Just to recap, the appraisal provides the market value for a particular property. The lender uses the value to determine how much to lend the borrower (ie. loan-to-value or LTV). The loan product determines the LTV (more information here).

Now, what you MUST understand about appraisals.

There are several unacceptable appraisal practices such as:

  • provide a market value that's misleading
  • misrepresent the physical characteristics of the property
  • use data from parties with a financial interest in the sale or in the financing of the property without appraiser verification from a disinterested source
  • Visit the Fannie Mae website for these and other unacceptable practices