Refi appraisels

[Doug Pretorius (ON) 9]

In your experience, do refinance appraisels typically come in: Higher, lower or about the same as new-mortgage appraisels?

[Mr Saint 0]

Doug,

 

The way an appraisal is accomplished is the same for refi's and sales. It doesn't make a difference, from an appraisal standpoint, either way. All the same methods are employed for each one.

 

That being said, however, there can be slightly higher values begot with a refi as opposed to a sale....and here's why.

 

With a sale, the mortgage company is looking to make sure the property is worth what the purchase price is. As we all know here, the 'purchase price' can very likely be lower than the market value...ie motivated seller. Therefore, with a sale, the appraiser may find decent comps that support the sales price, they go with that and everyone is happy. On the other hand, with a refi, most of the time the borrower is pushing to get every possible cent out of a property, which can in turn, result in a higher appraisal because the appraiser might be forced to look a little harder for the best possible comparables in the neighborhood.

 

Of course everything I have just said above is 'theory' and not common practice in the appraisal business. :ph34r:

 

Hope that helps,

[Doug Pretorius (ON) 9]

Of course, of course, everything is always entirely on the up and up

 

Thanks. Yes that does help and it is about what I expected. I recently heard of a house that was appraised for a refi about 10% above comps.

 

Another possible explanation (besides or in addition to what you mentioned) is that here in Canada, all mortgages above 75% LTV are insured by one of 2 independent insurers (except for GMAC who self-insures their own loans). Most refi's can be insured up to only 90% LTV, but both insurers seem to have very lax appraisel policies. They use computer modeling to predict the value and unless the requested mortgage amount is beyond a certain range, they do nothing more than a "drive-by appraisel".

 

So in light of this it would seem that a 90% refi could easily be a 100% LTV mortgage.

 

Another thing that probably leads to this abuse of mortgage insurance by the banks is that lenders can repossess by Power of Sale just 45 days after the first late payment. So what usually happens is the payment is missed (so they're now 1 month behind since mortgages are paid in arrears) then the bank gives them 2 weeks notice, and then they POS 45 days later ... for a total loss of just 3 payments.

 

 

Does anyone else's experiences confirm or rebutt Mr. Saint's comments?

[Mr Saint 0]

Thanks. Yes that does help and it is about what I expected. I recently heard of a house that was appraised for a refi about 10% above comps.

While that is conceivable, it's actually 'unethical' according to appraisal practice and the appraisal firm and mortgage company could get in big trouble if they are doing that on a regular basis.

 

 

What I was talking about is nothing 'unethical' really...ie. comps support both scenarios...it's just the appraiser might work a little harder to 'pull in' a higher value on the refi.

[Doug Pretorius (ON) 9]

Maybe they 'uncovered' comps that were 10% higher than what the realtor found. Nothing unethical about that I guess.

 

The purpose of all of this is so that I can show sellers they will net about the same or more by refi'ing and having me take over the payments, than they would if they sold through a realtor. So I hope it isn't unethical on my part to suggest that the appraisel may come in higher than what they'd get on the open market?

[Mr Saint 0]

So I hope it isn't unethical on my part to suggest that the appraisel may come in higher than what they'd get on the open market?

Doug, I wouldn't put that on your marketing material, but if you mentioned it casually in a conversation, I think that would be ok...you're just stating factual possibilities after all.