Lending Transparency to Appraisal ScamsJan 24 2013
Guaranteed Rate is slamming the door on housing scams by equipping you, the consumer, with the knowledge you need to protect yourself from the lure of unscrupulous criminals. Our series of Ripoff Tip-offs will impart transparency to what seems to be an arduous and convoluted process.
While new banking and mortgage regulation has furnished more industry transparency; unfortunately, there are still a few who would like to fleece you in a vulnerable position.
Let’s begin with some appraisal facts:
- Appraisers are paid a set fee no matter the derived home value.
- Appraisers are not home inspectors.
- The value of any home is not dependent on the age of the appliances or the crack in the ceiling. You’re probably wondering: "If the new Viking stove doesn’t count, then what really matters when determining value?". Here are some features you should confirm are accurate on your appraisal:
Age of Home
Living Square Footage
Bed and Bath Count
Type of Heating/Cooling
Additionally, the appraiser will consider similar homes, market trends and land value.
Now that you are armed with some facts let’s look at the scam and how you can protect yourself:
While appraisers are paid a set fee, they may be illegally incentivized, by the real estate agent or mortgage professional, to overvalue a home. The scam increases the purchase price and loan amount and with that comes increased commissions for both the agent and loan officer. The consequence to you is a significantly overvalued home and you may not even realize it until you try to refinance or sell.
How to protect yourself:
Check the appraiser’s license: Individual states are responsible for providing licenses, so ask to see the appraiser’s certificate and take note of the license number to ensure the appraiser has a clean record and that they are working in the state in which they are licensed. Finally, check the appraiser’s license against the Better Business Bureau’s database to review any complaints.
Accompany the appraiser: By walking through the home with the appraiser, you can ensure the appraiser is doing his/her job. The appraiser should be taking notes, asking pertinent questions and taking pictures. If you have recently updated your home, feel free to provide a punch-list of recent improvements.
Obtain a copy of the appraiser’s final report: The appraisal is owned by the mortgage company; however, you have the right to obtain a copy of the report from your loan officer. You should review the report to understand what was considered to derive value and to catch any possible mistakes. Should you have questions about the report, the loan officer should be able to provide full transparency, answer any questions and, if necessary, order a second appraisal.
According to Anthony Cummata, Vice President of mortgage lending at Guaranteed Rate, “The loan officer should be happy to facilitate a transparent process to ensure you are satisfied with the way the home was appraised, even if it comes in below expectations.”
Armed with this information you can now move forward with the confidence of knowing you will not be lured into an appraisal scam. Remember, you are the consumer, ask lots of questions.