Long Beach California Real Estate Loans

Long Beach, CA.  Recently, Mike Simpfenderfer, Co-manager of the Bixby Knolls GEM Mortgage Branch submitted this important letter to all appraisers working with our lending company.  Please take the time to quickly review the following missive and share it with your appraiser if you are involved with a FHA loan transaction:

This WILL affect values as too many listing agents are overpricing homes today. More than 90% of financing today is FHA.  In 2006 FHA came out with an appendix to the 4150 guide called Valuation Protocol.  This was a guide to completing the appraisal.  Recently HUD has begun to use this guide thoroughly in the review process of the appraisal.  Appraisals not meeting the guidelines are rated as deficient and the deficiency is charged against the underwriter as well the lending institution.   Many appraisers have never read this guide but continue to do FHA appraisals believing that they are following acceptable procedures.   Common issues that we are seeing from HUD reviews:  

• Comparable sales do not reflect the type of financing and/or percentage of concessions
• All improvements are not included on the sketch or dimensions of all improvements are not detailed.  This includes patios, pools, spas, detached garages etc.
• Appraisers are required to inspect the attic with at least a "head and shoulders" inspection and indicate this on the report.
• Appraisers are to indicate that all utilities are on and all systems are operating.  If utilities are not on this requires the appraisal to be marked "subject to" and a condition called out for this
• Appraisers are to indicate that the property meets HUD guidelines
• Number of cars that can be parked in the driveway is missing (this seems to be important to HUD for some strange reason)

  Many appraisers are not calling for repairs because the contract is written "as is".  The property must still meet HUD guidelines regardless of the contract.  Buyers and sellers must understand this   Other common errors:  

• Appraisers are indicating on page 1 that there is a stove but then later indicate it is missing or photos show it is missing.  If there is no stove it must indicate this throughout the report and any appropriate adjustments must be made.
• There is clear evidence of peeling or chipping paint on homes built prior to 1978 and the appraiser did not call for abatement per HUD guidelines
• Pools must be filled with water as this is considered a heath and safety issue by HUD and our investors
• Properties with septic systems must indicate if connection to sewer is available
• Square footage of comparable sales do not bracket the subject and appraiser fails to comment on why bracketing cannot be achieved.  Bracketing means that out of at least 3 closed sales one must be smaller in size, one larger in size and one approximately the same size.
• Lack of landscaping or condition of landscaping that would require an adjustment

  Investor issues with appraisals include:  

• Using older sales in a declining market with no negative adjustments.  Investors expect to see these adjustments or the appraiser must justify using no adjustments.
• Listings should be adjusted for a list versus sales price

Hopefully this helps you understand the appraisal conditions you see on your approvals.

Kirk Mulhearn, a Long Beach Real Estate Broker, manages Prudential California Realty, "The Bixby Knolls Office," and co-manages a net branch of Gem Mortgage, a direct lender originating FHA, VA, and Conventional loans.   Kirk Mulhearn may be contacted at:  562-989-4608 ext. 110

Subscribe to the blog at:  www.longbeachrealestateandloans.com