This one’s written to consumers, but really, the lessons can be applied to anyone involved with the mortgage transaction. After all, it’s everyone’s responsibility to see that a home purchase process goes smoothly and with authenticity!
We’ve talked a bit lately about the importance of having “good data” behind a home valuation. In fact, the entire process needs to be authentic. Although we’re oversimplifying it a bit, the fact is that the housing meltdown of the mid to late 2000s did have some of its roots in faulty (or, in some cases, artificially inflated) valuations and appraisals.
The government and the industry have taken a number of steps to ensure the valuation data we get today is pure. But the consumer has a place in all of this, too. The old saying “trust but verify” applies!
The Appraisal Institute wrote a great piece on what every consumer should understand about appraisals. You can see it in its entirety here. While we won’t rehash the article entirely, notice that much of what the consumer can do involves simply being involved. Review the report. Accompany the appraiser. Don’t be afraid to challenge the results. Check the appraiser’s qualifications. Every honest appraiser or valuation company makes a mistake once in a while. They’ll welcome your input if it corrects this. It’s when the valuation process goes beyond “honest mistake” into some of the seedier areas possible that diligence can mean everything.
As a consumer, you don’t have to become an appraiser to review the valuation process. Just be involved. Ask questions of your Realtor or loan officer (or appraisal company). The results could be…ahem…of value to you in the long run!