PRIVATE APPRAISALS FOR LOAN PURPOSES AND THE FHA
I often receive calls from people who want to have their house appraised to get a mortgage loan.
It is often the case that when you get a mortgage loan you will need an appraisal to assist the lender in establishing the market value of the property. This way they can manage the loan to value ratio. However, a federally regulated lender would have to order the appraisal or the lender can not use the appraisal. The idea is to keep property owners from colluding with the appraiser and producing appraisal reports with inflated values. Such activity would make it difficult for the lender to establish an appropriate loan to value ratio.
A problem today often occurs when a borrower applies for an FHA loan. Often the seller offers to pay some of the buyers loan costs. They then ask the appraiser to inflate the appraised value conclusion to include those loan costs. The market value of residential real estate is based on net sales price to the seller. So, if the house sells for $260,000 and the seller is paying $10,000 of the buyers loan costs, the net to the seller would be $250,000. It is the appraisers responsibility to find any hidden pay backs from the seller and get to the net sale price.
Pacific West Appraisal Services, Inc.
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