Appraisal Process During The Coronavirus Pandemic Crisis Was PUBLISHED On March 26th, 2020
The Appraisal Process During The Coronavirus Pandemic Crisis By Lenders:
- Gustan Cho Associates are here to bring you an update on the appraisal process during these tough times
- The COVID-19 coronavirus outbreak has affected every industry on our planet, including the real estate and mortgage sector
- In times like this, major agencies must come together to formulate a plan to succeed
- We are seeing this in the appraisal process for real estate transactions
- Recently, FANNIE MAE sent an approved appraisal process for these dark times
- In this blog, we will detail the temporary changes in the appraisal process
In this article, we will discuss and cover the Appraisal Process During The Coronavirus Pandemic Crisis.
Fannie Mae Appraisal Process During The Coronavirus Pandemic Crisis
Fannie Mae made an appraisal announcement to help curb the spread of COVID-19 coronavirus.
- They have announced temporary flexibility to the appraisal process that is effective immediately for all mortgages in process on her before May 17, 2020
- Fannie Mae is temporary allowing appraisal inspection and reporting requirements to be lowered
- Fannie Mae will now accept alternatives to the “traditional appraisal” required under selling guide Chapter B4-1
- This is the Appraisal requirements when an interior inspection is not feasible
- This is because of COVID-19 concerns
Fannie Mae will accept either a “desktop appraisal” or an “exterior only” Inspection report in place of the interior and exterior inspection appraisal typically required per Fannie Mae selling guide.
Fannie Mae Alternative Appraisal Process During The Coronavirus Pandemic Crisis
More simply stated, if a traditional appraisal may not be obtained due to the COVID-19 coronavirus, an appraiser may complete a desktop appraisal or an exterior-only appraisal in lieu of the traditional appraisal report.
- In these dark times, many American citizens do not want random people in their house such as an appraiser
- Completing a desktop appraisal or an exterior-only appraisal does not require someone to physically enter your dwelling
- This new process is putting many at ease during these confusing times
The real estate sector of our economy is massive and any efforts to keep it afloat will go a long way!
Types Of Appraisals Allowed During The Coronavirus Pandemic Crisis
At this time, for all primary residence purchase transactions, any appraisal report can be used.
- This includes your traditional appraisal, a desktop appraisal, or an exterior-only appraisal
- The same is true for a second home and investment property as long as the loan to value is less than 85%
- Meaning you must put down at least 15%
If you’re buying a second home with less than a 15% down payment, a traditional appraisal report will be required.
Appraisal Process During The Coronavirus Pandemic Crisis On Refinances
Are the requirements the same for a refinance transaction?
- During these tough times, there is a mini refinance boom happening in the mortgage industry
- With the announcements of the FEDERAL RESERVE cutting interest rates, many Americans reached out to refinance their current mortgage
- If you are completing a rate and term refinance, and your loan is currently owned by Fannie Mae, a traditional or exterior-only appraisal may be used
- If your home loan is not currently under the Fannie Mae umbrella, you will need a traditional appraisal report
For any cash-out refinance transactions, a traditional appraisal report will be required. This holds true regardless of your current mortgage is serviced by Fannie Mae or not.
Desktop Home Appraisal
What is a desktop appraisal?
A desktop appraisal is the next best option for a lender compared to a traditional appraisal.
- The desktop appraisal will provide more information than an exterior-only appraisal
- A desktop appraisal does the minimum scope of work for home value
- A desktop appraisal does not include an inspection of the subject property or comparable sales
- The appraiser will simply rely on information provided by the MLS (multiple listing service), public records, and other third-party data sources to create value for the property
- This can leave room for error
- My next-door neighbor is a retired appraiser with over 30 years of experience
- After talking with him about these recent changes, he mentioned that a desktop appraisal can sometimes leave up to 30% of the value of a property off the table
- For example, the appraiser would have no way of knowing that a homeowner recently updated their kitchen with all new granite countertops, new appliances, new floors, and new lighting
- All of which add significant value to a property
- This may be the difference between appraising at the value and coming up short
- The appraiser is expected to obtain photographs of the subject property, even in these challenging times
- The appraiser should by any means necessary obtain recent and relevant pictures of the subject property
We cannot stress enough that these appraisal changes are temporary while the American people battle the COVID-19 coronavirus.
Exterior-Only Appraisal Process During The Coronavirus Pandemic Crisis
What is an exterior-only appraisal?
- The exterior only inspection appraisal is the last resort for appraisal options
- This report may be used for purchase transactions and rate and term refinance loans that are already owned by Fannie Mae
- The exterior only appraisal includes a street map that shows the location of the subject property and all comparable sales used, clear and descriptive photographs (hopefully in color) that show the subject property
This information will be combined with the thousands of data points already in the Fannie Mae database and will be acceptable for Fannie Mae selling guides.
Importance Of The Home Appraisal During The Mortgage Process
It’s not every day you see major announcements and such a key aspect of the mortgage process. The appraisal is one of the most important parts of a real estate transaction. Without an appraisal, a lender cannot determine the loan to value thresholds. It is no secret that this COVID-19 outbreak has sent most of our economy into a tailspin. A major player such as Fannie Mae to announce changes like this for multiple months into the future is unprecedented. Let’s hope we don’t see anything like this again.
We will continue to keep you updated. Gustan Cho Associates are going to continue pressing forward to the best of our abilities during these times. Our thoughts and prayers go out to the victims of this invisible killer. We hope you and your families are safe and doing everything they can to prevent the spread of COVID-19 coronavirus. For any questions specific to the appraisal or mortgages in general, please call Mike Gracz at 630-659-7644. We at GCA Mortgage Group are still available seven days a week even through these tough times. We will all get through this together. To continue to stay up-to-date, check out our YouTube CHANNEL.