A daily newspaper in my area every Friday prints a classic car column. This past week the columnist, who performs classic car appraisals, said there are some 56 different values that can be assigned to any one car, depending on the circumstance.
He goes on to say the answer to the question what is my car worth is not as simple as most people think.
The same is true with real estate appraisal and valuations. Different entities have differing reasons and different methods of determining what a home is worth. And paraphrasing what Steve Linden said in that column, the only value which really matters about a house is what it is worth for the buyer or seller.
And that is an education moment for the mortgage originator. But unfortunately, real estate appraisal is not as simple as that. If it were, the complaints regarding
Originators need to teach their borrowers about the process. They need to explain what might happen, that an appraisal is an opinion of value and that opinion is based on several factors including the nature of that transaction as well as nearby recent transactions.
And they need to educate the borrower to have a battle plan ready if the appraisal comes in low.
The Boy Scout motto, Be Prepared, should be the motto of all involved in the home buying process, including the borrower.
