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Robert Nusgart: You are your home’s best advocate

During the last several years, the mortgage industry has undergone intense scrutiny. And with good reasons:

• Additional federal and state regulations to protect consumers.

• The licensing of mortgage originators.

• Stricter underwriting guidelines so that only those who can afford a home would be able to qualify for a mortgage to purchase a home.

And then there is the new relationship between loan officers and appraisers who determine home values …

Excuse me! There is no new relationship. In fact, as a part of the reforming of the business, a wall has been put in place between those two parties so that appraisers could do their job without loan officers pressuring them to hit certain values so that a deal works.

Before the mortgage meltdown, loan officers typically would have maybe two or three appraisers with whom they had forged relationships. The loan officer could talk to the appraiser to get a sense of a home’s value or question how the value was arrived at. And I would say for the most part the conversations between the lender and the appraiser were done with good intentions. But in the aftermath of the meltdown, the sinister and destructive sides of these relationships were revealed, and it became necessary for a separation between these two parties.

Third parties

Now when appraisals are ordered, they are done through third-party management companies that have a roster of appraisers. In most cases, the loan officer has no idea of who is going to be selected. There are pros and cons to that process, but nonetheless it is the process that is in place.

Therefore, I tell my borrowers that when the appraiser comes to their home, it is their responsibility to be the advocate for their home. An appraiser will typically pull comparables of past sales in the subject’s neighborhood before visiting, but only the owners can tell the appraiser of the upgrades they did. Only the owners can tell the appraiser of the new bathroom they installed or new hardwood floors and granite countertops.

Simply put, when an appraiser comes to inspect the home, don’t be sheepish. This is your home. Brag about it and feel free to tell the appraiser what you think the home is worth — and why.

Just as in any profession, there are good appraisers and bad appraisers. And just like all of us, they are capable of making mistakes. But those mistakes can affect a deal.

Here is a recent example:

A couple purchased a home in Baltimore County last February for $215,000 and used an FHA 203k rehab loan to update the property. After the renovations were complete, the value was figured to be $240,000.

Recently, they sought to refinance. Another appraisal was done. The appraiser came back with a value of $245,000. The borrowers were upset because they thought that the value should be higher given the improvements and such.

They were told that unless they could find material facts that could alter the value and launch an appeal, then the number was what it was.

They pulled out the original appraisal, and it showed that the gross living area was almost 1,450 square feet. In addition, the State Department of Assessments and Taxation website also had the square footage at 1,450. The new appraisal had it at just more than 1,100. Three hundred square feet in a small home can make a big difference when it comes to value.

An appraiser is required to measure and sketch the house as part of the report to show how the square footage was arrived at. After comparing the two sketches, the original appraiser had the front of the home at 50 feet; the second had it at 40 feet.

Same house. Same front. Different measurements. Hard to believe.

Added value

That prompted the homeowners to measure their own home, and it was closer to 50 than 40. And given what the appraiser used as a cost per square foot, that would result in a $10,000 increase in value.

For them, that extra $10,000 would mean that their loan to value would drop from 97 percent to under 95 percent. The mortgage insurance that would be charged on the loan would drop from approximately $232 a month to $132 a month. Those are significant savings.

So those homeowners took charge of the situation, challenged the appraisal and eventually won. The second appraiser returned to the property, discovered the error and resubmitted the appraisal with the higher value.

The moral of the story is that you, the homeowner, are paying for the appraisal. If you think that the appraiser is not doing a good job, speak up. If there are errors on the state’s assessment site when it comes to square footage, tell the appraiser, because the appraiser is going to use the state’s information as well in determining value.

But a word of caution: Values aren’t going to change just because a homeowner disagrees with an appraiser’s opinion. There must be “material facts” that the appraiser missed (a sale that wasn’t used), an error in math or a mistake such as using sales from a neighborhood that shouldn’t have been used.

A loan officer can help explain the process and work with the homeowner in questioning the appraisal, but the best advice I can give a homeowner when the appraiser visits is to brag about your home — just as you would brag about your children — and back it up with facts.

Robert Nusgart is a loan officer with Mortgage Master Inc. in Baltimore. He can be reached at 443-632-0858 or by email at [email protected] Visit his website at for the latest mortgage and financial news.