3.6 Crunch Time

[Sandra Koutsopoulos]

...Saving time and money... maybe in refi's. But my recent appraisal inspections for sales and pre-foreclosures have given me an insight I hadn't expected. For example, today's blight inspection is a cabin in the woods (Crestline), and when I told my assistant that someone had paid $200,000 for it within the last 2 years, he was incredulous. Yes, somebody got a loan on this unstable wreck, and they probably did it subsequent to having an appraisal done. ...or not? Lender is foreclosing now. If there was an appraiser involved, they must have had their 'no-see-um' glasses on because this is a dump. Not only that, it was a FLIP! OMG! Nice new appliances and a few cupboards, bathroom, paint on the inside, less on the outside over the rotted wood siding and fascia. All newer vinyl plank flooring... and a good thing, too because that stuff bends a bit, to follow the caving-in floors of this palace that are so slumpy that the side door only opens 8" before getting stuck tearing up that new vinyl plank flooring. The foundation... isn't. All floors sloping badly. Exterior has painted over rotted wood siding and painted over flake-board.

I assume there was an appraiser that did a physical inspection this time (Lordy, Lordy), but as AI takes over more of the valuation side without a knowledgeable person putting eyes on it, I suspect there will be a TON of overvalued crappy houses out there that borrowers will walk away from once they realize they have a beat up shack and not a livable house. This is the 3rd one within the past 30 days in similar condition. Just 'cuz you slap some lipstick on the pig, it's still a pig. Appraisers provide an invaluable eyes-on service.

 

[autobot]

When AI can do all that stuff in the 3.6 form for you. Pretty soon it will be making $500, and you be getting $20 hour secretarial pay. But then get AI to check AI. Is that a conflict, friend checking a friend, both talking to each other.

$500/$20 sounds pretty accurate, but I'm thinking the $500 would also displace the $25,000 average total Real Estate Agent's commissions, and a big chunk of a few others such as Title Search, loans commissions, etc.
It all goes back to my very first post on this forum where I suggested home Sellers might partner with a bank and have pre-Appraised, pre-emptive, pre-approved, pre-funded Mortgages all signed sealed and delivered by their bank in place BEFORE their house is even listed. Google says banks spend $1000-3000 per mortgage in ADVERTISING, and IMO banks are like gas stations, in that there is some diff in price but you normally go with the most convenient, especially if you are low on gas. Even in a row of new construction tract houses, there will be important diffs and getting the right one is worth big money, so if the house you've chosen to bid on has one bank ready to close instantly, vs starting a month's long journey through unknown territory and minefields with another bank, you wont care if the first bank's rates are razer-thin fraction higher. You marry the house but only date the mortgage rate.
Technically it requires a legit Buyer's SSI# to roll a real UAD 3.6 but they are allowing full dress-rehearsal practice 3.6 by banks on houses. So it would be "Fully Appraised, Inspected and Funded" with an "*", like all bank offers got "*".
IMO a bank that does an Appraisal and Home Inspection on their terms before a house even hits the market would be able to offer lower more competitive rates, for a few reasons, than any bank coming into the process after the whole Offer/Acceptance, Contingency and related DEAD LINES.

I'm not worried about AI causing any problems at this stage, because any AI Appraisal and/or Home Inspection will be reviewed by at least Sellers, Buyers and their IRL friends and experts.

"friend checking a friend, both talking to each other." I posted some questions about the Home Buying Process on 4Chan DIY and someone said that but about RE Agents conspiring to jack up Closing Costs.

 

[J Grant]

$500/$20 sounds pretty accurate, but I'm thinking the $500 would also displace the $25,000 average total Real Estate Agent's commissions, and a big chunk of a few others such as Title Search, loans commissions, etc.
It all goes back to my very first post on this forum where I suggested home Sellers might partner with a bank and have pre-Appraised, pre-emptive, pre-approved, pre-funded Mortgages all signed sealed and delivered by their bank in place BEFORE their house is even listed. Google says banks spend $1000-3000 per mortgage in ADVERTISING, and IMO banks are like gas stations, in that there is some diff in price but you normally go with the most convenient, especially if you are low on gas. Even in a row of new construction tract houses, there will be important diffs and getting the right one is worth big money, so if the house you've chosen to bid on has one bank ready to close instantly, vs starting a month's long journey through unknown territory and minefields with another bank, you wont care if the first bank's rates are razer-thin fraction higher. You marry the house but only date the mortgage rate.
Technically it requires a legit Buyer's SSI# to roll a real UAD 3.6 but they are allowing full dress-rehearsal practice 3.6 by banks on houses. So it would be "Fully Appraised, Inspected and Funded" with an "*", like all bank offers got "*".
IMO a bank that does an Appraisal and Home Inspection on their terms before a house even hits the market would be able to offer lower more competitive rates, for a few reasons, than any bank coming into the process after the whole Offer/Acceptance, Contingency and related DEAD LINES.

I'm not worried about AI causing any problems at this stage, because any AI Appraisal and/or Home Inspection will be reviewed by at least Sellers, Buyers and their IRL friends and experts.

"friend checking a friend, both talking to each other." I posted some questions about the Home Buying Process on 4Chan DIY and someone said that but about RE Agents conspiring to jack up Closing Costs.

The reason the above would not work is that even if a seller partnered with a bank for a pre-sale appraisal and home inspection, the seller can not FORCE the buyer to use that bank for financing. And some buyers pay cash, in which case the seller wasted their money on an appraisal

Even if a seller convinced a buyer to use the bank they partnered with, the bank might order its own new apprasial done at the time of the contract. Or greenlight a waiver.

 

[autobot]

f there was an appraiser involved, they must have had their 'no-see-um' glasses on because this is a dump. Not only that, it was a FLIP! OMG! Nice new appliances and a few cupboards, bathroom, paint on the inside, less on the outside over the rotted wood siding and fascia. All newer vinyl plank flooring... and a good thing, too because that stuff bends a bit, to follow the caving-in floors of this palace that are so slumpy that the side door only opens 8" before getting stuck tearing up that new vinyl plank flooring. The foundation... isn't. All floors sloping badly. Exterior has painted over rotted wood siding and painted over flake-board.

I assume there was an appraiser that did a physical inspection this time (Lordy, Lordy), but as AI takes over more of the valuation side without a knowledgeable person putting eyes on it, I suspect there will be a TON of overvalued crappy houses out there that borrowers will walk away from once they realize they have a beat up shack and not a livable house. This is the 3rd one within the past 30 days in similar condition. Just 'cuz you slap some lipstick on the pig, it's still a pig. Appraisers provide an invaluable eyes-on service.

 

[autobot]

Since AI appraisals aren't a thing, yet, whatever is going on in those deals is "Human Error". Maybe the bank is relying on AMVs and the typical Zillow highly curated 28 pics, and the buyer had a big down payment?

I think an AI looking at a big stack of pics would've flagged all those issues, at least for "further inspection by qualified person" even for stuff like recently painted by clearly older exterior wood on the shadely moist side of the house, because the AI would know which way north is and the climate, and see moss and ferns. AI would certainly flag any sloping floors and out of plumb doors.

My big grip is listings on Zillow only have 28 curated pics.

 

[autobot]

The reason the above would not work is that even if a seller partnered with a bank for a pre-sale appraisal and home inspection, the seller can not FORCE the buyer to use that bank for financing. And some buyers pay cash, in which case the seller wasted their money on an appraisal

Even if a seller convinced a buyer to use the bank they partnered with, the bank might order its own new apprasial done at the time of the contract. Or greenlight a waiver.

Sure a buyer could use their bank, if they want to give other buyers a few weeks to snatch the deal out from under them. I can't understand why sellers will agree to pay 1/2 of $25,000 RE Agent commissions for an hour's worth of figuring out how to list on Zillow, but will dig their heels in against things that actually could make a difference to buyers, like an Appraisal or Inspection, even if those might become redundent. OK, I guess I do know...they are doing what their Listing Agent tells them.
Even for a cash buyer, an Appraisal done pre-emptively by seller certainly has value and something that will assure them the house is even worth a visit. At least a $500 Appraisal will be done by a "grown up" and come with real info, unlike a $12,500 RE Agent's Zillow listing. Here in Silicon Valley many Listings do have Appraisals and Inspections done by Seller, and its assumed the Buyer will likely do their own, but at least its a starting point. That seems to break at exactly $500K for the houses and about 90 IQ points for the Agents.

But I'm thinking it would be the sponsering bank that would do the pre-emptive Appraisal for FREE, because banks well understand "its a numbers game", and are happy to front minor expenses to likely make interest earning loans. That is why banks don't charge their internal costs to issue Credit Cards up front. Chase is offering $500 cash to open a FREE checking account after 3 months of your Direct Deposit to that account.

One of the few valid reasons anyone buys a house for cash is to lock the deal before someone else does, but my idea would end most of that. Unless you've got extensive iron-clad inside knownedge of a house and RE deal, I'd much rather "partner" with a bank, and put all the real risk on them, at least for the first couple years of home ownership. Maybe I'm a worry-wart, but it seems like "loan origination fees" are cheap insurance against "OMG! If I'd know it was gonna be like this I wouldn't have bought this. Now I'm stuck and can't get my $500,000 back".

 

[Joe Flacco]

The problem with that idea is that sellers are trying to sell for the highest possible price, not necessarily someones opinion of market value. What if the seller thinks they can sell for $2 million and the pre-listing lender approval comes in at $1.9? The seller is not going to list for $2 million and advertise that loan collateral is approved at $1.9m.

It's the same reason why the GSE waiver value is not made public. In theory, the GSE could publish their estimate of market value for each property and say up front how much the loan can be. But they won't do that because then the valuation is probably interfering with the market.

 

[Joe Flacco]

We do the best we can, but we are just not accurate 100% of the time. It's a difficult job and it can be humbling at times.

 

[J Grant]

I can say this: Many of the appraisals that the RE agents use are from another planet. Here is a typical case:

"This awesome house, 112 Lilly Rd, has just been reduced from $800,000 to $750,000 after 400 days on the market. Selling under appraised value of $900,00!! Come steal it before it's gone.

 

[glenn walker]

I can say this: Many of the appraisals that the RE agents use are from another planet. Here is a typical case:

"This awesome house, 112 Lilly Rd, has just been reduced from $800,000 to $750,000 after 400 days on the market. Selling under appraised value of $900,00!! Come steal it before it's gone.

400 days on market that should be a hint but in all fairness some sellers won't budge and so the agent just hoped a buyer comes bye.