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Appraising is like a minimum wage job.

I thought about the 'minimum wage job" observation and I think the occupation is more like being a High Wire Artist. As Aerialists, we are expected to always complete the difficult task of crossing the wire, objectively, competently, and honestly. But should anything go wrong, like not making value, exposing property issues, kowtowing to realtors, and now 'not using comparables that support the higher value' then there can be fatal catastrophic consequences (board complaint, black list, bias lawsuit). Each step could be our last so we take each step carefully. Doesn't help that the stakeholders are on the ground shouting, "Fall, Fall, Fall." But we still do it for the self satisfaction of completing the task but will not take the risk of getting on the wire if not appropriately compensated.
 
For mortgage lending work, the lender quotes the borrower a fee and then can not deviate it - so the appraiser has to do the appraisal for that fee, whether rit takes 5 hours or 10 hours.

Lenders will go back to borrowers with higher appraisal fees or pay the difference themselves. Happens all the time.
 
lender quotes the borrower a fee and then can not deviate it
I don't think that is exactly correct.

Correct me if wrong, but I believe D-F allows a 10% tolerance on the GFE. With the " average total closing costs in this analysis ($8,686) represent about 8 percent of the mean loan amount. Obviously, closing costs are a significant expense for borrowers and are worthy of attention and scrutiny. But another important issue—one that was beyond the scope of this analysis—is whether the disclosure process provides information in a timely way so borrowers can actually use it. A borrower who finds out on the day of the loan closing that settlement costs are greater than estimated may be in a difficult position. If the loan is necessary to purchase a home or, in the case of a cash-out refinance, to gain access to needed funds, the borrower may be unwilling to back out of a standing loan offer. In the rush to settle the loan, borrowers may not even recognize cost increases. In future analyses of the disclosure process, the matter of timing warrants careful assessment." (Minn. FED)

So, on an $8,686 closing, they have $868 margin and since most costs will be fixed, only the variable ones (like the appraisal) impact the Good Faith Estimate. I don't believe that GFE implies a line item 10% but rather the total closing costs. Obviously, a badly under-estimated GFE may require the lender to pay the difference. The problem for lenders is thinking it is a SFR and not doing the 'due diligence' to find out before offering the GFE what the fee will be. This should be a sign to bankers they need to order an appraisal early in the process so they can modify the GFE early. For instance, the house might be lake front, or might have an ADU, second home, large shop, etc. What appraiser doesn't want an additional fee for additional work?

Lenders need to be transparent to the borrower. They also need to be transparent to the appraiser. I've been sent to do "SFR" appraisals on 2 commercial dog kennels, and a new house with a commercial cabinet making shop on the same site. It's frustrating. The last dog kennel wasn't finished (new construction as well) for well over a year, after I had asked to be taken off their vendor list for similar antics. They begged me to do the final inspection, and I refused. Internally, their policy was to use the original appraiser for finals, but I bet they sent one of their own appraisers out to do that rather than another roster appraiser.

So, send me the assignment and I will look it up, and report back. If you ask me what's the fee, I will give you my good faith estimate and stick to it. But with the community banks I use, I think they simply over-estimate the appraisal fee and closing costs are generally lower than the GFE. The Minneapolis FED said that 61% of GFEs are higher than the actual closing costs on the HUD-1.
 
Lenders will go back to borrowers with higher appraisal fees or pay the difference themselves. Happens all the time.
It happens on occasion or where the property is complex. The system is designed so it does not happen on a regular basis with non complex orders.
 
I believe the 10% tolerance is for the appraisal itself ( $500 , tolerance of $50 ). The lenders frankly do not want to be bothered on an ongoing basis by an appraiser asking for more inrement of a fee on normal work and will probably drop one who does that. OF course, a fee quote is appropriate and given on complex and high-value orders.
 
Designed?
Yes, there is a tolerance for appraisals as part of the HUD, that they can not exceed X %of the TILA good faith estimate the lender gave the borrower wrt fees. These comments refer to GSE loans only. There is no counterpart for private work.
 
Yes, there is a tolerance for appraisals as part of the HUD, that they can not exceed X %of the TILA good faith estimate the lender gave the borrower wrt fees. These comments refer to GSE loans only. There is no counterpart for private work.
That does not stop the lender from providing an updated TILA with different costs. The lender has to provide the TILA 3 days before closing. If the Tila changes. That waiting period restarts. Since most appraisals are ordered and completed sometimes up to a month before closing. The lender has more than sufficient time to inform the borrower of any changes before the appraisal is even assigned.
 
before the appraisal is even assigned.
When I started 30+ years ago, appraisals were ordered within 24 hours of the application. And the borrower put up money upfront for the appraisal cost and credit check. There were no surprises on the GFE (which applied even before D-F.)
 
Yes, there is a tolerance for appraisals as part of the HUD, that they can not exceed X %of the TILA good faith estimate the lender gave the borrower wrt fees.

That is a lender problem. It is your choice whether or not you allow it to become YOUR problem
 
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