How Are Appraisals Used In Default/ Pre-foreclosure Process?

[spittman]

Not sure which section this should be posted in. If a moderator feels it should be moved, please do so. The topic is about foreclosure appraisals, but my question is directed towards professionals in the lending industry or anyone with direct knowledge or experience of what goes on during the foreclosure process.

Whenever I call the borrower to set up an appointment for these types of appraisals, and many times the borrower has passed away, so my contact may be a caretaker or executor, but they ask what the appraisal is for. I just tell them that they need to discuss that with the lender.

But how exactly is an appraisal used in foreclosures? Does it depend on what type of loan it is?

Let's say the mortgage balance on a home is $80,000. If they sell the home for $90,000 is the deceased inheritors entitled to the difference or does the lender keep it all? In contrast, if it were to sell for $60,000 would they just have to pay the difference and how excactly does the appraisal play in all this? Is it just a marketing tool for the bank to see so that they can determine how to move forward or does it end up in judicial court somewhere for all to see?

When trying to setup the appointment with a contact that is resistant, I'm compelled to tell them that it is beneficial for them to let me do a full interior, but I'm not sure if that is true or not.

 

[bnmappraisal]

Not sure which section this should be posted in. If a moderator feels it should be moved, please do so. The topic is about foreclosure appraisals, but my question is directed towards professionals in the lending industry or anyone with direct knowledge or experience of what goes on during the foreclosure process.

Whenever I call the borrower to set up an appointment for these types of appraisals, and many times the borrower has passed away, so my contact may be a caretaker or executor, but they ask what the appraisal is for. I just tell them that they need to discuss that with the lender.

But how exactly is an appraisal used in foreclosures? Does it depend on what type of loan it is?

Let's say the mortgage balance on a home is $80,000. If they sell the home for $90,000 is the deceased inheritors entitled to the difference or does the lender keep it all? In contrast, if it were to sell for $60,000 would they just have to pay the difference and how excactly does the appraisal play in all this? Is it just a marketing tool for the bank to see so that they can determine how to move forward or does it end up in judicial court somewhere for all to see?

When trying to setup the appointment with a contact that is resistant, I'm compelled to tell them that it is beneficial for them to let me do a full interior, but I'm not sure if that is true or not.

Good questions (my bold above) regarding the use and I guess I can understand where you're coming from. I've never worked on the lending/bank side of an appraisal, so I, too personally, don't know and can't answer those questions, but I do think they are valid as far as learning the whole process ...

I will add though, that the second parts of your question, although I also can see WHERE you may be coming from, I don't think they need an answer to the "unintended user(s)" of our report. We are asked by the client/bank/lender, etc to appraiser 123 Main St ... we are NOT asked to (generally) to disclose WHY we are doing said appraisal.

E.G. Sometimes people (neighbors) approach me while I'm measuring/taking pics of a particular property (it's 99% of the time a vacant property) I always have the same response - "I'm doing a project for the owner of the property."

This has always worked (9yrs deep) and also doesn't disclose any potential confidential info that the inquiring party may/may not infer.

 

[Tim The Enchanter]

The use the appraisal for decision making purposes, sometimes at least.
Do a loan mod? Short sale? Repo it?
I have done some where the owner or agent said the property was in poor shape, and had it listed low.
Sometimes it is, and sometimes they are not being truthful. Sometimes they claim hidden damage, so I don't know for sure.
Bottom line, they need to know the value.

 

[Elliott]

What are they used for? The lender realized they've got a non-performing loan. They want to know what its worth a year ago, six months ago, and today, and it helps them make a decision what to do next. They want to lose as little as possible and they own the property.

 

[Riick]

If the property sells for more than the outstanding balance of the loan(s)
+ costs + penalties, the balance goes the mortgagor, or their heir(s).

 

[Meandering]

Primarily the appraisal is needed for the bank's accounting.

Look up "mark to market accounting" and you immediately see why they need a current value on a property that is securing a loan.

.

 

[spittman]

... I don't think they need an answer to the "unintended user(s)" of our report. We are asked by the client/bank/lender, etc to appraiser 123 Main St ... we are NOT asked to (generally) to disclose WHY we are doing said appraisal.

In the report, I usually put the purpose and intended use as "to determine the current fair market value of the property for asset evaluation purposes" or something similar. If it's someone asking me like a neighbor, or like that "neighborhood watch guy" that chased me down a few weeks ago, I tell them I'm an appraiser or that I'm inspecting the home, but I don't know what they're gonna do with it. Sometimes I just tell them I'm a realtor and that I'm gathering information for market data, blah, blah, blah.

If it's the heirs asking me, I just act like I don't know who they are and redirect the question by asking if they are trying to sell the home or refinance or another similar modification program. They will basically answer their own question by telling me more details about what's going on. I suspect that the caretakers of the deceased homeowners know why the bank is ordering an appraisal. They have more knowledge of went on in the actual meeting between them and the lender so they know the details [or should know] of the modifications to the loan. I think they just do not trust what the lender will do. I had one contact actually ask me "If the appraisal comes in higher than what the home is worth, will we owe more?" I don't believe the lender can ask for more money than what is owed and that the exact opposite could happen. I am so compelled to tell them this, but I don't want to put my foot in my mouth so I just respond by saying they need to talk to the lender about it.

Primarily the appraisal is needed for the bank's accounting.

Look up "mark to market accounting" and you immediately see why they need a current value on a property that is securing a loan.

.

Thanks. That's some very good information.

 

[Bobby Bucks]

The word "caretaker" is usually on assignments for FHA or conventional closeouts following the death of the borrower. In my experience, these assignments are used to (1) establish a listing price, (2) to satisfy the bean counters who determine just how much money was lost in the process. There usually isn't much left for the heirs, in fact it's fuzzy math, reverse mortgage style. The bright side is that it's not uncommon for there to be 3-4 assignments or even more over a 2 year period before the decision makers decide which shelf in the shadow inventory to place the property. Duplication and replication in the REO world is our best friend.

 

[Peter LeQuire]

It may be different in different jurisdictions, but in this state, lenders can obtain a judgment for any deficiency remaining after a foreclosed property is sold and the expenses of foreclosure have been recouped.

 

[spittman]

The word "caretaker" is usually on assignments for FHA or conventional closeouts following the death of the borrower. In my experience, these assignments are used to (1) establish a listing price, (2) to satisfy the bean counters who determine just how much money was lost in the process. There usually isn't much left for the heirs, in fact it's fuzzy math, reverse mortgage style. The bright side is that it's not uncommon for there to be 3-4 assignments or even more over a 2 year period before the decision makers decide which shelf in the shadow inventory to place the property. Duplication and replication in the REO world is our best friend.

Yes they are. I just received a repeat on one that I did six months ago for an expedited fee. I wonder why it's so important to get these in before the end of the month that they are willing to pay a decent fee increase?