Want to know how the new Fannie Mae controversial “value acceptance” can be good news for homeowners, home buyers and realtors?
This post is all about thinking outside of the box to use Fannie Mae’s shocking decision and flip it to work to your advantage.
Fannie Mae has introduced “value acceptance” recently and it has sent shock waves through the lending industry.
This announcement has changed the appraisal process in a way that, if left alone, can be financially damaging to homeowners and home buyers, which is extremely alarming.
But, I am a think-outside-of-the-box kinda human. I choose let go of what I have no control of and, focus on what I do have control of when looking for a solution to a challenge.
You are going to learn 3 Reasons why the Fannie Mae controversial “value acceptance” can be used to your advantage when it comes to buying or selling a home.
After you learn what I am about to share, you are going to be excited about the process!
This post is all about thinking outside of the box to use Fannie Mae shocking decisions to rely upon value acceptance – and flip it to work to your advantage.
The Fannie Mae Controversial “Value Acceptance”
“Value Acceptance” (formally known as “appraisal waivers”).
There are many appraisers right now who are shocked and angry at this most recent Fannie Mae announcement.
In a nutshell, this decision to implement “value acceptance” is cutting the the appraiser out of the equation and telling the public this is a good thing.
Fannie Mae is basically saying that the most expensive thing you will ever buy does not need to be inspected, measured and fully analyzed by a licensed professional who has spent a minimum of 5 years learning the valuation process.
Instead, you will be relying upon an unlicensed “property data collector” who has undergone approximately 2 weeks of training to make observations and decisions regarding your purchase.
This process is not new and it has been it the works for at least 5 years.
So, this announcement should not be surprising to the lending or appraising world.
Meanwhile, I have had plenty of time to research and understand how this frightening decision could be flipped on it’s side and used to the advantage of the home buyers, sellers and realtors.
Why is Fannie Mae cutting the appraiser out of the valuation process?
You will be told that this decision will provide options, save the home buyer money and make things move along quicker.
When, in reality, a “value acceptance” process could cost the home buyer tens or even hundreds of thousands of dollars.
Imagine if the appraisal is waived and the value of your home is accepted to be $50,000 higher than what it is actually worth.
Then, in 3 years, an unexpected, life changing moment causes you to list your house for sale.
What if the market has not increased in those 3 years?
Maybe the market has been stable, or even, decreased in those 3 years due to higher interest rates or some other influence….?
Now, your biggest investment is worth less PLUS the impact of the $50,000 mistake.
How would that effect your family’s life?
The only entity that benefits from the “value acceptance” process is the lender.
The lender saves money by skipping the appraisal process, not you.
Fortunately, not all lenders will be implementing this process.
Zen Appraisals only works with lenders who have superior standards and do not rely upon property data collectors.
We personally inspect, measure and fully analyze all of our appraisals in house using processes and education accumulated over 22 years of experience in the real estate industry.
3 Reasons Why the Fannie Mae Controversial “Value Acceptance” Can Be Good News
Yes, I said it
But, please hear me out.
Because if you know me, then you know I have a way of finding solutions to difficult problems.
After all, our company specializes in unique property valuation.
So, problem solving is our specialty!
Bev and I have been brainstorming and we have come up with a few ways to make this potentially harmful lending announcement work in your favor.
#1 – Home buyers can now choose their own appraiser.
Typically, in the loan process, the home buyer has no say in who appraises the property.
It would be nice to tell the bank that you want to choose the appraiser, right?
But, there are laws in place that prevent this option.
However, if your lender suggests that you chose the “value acceptance” process…. then you suddenly have a beautiful option that this lender will not tell you about but, I will explain it to you right now….
First, I would NOT insist for my lender to order an appraisal completed by a license professional.
Are you surprised? Keep reading…
Instead, I would say Yes, I will take your “value acceptance”, thank you very much…
And then, take these 2 very important steps immediately:
- Be sure that the agreement of sale includes an appraisal contingency.
- Hire your own appraiser to provide you with a professional estimate of value.
Here’s how this beautiful option will benefit you:
- Hiring your own private appraiser saves you money because it cuts out the middle man. (Yes, many lenders charge you more for the appraisal than it actually costs)
- Choosing your own appraiser gives you the power of selecting an appraisal company who has been highly recommended by a trusted resource and/or Google reviews.
- When you hire your own appraiser then you are officially our Client and we can discuss the entire appraisal process with you. (When your lender hires the appraisal we are very limited to what we are permitted to discuss with you.)
- Obtaining an appraisal report from a licensed professional empowers you with informed decision-making choices.
Think about it this way:
Are you getting a home inspection so that you know your house is safe and well-maintained?
Maybe you are also getting a home warranty in case the hot water tank breaks, etc?
So, you are willing to spend about $1,000 on home inspections and warranties but are not concerned if the property is worth what you are paying for it?
Why skip the appraisal when making such a huge investment?
Because Fannie Mae said so? That’s just silly.
Skipping the appraisal only benefits the lender. It does not benefit you in any way.
Our office routinely completes appraisals for savvy home buyers who are purchasing properties with cash….. because they want to be sure their investment makes sense….
Looks like we will be expanding our services!
We are looking forward to helping more clients save money and also be armed with the information required to be a well-informed home buyer.
Start with getting our complimentary House Hunting Checklist.
#2 – Home sellers can get an appraisal to support their list price.
Now that home sellers know that home buyers may not need an appraisal this can work to their advantage as well.
Especially during a climate of uncertainty where homes prices can fluctuate drastically depending on the location and market influences.
Our office often appraises homes before they are listed for sale because the home owner needs the bargaining power the appraisal report provides in case a home buyer wants to offer lower than market value.
Therefore, our advice to homeowners is always: keep this appraisal report to yourself because you may get a buyer who will offer more than market value.
And now, if that buyer is following the “value acceptance” process without getting their own appraisal then the seller has the upper hand in the negotiation process because they are the only one with an appraisal report.
Begin with our complimentary Important List for Homeowners.
#3 – Realtors can (and should) hire an appraiser to cya.
By offering the “value acceptance” process to the buyers, Fannie Mae is basically placing the responsibility of value decisions squarely on the realtors shoulders.
If you are a realtor, do you feel 1000% confident in your opinion of market value?
Do you have the support and the facts to back up your opinion?
Yes, there are a few situations where the value can be pretty easily determined.
Such as cookie cutter homes in a newer development where there are lots of current sales and no differences in the condition or improvements, and the sale price range is very tight.
In the Philadelphia Metro market area, those cookie cutter homes are a needle in a haystack.
So, quite often the seasoned realtor will be able to pull sales that are similar and then say to their client: “Let’s see what the appraiser says”.
Meanwhile, more buyers will opt for the “value acceptance” and rely upon the realtors opinion.
Now, imagine if the realtor accidently missed something important that affects the market value, or what if the market shifts?
Then, the homeowner refinances shortly after moving in and finds out that the house is not worth what they paid for it.
Do you, the realtor, really want to take that phone call?
Are you prepared to answer the questions?
Sure, you could say that the option was theirs to waive the appraisal and it’s a risk that they took.
How do you think that home buyer is going to feel about you?
Wouldn’t it be better for your sales business to refer the responsibility of valuation to a real estate appraiser who has completed extensive research based upon years of education and experience in determining market values?
Be sure your clients always get an appraisal. It’s in their best interest.
PS: We also provide measurement and floor plan services so that your clients will know the correct square footage of their property. The county assessment is often incorrect because they do not go inside the house…. but that’s a topic for a different day 🙂
