As of May 1st, guidelines will change for appraisals on mortgages that want Fannie Mae or Freddie Mac's blessing. Up until now, your lender chose the appraiser when you applied for a loan. The fee was typically in the $350 range. Each lender had a list of appraisers that they had approved. And, you, as the home buyer, paid for the appraisal at settlement. In this market the seller often gave you money to pay for the appraisal.

Now, lenders will not be allowed to choose the appraiser they use. You can see the reasoning for this. There was a lot of fraud over the last few years. There were crooked lenders using crooked appraisers to "cook" the appraisals to come up with the numbers they wanted/needed. And, that's one piece of why we're in the financial mess we're in.

But no one is very happy about the medicine they'll be taking on this one. Lenders will now go to third party companies who will then assign it to an appraiser they have on their books. Because of the change, appraisers will likely get paid less. But, because another layer has been added in, the consumer will likely pay more.

And, because of the change, buyers will no longer be able to pay for the appraisal at settlement. They'll be required to pay up front. At a time when buyers are putting out cash for other things like home inspections as well, it'll make the money a little tighter. Hopefully, seller's contributions to settlement costs can still be used at settlement to reimburse the buyer for this expense.

As we begin to use the new system, no doubt we'll notice other changes. Stay tuned for more.

We've talked a little bit in the past about appraisals and we've talked about the use of comparables when deciding on a listing price. But I had something a little out of the ordinary come up this week and thought it might be of interest to everyone.

An agent called to say she was writing an offer on one of my listings in Warrenton. She also told me she was using the last settled comp (comparable) in that subdivision as a basis for the offer price. Now that seems perfectly reasonable. That's especially true given that settlement on this particular home occurred only about a week ago.

However, there are special circumstances at play here that definitely warrant a closer look. This particular unit is reasonably similar to my listing. However, it was never actually for sale in the multiple listing service. It was entered into the MLS solely for comparison purposes. A good clue that this is the case is when something is entered into the MLS as "sold" with zero days on the market. I called the agent for a little more background because there was something else unusual here. Generally if it's never really been for sale and is entered only for comparison purposes the List Price and the Sold Price are the same. However in this instance there was about $55K difference between them.

Basically, the home had been owned by a foundation that was liquidating assets. A private buyer became aware that this home was going to be sold and approached the agent about buying the property without it going on the market. The foundation was willing to take substantially less cash for a quick, cash sale with the property sold as is.

Now, I am a little concerned about this because certainly this will come up when an appraisal is done on my listing. But part of the appraisal process says that in order to compare "like properties" they should both have been exposed to the full competitive market. Clearly that didn't happen with this unit. And, I'll make sure I make the appraiser aware of this.

I also made the agent writing the offer aware of the background so that she understood the flaws with basing her offer solely on this comparable.

It's too soon to tell what the outcome will be as we haven't yet received the offer. But sometimes a comparable isn't really comparable!