from Local Attorney, Michael H. Wasserman

Monday, August 31, 2009

Assessing Mortgage Appraisals

Chicago area real estate contract live or die depending on the results of mortgage lender appraisal reports. If the property value does not justify the loan, the contract is going nowhere.

As the market defalted over the last two years, many of my clients saw contracts collapse based on low appraisals.

A great many Chicago area Realtors, bloggers and other real estate pundits were quick to place blame for low property valuations on the Home Valuation Code of Conduct that became effective this past May. Frankly, the low appraisals were already a problem long before HVCC went into effect. For all the uproar, I am seeing a rather interesting (positive) trend of late. More on that in a moment. First a quick recap.

The HVCC is not so much law, as it is the result of an agreed settlement entered into by Fannie Mae, Freddie Mac, and the office of the New York State Attorney General.

The idea was to stem the tide of appraisal fraud and abuse by changing the way that lenders select their mortgage appraisers. Rather than rely on appraisers who were "friendly" or beholden to the brokers that hired them to "get" the right valuations, lenders must now assign appraisers using staff that have nothing to do with the loan production.

The Code has been pretty roundly criticized, perhaps even justifiably, as lenders began to employ third-party appraisal management companies to select appraisers. AMCs are middlemen. They receive appraisal requests from lenders and then assign them to an appraiser from a list of approved vendors who agreed to take assignments. Not everyone on the list is necessarily familiar with the localities they are assigned to work in. By design, it is harder for loan brokers or real estate agents to influence the valuations (for good or for bad).

So, how are things working out under the new system?

Curiously, I am seeing many more appraisals coming in significantly higher than the contract purchase prices. Really, truly, honestly. Significantly higher. Today, I saw a reported valuation 50% over the contract price. Valued fully $100,000 over what the seller agreed to sell for. Only one contract all month that came in below the contract price, and we quickly and easily negotiated an appropriate price reduction for our buyer.

Is this the result of a strengthening marketplace? Is this a positive effect of the HVCC? Hard to say at this point.

One way or another, it sure seems to bode well for my buyer-clients. Listing agents may want to hold just a little bit firmer on their asking prices too.

Anyone else having similar experiences?

Thursday, August 27, 2009

Need to Negotiate with your Mortgage Lender? New Instructional Video Shows You What To Expect

Have you tried to modify a client's mortgage loan, negotiate a short sale or tried to discuss a file in process with an underwriter recently? If not, this video pretty much sums up what the experience is feeling like.

Ok, the dialogue is in russian, but watch it anyway.....

You'll get it.

Monday, August 17, 2009

Another New Real Estate Contract Debuts...

I had the good fortune this afternoon to be retained in another Chicago condominium purchase. After an introductory phone conversation, I asked the client to forward his contract for review.

Much to my surprise (and delight) I immediately recognized that the newest local form contract is finally in circulation.

Ladies & Gentlemen of the real estate community, I give you "Multi-Board Residential Real Estate Contract 5.0.

A more complete exploration of the Multi-Board 5.0 form will follow in another post or two.

I know that a lot of realtors do not like the form for its shear heft (14 pages compared to the Chicago Board's 4 pager), but I like this one and encourage everyone to at least give some consideration to "trading up"

These two features alone make it the best available contract for local transactions:
  1. A new font and larger type make this one emminently more readable, even if faxed 3, 4, or 7 times back and forth during negotiations.
  2. The electronic form (5.0e) is based on the Adobe PDF file format. It is easy to navigate from field to field and page to page when making offers or counters. it even allows for easy digital signature (you do have one of those, don't you?)
Oh and substantively, this one solves my most severe criticisms of the 4.0 and prior versions and of the several CAR forms.

A big thank you to the Illinois Real Estate Lawyers Association, the Will County, DuPage County and Northwest Community Bar Association members who draft this gem and to the several local Real Estate Boards that have given it their seal of approval.

Call me if you want to learn more about how 5.0 is going to make your deals work better

Thursday, August 13, 2009


Its Official -

The Governor signed off on PA-96-0232 this week.

Illinois homeowners are now required to give a 23rd disclosure to prospective purchasers to comply with the Real Property Disclosure laws; knowledge of the property's past use for the manufacture of methamphetamines.