The industry needs to change IMMEDIATELY in ..................

buying real estate in costa rica
costa rica jaco real estate
costa rica real estate for rent

Just as I wrote this I am wondering what changes you think we should implement to "improve" the industry, when you read that title.

Here is my suggestion: APPRAISALS NEED TO BE PAID BY THE LENDER / MORTGAGE BROKER.

Let's analyze this a little further so you can see where I come from. We all work with pre-approved / pre-qualified buyers right? So lets assume the buyer is looking for a house with 20% down and the rest financed, at a certain interest rate and mortgage payment. This "information" gives us certainty the buyer will be able to make loan payments to the lender. It should also assure the lender the buyer can make the payments, based on all their underwriting rules (they will not publish of course) 

That same buyer now buys a house for exactly the same price as the loan amount plus the down payment. And then comes the appraiser. He/she appraises the property for $20,000 less (that would be good becuase I have seen much much worse) than purchase amount, which means:

1. the buyer cannot get the loan he/she was pre approved for.

2. the buyer has to come up with the 20K in cash to make up the difference in order to buy the property.

3. if you have an appraisal contingency you can get out of the purchase contract but you "lost" about $400 to pay for the appraisal, ( and what ever other inspections you the buyer paid for)

4. there is probably not enough time in the contingency to apply with a different lender in the hope you get an appraiser who might appraise at value. So this is not an option

5. you can ask for an appraisal review ( takes quite some time too), and usually that is also not possible within the time constraints in the contingencies. But even if you can, no other appraiser is going to go against the findings of the first (OA) appraiser. As you may have seen in the past, they are always right and never make mistakes. (they are willing to admit to at least).

So you are, as a buyer, "screwed". 

Does anyone see whats wrong here? I hope so.  

The appraisal protects the lender,  not the buyer as so many banks will tell you. By the way, the appraiser is NOT  the only one who can have " AN OPINION OF VALUE",  (that is an appraisal). As a broker I took the appraisal course as well. As an investment adviser I took CCIM courses to look at value from 3 perspectives (buyer, seller and lender). And I know my market (trend).

Appraisers were very wrong in 2004 - 2007 as they kept "appraising" at over asking price mainly because ( I think) they were told by banks to appraise at value, as the banks were making tons of money selling these loans via the back door as MBS'es. Appraisers were wrong then and they are wrong again. So they do not have a very good history in my opinion.

So lets put the burden where it protects the entity. If banks want to be protected, then they should pay for the appraisal. It should be part of the "service" they provide. And maybe, maybe, the buyer should compensate the bank when it appraised for value and the bank is willing to fund. 

There is much more to be written about appraisers behavious and banks, but that is for another time.

Thanks for listening.

Antoine