Real Estate Costs, Fees and the Mortgage-Backed Securities System

Residential Real Estate is Not an Asset; it’s an Expense. It is a “Non-liquid assets” that cannot be sold or converted into cash easily without a significant loss of investment and time.

That’s why before you buy or sell real estate, contact an independent, third-party professional to advise you properly before you buy or sell your residential property. The Real Estate Industry is a thirty trillion-dollar industry; it’s incredibly complex and loaded with regulations, state and federal laws, good and bad guys, and gals. And more changes have taken place since 2017 that impact real estate costs than the previous 30 years.

If you’re a person who appreciates an honest assessment, then please read on. Residential properties generate no income for their owner; they do, however, create expenses. Let’s start with real estate taxes, property insurance, mortgage insurance, and utility bills.

Now add the ongoing time-suck of interior and exterior maintenance. Now the big one; having to pay contractors when you’re unable to DIY (Do It Yourself) and those costs can bleed you dry. Yes, your home has cash (equity value.) However, you can’t tap into it unless you sell or refinance-which is another costly expense.

Appraisers are State Credentialed and Certified Real Estate Appraisal Experts. Appraiser fees are on average, incredibly modest ($550), and clients gain a wealth of unbiased third-party data and insight into your home and where it stands in your market.

When compared to the Real Estate Salesperson that Markets a modest $200,000.00 home, with the average and typical fee of 6% This will cost a homeowner approximately $12,000. Not including transfer and local taxes, which could run between $1000 and $6000.

Mortgage and Refinance cost. That depends on your FICO score and Lending institution. This process can set you back from a low $2800.00 for the best FICO score up to $9000.00, and beyond.

Every single residential home produces expenses, and you need to view it through that lens. For each dollar you tie up in your home, that’ll be one dollar you can’t invest and use to grow your wealth.

Your Home Budget Painted by the Numbers

  • Create a spreadsheet of your spending priorities:
    Automobile(s) and required insurance, maintenance, fuel.
  • College savings and Loan Repayments
  • Breakfast and Lunch Costs
  • Entertainment, Recreational Expenses like Travel Trailer, Vacations, Technology
    Retirement Funding, Healthcare Costs, Life Insurance
  • Costly Bad Habits
  • Add 10% extra wiggle room for unexpected expenses.

Now subtotal, and subtract from your current single or combined monthly income. In the Lending world, this is Debt to Income (DTI) and what is left is what you can afford to them.

That loan you just closed at your local Lender, will be sold within two to four weeks after you close the mortgage deal, to Government-backed institutions. They are publicly known as Fannie Mae, along with others. They bundle your home mortgage on the open market to thousands of global Investors every single day.

This exchange or process is called a Mortgage-Backed Securities (MBS). And according to The National Association of Realtors report, as of late 2019, 93% of all home sales involve a mortgage, and 88% of repeat home buyers have mortgages as well.

Only a *Certified Residential Real Estate Appraisers have the day to day knowledge, experience, and credential on what the lending system (MBS) requires.

No one else in the involved transaction has the professional credentials to inform you of how the complete Mortgage-Backed Security system works like an affordable and skilled Certified Appraiser. Not the Real Estate Broker/Agent or the Local Lender. After all, they’re required by law to hire a qualified Appraiser.

Trust Real Estate Appraisal Services PLC. Residential Appraisals, Valuation and Consulting Services in Grand Rapids and West Michigan. Data-driven, clear Scope of Work and solution Based Data Services: Deep dive historical and current trends, Suburb Location analysis. We always walk our clients through the best and worst-case scenarios of our products/services. Schedule your Appointment Today?

*A State Certified Appraiser credential allows for Complex properties of any type or Value. State Licensed Appraisers are not allowed to perform complex appraisals. Choose wisely, choose Trust Real Estate Appraisal.

Trust Real Estate Appraisal Services PLC

Hire us before you buy or sell real estate in Grand Rapids of West Michigan. Unbiased, third party market appraisals, valuations and Real Estate Consulting. Our clients receive far more value that what we charge in Fee's.

Home Owner Maintenance Cost-How it Impacts Sellers & Buyers

Home Owner Maintenance Cost-How it Impacts Sellers & Buyers

All housing components have a life span. Some parts last a lifetime, and others are more or less “consumables” and some lasting only a few years. Maintenance costs go with the property from day one of ownership and are factored to be considered to be at “market value” as defined by a Certified Residential Appraiser. 

There is a life expectancy of most of those, and that is approximately 5-18 Years, and that time goes fast. And if you, as a home Seller that could have a market value impact on your list price with low offers from market participants.

And if you’re a home buyer, performing your due diligence could save you time, frustration, and money. At the end of the day, only you can look out for what is your best interests. In real estate, it’s “buyer beware.” If your experience in real estate is limited, selecting the right professional is paramount for your success by choosing the right deal or falling into a money pit.

No one can better look out for you and your family’s self-interest other than you. Choosing the professional will provide you with that due diligence. Buying a home for the first time or third time can be emotional for those involved. Don’t enable yourself into “sleepwalking” through a home purchase process. “Sleep Walking” is a term for anyone that’s over-reliant on an inexperienced one real estate actor, In addition to not being vetted by you for professional competence.

Selling or Listing Your Grand Rapids West MI Home? Ask these Questions

Selling and or Listing Your Home?

Both REALTOR® Appraiser’s and Appraisal Organizations encourages all consumers to utilize the skills and talents of a local A REALTOR® Agent along with a Professional REALTOR® Appraiser to make the process of selling your home go smoothly and quickly.

The REALTOR® professionals are the one expert resource available to guide you through the home selling process, and the Licensed and or Certified Appraiser is the one expert that will give you factual information about the market value of your home.

Both the REALTOR® Appraiser and the Agent working together as a team will provide the required information you’ll need for your due-diligence so that you can make informed decisions.

1) When interviewing a prospective REALTOR® Agent to list your home for sale, it is essential to understand how they operate. Are they the best resource to assist you in the process? Here are some right questions to ask the Realtor Agent:

2) Do you recommend a homeowner to obtain an appraisal to help set a list price?

3) What are your qualifications to value a property?

4) If you have a Realtor designation to value real estate, how many classroom hours did it take and did you have to pass an exam to obtain it?

5) What are the difference between market value, market price, and cost? Go to Article. http://vacaponline.com/selling-your-home/

Taking the wrong exit on the aspiration highway

Ten Years After the Mortgage Meltdown; Banks will do anything to get around primarily, the cost and secondly the purpose of an appraisal. After all, the Big banks are certainly not making enough money as it is, correct?

Like many folks, I’d assume, most don’t keep up to date with the mortgage and banking industry. Moreover, I can confirm that there have been some very interesting $#*& Going down in the new and improved “valuation space” formerly known as Appraisal, that could jeopardize appraisal accuracy, so grab a cup of whatever you like, and let’s focus forward.

Background and Detail

There has been a five-year-long false narrative campaign that there is a shortage of appraisers that have resulted in longer turn times and higher fees.

Lenders and their AMC’s have been cherry picking the data that Appraiser numbers have declined and that therefore, there are not an adequate amount of active appraisers to meet the demands in the majority of “their” areas.

Who is this source that’s spreading these rumors?

What they’re not sharing is that since legislation went into effect post, 2007-2008 has spurred the creation and growth of “Third Party (Think of HMOs) Appraisal Management Companies (AMC’s) who have appropriated the Fee Appraisal industry like Temp Agencies. 

Systematically, fees paid to appraisers have been steadily “Compressed” as this was how the AMC’s idea of paying appraisers like giving them a minority percentage of the entire Appraiser fee paid by the bank for the Appraiser.

Well, there is a term for this. it’s called “Assumpsit,” which  in English is called “Unjust Enrichment.”) And this has and has been the main reason that many Appraisers refuse to work for these AMC’s. 

And the reaction from the AMC/Lending industry was to utilize the AMC and Lender Associations and lobby groups to implement an ongoing “Appraisal Shortage Fake News” cycle that has finally gained the The Appraisal  Standards Committee to eliminate the four year degree requirement for the Certified Residencial License and lower both the Class Room and Experience hours in 2017. 

Then in 2018, Fannie Mae began the Property Inspection Waiver, and there is Senate Bill 2155 which eliminates the need for an Appraisal in rural America, where it is especially needed.

All Players in the Real Estate Industry affected with “iBuyer, FrontDoor, Zillow Offers” the banks are finding ways to get around the appraisal process and or continuously finding ways to lower the cost of an appraisal to the bank.

This race to the bottom is a one-sided, self-serving pursuit of winner take all. Like the Chinese water torture fable, each of these disruptive business models not only serves to decrease the accuracy and reliability of the service of the appraisal, but for the Real Estate Agent and Lenders as it undermines Consumers and the integrity of NAR, and the financial institutions of our country.

Reader, I’d like to Introduce to you, three new, improved and Cheaper “Valuations” that the Lenders and FNMA are implementing since 2018.

Property Inspection Waivers (PIW), Hybrid Appraisals, and Appraisal Waivers.

1) Property Inspection Waivers- (PIW)In a PIW situation, when the traditional appraisal is not mandated, but instead the buyers’ property value is based on an Automated Valuation Model (AVM) by Fannie Mae’s Collateral Underwriter (CU) program from the Independent Appraiser’s from across the country since 2014. 

There is very little daylight between Fannie Mae’s AVM and Zillow’s “Zestimate” because both rely on algorithms (not boots on the ground data) to base the value of your home and loan. 

Algorithms are both Deterministic ( producing the same output going through the same states) and Non-Deterministic ( will show different behaviors for the same input on different execution and there is a degree of randomness to it.)

Both FNMA and Zillow do not publish or share their methods to either to the Appraisers whos data they use, the Lender or the Consumer. Is that even ethical under statute or current business law? All this allows for margins of error when these fatalist Algorithms machines Appraise”your property.

However, has Fannie Mae factored that in if they’re their costs calculations? No Worries, Fannie Mae (A GSE who was bailed out by the taxpayers in 2009 have absolved themselves, including the originating Lender (as in your local lender) from any future lawsuits that may pop up in the future from current and prospective consumers. Misleading or am I too “judgy.” 

Let’s Summarize: The Government Backed FNMA is not Responsible. The Lender is not responsible, and There is no Appraiser to complain about or their E&O Insurance.

Which practitioner is potentially holding the “Bag”? Could it be the Buyers Agent and their Brokerage?

2) Hybrid AppraisalsA hybrid appraisal is where the functions of the appraisal process are divided up among farmed out to unknown parties, each with their ways of doing things.

The number crunching performed by a certified appraiser and is similar to a desktop appraisal. The Appraiser property observation is farmed out by AMC to a non-appraiser. Which, could be a real estate agent or some other type of property inspector, all who by the way are not familiar with each other’s Real Estate credentials or experience. 

The problem with this type of Fractured (Hybrid) appraisal is that if the property observation is performed by someone who does not hold a State Appraisal Credential and does not know what to look for in that context. 

Knowing what to look for is one of the most critical components of the trained Appraisers job, and the results of the observation get reconciled with the other parts of the professional appraiser. Which can impact the final opinion of value?

 3) Appraisal waivers in rural areas referenced at the top of this post, SB2155 allow the Lender to invoke not only a property inspection but eliminates the need for an appraisal by an unbiased third party appraiser.  What Could go wrong?

Most would state that this is just an example of the “dumbing” down of services across all industries. The Real Estate Industry for both Residential and Commercial is a 25 Trillion Dollar Annual Market, and the wolves are at the door.

In closing – For Home Buyers getting mortgages, before allowing the bank in your negotiations, that you will enable them to perform one of these types of Valuations (they are not appraisals), you should know that you as a Consumer are not achieving your due diligence and need to be aware and accept whatever the consequences.

As for Real Estate Broker’s and Agents and or E&O insurer if you have coverage for this under any of the three Valuation substitutes you’ve have read about today, and most importantly, create a very tight legal disclaimer. 

Home Buyers-Your Lender Wants an Algorithm to Appraise Your Home

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Currently, the terms “Artificial Intelligence,” and “Algorithms” have been sold to the masses as being objective, scientific and unfortunately accurate. What has been sold to us, is and has been, merely a marketing trick to intimidate consumers with accepting algorithms as gospel. A lot can go wrong when collectively, we put blind faith in big data.

If Fannie Mae and Freddie Mac now allow ‘Algorithms’ be the ‘Decider’ and not human appraisers for your next Home Loan – Then is it not logical that the laws be updated and enacted to properly reflect and acknowledge that the programmers and their Bosses who’ve signed off on them by holding them to the same level of accountability as both the Licensed and State Certified Real Estate Appraisers?

Algorithms are everywhere. They sort and separate the winners from the losers. The winners get the job or a good credit card offer. The losers don’t even get an interview, or they pay more for insurance. We’re being scored with secret formulas that we don’t understand that often don’t have systems of appeal.

That begs the question: What if the algorithms are wrong?
To build an algorithm, you need two things: you need data, what happened in the past, and a definition of success, the goal that you’re looking for and often hoping to repeat. You train an algorithm by looking, figuring out. The algorithm figures out what’s associated with success. What situation leads to success?

Algorithm’s; Artificial Intelligence are 21st-century machines. They require a human being to function. Therefore algorithm/A.I., cannot usurp the human mind. A machine can solve only “deterministic” problems. New data/information would be a surprise. A “deterministic algorithm” is an algorithm which, given a particular input, will always produce the same output, with the underlying machine always passing through the same sequence of states.” The second type: “nondeterministic algorithms” are often used to find an approximation to a solution, when the exact answer would be too costly to obtain using a deterministic one. A nondeterministic algorithm represents a single path stemming into many routes, some of which may arrive at the same output and some of which may arrive at different outputs.

  • However, both are just machines and require a human being to function.
  • Machines do not think
  • Computers lack creativity
  • Devices lack consciousness
  • Only human consciousness produces thinking.

Who are these human oracles from the Banks and their Coders programming these algorithms? What are their goals, their biases, responsibilities, and accountability? In an industry that has multiple regulatory requirements, how do they fly so low under the radar?

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Home Buyers Ask-Why Should I Hire a Certified Real Estate Appraiser?

Our Buyer Clients benefit from our impartial, third-party appraisal, State Certified expertise for an in-depth scope of work based on your home buying needs and requirements.

Buyers ask; why should I hire a Licensed Certified Appraiser?
Appraisers are the go-to professionals for Mortgage Lenders, Attorneys, CPA’s, and individual Buyers & Sellers. Home Buyer 101: You’re Drowning in Data – Typical Buyers will experience the ultimate Data Dump of ever-changing, high-level information, boilerplate disclosures, and Documents to “review and approve in this highly regulated industry. It is almost impossible for many home buyers to absorb and comprehend so much information In the time allowed.

“Let The Buyer Beware”. Is a principle of contract law in many jurisdictions that places the burden on You, the buyer to perform your own due diligence before making a purchase.The term is commonly used in real property transactions but applies to other goods, as well as some services.

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Who’s Helping Whom
Generally, the only advice a Buyer will get is from a Real Estate Agent (Sellers Agent or Buyer Agent). Most real estate agents are diligent and ethical. But they are not qualified to give Appraisal or legal advice, and the successful ones avoid doing so. So, Buyer Beware. Real Estate agent(s) will only earn a commission (get Paid) if and when the buyer purchases the property. If the agent gives the buyer advice which might result in the buyer deciding not to purchase, the agent may lose tens of thousands of dollars. As a result, there is a temptation for some agents to downplay the risks or problems in a particular purchase.

Still, want to Go at it alone? Get in Touch with us Today.