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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127814  
Subject: No comps = no refi? Date: 10/11/2012 5:47 PM
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I'm considering a refi on my house. I'm looking to combine a fixed rate first mortgage and a HELOC into a new FRM. Since this is considered a cash-out refinance lenders are a little more strict on the CLTV limits. My CTLV will be close to that limit, depending upon the appraised value of the house. Unfortunately there are no recent comps in my neighborhood upon which to base an appraisal. There are lots of houses just like ours nearby (all up and down the street!), just none of them have been sold recently.

My loan officer (who seems to know her stuff and comes highly recommended) says she's "trying to find an alternative" but is hinting at the fact that no comps means no appraisal, and no appraisal means no refi. Is it that cut and dry? I know things are a lot tougher these days but I would think there must be some sort of acceptable method of determining an appraised value when there are no good comparable sales.

Any advice?

Thanks,

Wot
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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124378 of 127814
Subject: Re: No comps = no refi? Date: 10/11/2012 7:36 PM
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Hi Wot,

My loan officer (who seems to know her stuff and comes highly recommended) says she's "trying to find an alternative" but is hinting at the fact that no comps means no appraisal, and no appraisal means no refi. Is it that cut and dry?
I'd like to be able to say "no"... and common sense would say there has to be *SOME* alternative.

I know things are a lot tougher these days but I would think there must be some sort of acceptable method of determining an appraised value when there are no good comparable sales.
Of course, ultimately there IS... its called private money financing, at 50 LTV (value determined by fire-sale estimate) at rates 12-13% and 6-8 points closing costs... ;~(

Any advice?
http://www.youtube.com/watch?v=uepFO4psgKE

Wish I could break the tension & deliver a non-punchline solution... but I've been equally stymied in similar situations the last 24 months.

Dave Donhoff
Leverage Planner

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124379 of 127814
Subject: Re: No comps = no refi? Date: 10/11/2012 9:30 PM
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We tried to buy a house with a purchase mortgage last January. It's in an area with very few sales, and the sales that existed had to be modified to such an extent that they were discounted. We tried three lenders. No go. Had to pay cash, which allowed us to negotiate the price down further, as cash payers don't come around often.

IP

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124380 of 127814
Subject: Re: No comps = no refi? Date: 10/11/2012 11:25 PM
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Unfortunately, WotPeed, your subject line says it all: no comps...no loan.

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124381 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 9:37 AM
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Thanks for the replies, even though that's a bit of a bummer. So basically no one with a house like mine in our neighborhood will be able to sell their house to anyone needing a loan until someone comes along and pays cash for a house to set the market price?

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124382 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 10:36 AM
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So basically no one with a house like mine in our neighborhood will be able to sell their house to anyone needing a loan until someone comes along and pays cash for a house to set the market price?

Makes for interesting real estate liquidity issues, doesn't it?

If you are rural enough and it's a primary home, (ours wasn't,) future buyers might be able to go USDA. Or something like that. Perhaps Dave can chime in since he had mentioned that as a possibility when I was discussing the mortgage problems we had. Apparently they are less tough on comps.

IP

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124383 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 11:20 AM
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If you are rural enough...

Not rural at all. This is a home in one of the nicest parts of San Diego, just a few miles from downtown. There have been some sales in our neighborhood recently but our house is small and the recent sales have been bigger homes.

Seems to me that a reasonable appraisal can be made by starting with the sale prices of the larger homes, estimating the cost of the land vs the cost of the structure, then applying the same (or similar) $/sq ft to any other nearby properties. Certainly not as good as the sale of a comparable property but it's reasonable.

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124384 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 12:04 PM
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Not rural at all. This is a home in one of the nicest parts of San Diego, just a few miles from downtown.

I wonder if your loan broker might be getting too picky with the definition of comps. Have you talked to an appraiser? They are really the specialists in appraising property and finding appropriate comps and adjusting for differences.

--Peter

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124385 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 12:10 PM
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...but our house is small and the recent sales have been bigger homes.

This was part of our problem as well, one which we hope will disappear with our garage conversion to living space. There's a limit to how much a comp can be tweaked before it is disallowed. Though the appraiser did the build up approach you suggest, taking land value and what it would cost to build the existing structure, the banks wouldn't touch it.

IP

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124386 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 12:35 PM
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ptheland:

<<<Not rural at all. This is a home in one of the nicest parts of San Diego, just a few miles from downtown.>>>

"I wonder if your loan broker might be getting too picky with the definition of comps. Have you talked to an appraiser? They are really the specialists in appraising property and finding appropriate comps and adjusting for differences."

I am not a lender, loan broker or loan originator, and I am certainly not in the residential lending market every day, but there are three approaches to apppraising real estate (and comps, is only one way).

The three approaches are:

"1. Cost = Land Value + value of Depreciated Improvements;

2. Sales Comparison/Comparables - after adjusting for disimilar characteristics, including location, size, design and construction quality, age and other physical characteristics; and

3. Income = (Gross Income, adjusted for vacancy & collection) less Operating Expenses)/ Capitalization Rate."

Logic would suggest that even if comps are hard or impossible to come by, that one (or both) of the other two approaches would allow an appraiser to deliver an appraised value.

Regards, JAFO

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Author: FlyingDiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124387 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 12:38 PM
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Logic would suggest that even if comps are hard or impossible to come by, that one (or both) of the other two approaches would allow an appraiser to deliver an appraised value.

Logically, yes. But banks don't always work logically.

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124388 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 12:52 PM
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I wonder if your loan broker might be getting too picky with the definition of comps. Have you talked to an appraiser? They are really the specialists in appraising property and finding appropriate comps and adjusting for differences.

I haven't talked to an appraiser myself, but 5 minutes on Zillow turned up several properties that look like pretty good comps to me. Very similar properties to mine, less than a mile away, sold back in late July/early August. I forwarded them along to the loan officer I'm working with and she said she'd review them. I would hope they would also take into account that home prices (at least around here) have risen noticeably since August.

The place I'm working with is a direct lender. I thought that would give them more flexibility with regards to stuff like this, but I guess they still have their own hoops to jump through. When my LO says she'll review the sales I sent her, I don't know if that means she is passing them along to their appraiser or if she's just using her own judgment to figure out whether it's worth getting the appraisal process started at all.

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124389 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 1:11 PM
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WotPeed wrote: The place I'm working with is a direct lender. I thought that would give them more flexibility with regards to stuff like this, but I guess they still have their own hoops to jump through.

Direct lender pro:

Work with their own pool of funds and lend directly.
Approval process is simpler since no one else is involved.

Direct lender con:

Less flexibility in overcoming roadblocks to getting you approved.

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124390 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 1:21 PM
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Direct lender con:

Less flexibility in overcoming roadblocks to getting you approved.


Hi CC,

Do you know if direct lenders have their own in-house appraisers or do they farm that stuff out? If I were to get my own appraisal would they consider it?

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124391 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 1:35 PM
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Logic would suggest that even if comps are hard or impossible to come by, that one (or both) of the other two approaches would allow an appraiser to deliver an appraised value.


Getting an appraised value is not the problem. Getting the bank to accept the appraisal is.

IP

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124392 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 1:37 PM
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Hi WP,

Do you know if direct lenders have their own in-house appraisers or do they farm that stuff out?
The new laws require all residential loans to use independent (not in-house) appraisers.

If I were to get my own appraisal would they consider it?
No, but you can try to offer your own generated comparables to the lender's hired appraiser when he shows up to do his physical inspection. He's quite unlikely to accept them though... but you can offer.

I'd concur with JAFO's notes. If you are in San Diego proper (or even anywhere in that huge county,) there is enough general activity for an appraiser to use a mode to create a report.

Luck!
Dave Donhoff
Leverage Planner

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124393 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 1:50 PM
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I'd concur with JAFO's notes. If you are in San Diego proper (or even anywhere in that huge county,) there is enough general activity for an appraiser to use a mode to create a report.

Thanks Dave. What would you recommend I do if my loan officer comes back and says there aren't enough comparable sales to get an appraisal? Tell her to schedule an appraisal anyway? Punt and look for another lender/broker?

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124394 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:03 PM
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Punt and look for another lender/broker?

That would be my choice in this case.

From your description, it appears the loan officer isn't really motivated to work through your issues to get the loan done. I'd switch to someone who is more responsive and willing to work to get the deal done.

--Peter

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124395 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:05 PM
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WotPeed wrote: Do you know if direct lenders have their own in-house appraisers or do they farm that stuff out? If I were to get my own appraisal would they consider it?

According to HVCC (Home Valuation Code of Conduct), all lenders of every type are supposed to hire independent appraisers. The practical reality is that some lenders created their own "independent" third party appraisers.

No, you can't hire your own appraisal.

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124396 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:06 PM
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1. Cost = Land Value + value of Depreciated Improvements;

2. Sales Comparison/Comparables - after adjusting for disimilar characteristics, including location, size, design and construction quality, age and other physical characteristics; and

3. Income = (Gross Income, adjusted for vacancy & collection) less Operating Expenses)/ Capitalization Rate.



There may be three approaches, but only #2 is used in residential lending.

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124397 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:06 PM
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WP,

What would you recommend I do if my loan officer comes back and says there aren't enough comparable sales to get an appraisal? Tell her to schedule an appraisal anyway? Punt and look for another lender/broker?
She's just a single-source retail rep, right? If she says she can't do it, fergodsakesman, don't argue against her!

Either shop more retailers yourself, or find a competent & trustworthy broker to do the dirty work for you.

Dave Donhoff
Leverage Planner

Wise advice I once heard;
"When someone tells you they are not good enough for you, believe them!"

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124398 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:14 PM
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From your description, it appears the loan officer isn't really motivated to work through your issues to get the loan done. I'd switch to someone who is more responsive and willing to work to get the deal done.

To be fair, I've only just started the process with this LO so I can't jump to this conclusion yet. In fact I would say that she HAS been responsive so far, just that the response has been discouraging. That's probably not her fault. And maybe the sales I forwarded to her will change someone's mind and things can continue forward. I'm mostly just trying to decide the best course of action if it doesn't work out.

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124399 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:20 PM
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She's just a single-source retail rep, right?

I'm not sure what that means. She's a loan officer for this company:

http://www.sdfunding.com/

I've heard nothing but good things about the company and this specific LO from various sources.

If she says she can't do it, fergodsakesman, don't argue against her!

Either shop more retailers yourself, or find a competent & trustworthy broker to do the dirty work for you.


I guess my question would be better phrased as "If she says they can't get an appraisal, is anyone else likely to?"

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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124400 of 127814
Subject: Re: No comps = no refi? Date: 10/12/2012 2:40 PM
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I guess my question would be better phrased as "If she says they can't get an appraisal, is anyone else likely to?"
Hard to say... she may be very competent, and accurate... or not so much in either case (but very friendly & nice sounding.)

Dave

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124407 of 127814
Subject: Re: No comps = no refi? Date: 10/13/2012 10:43 PM
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Sometimes there is a happy ending after all (and not just at massage parlors). I came home from work yesterday to find one of those refi offers in the mail from Chase (holders of my first mortgage), the kind where they say "just sign here" and the loan is magically reduced from 5.25% to 3.25%.

I've gotten these offers in the mail before but the fine print pointed out that I wasn't eligible due to our HELOC. I assumed that would be the case this time as well but I called anyway and the nice lady I talked to said that they would submit the subordination request to PNC (holders of my HELOC) and that they haven't been getting any resistance from PNC on these subordinations. So the HELOC will stay in place as-is but the first mortgage will get a nice drop in interest rate.

Otherwise, no appraisal (yay!), no closing costs, etc. Just a reset to a new 30 yr term at a lower rate. Can't beat that, especially given the rock and hard place we may have been stuck between due to this comps/appraisal situation.

Thanks to everyone for their input. Hopefully this won't be an issue when we eventually do sell our house (probably in a couple of years).

Wot

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Author: CCinOC Big funky green star, 20000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124408 of 127814
Subject: Re: No comps = no refi? Date: 10/13/2012 11:07 PM
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WotPeed wrote: Thanks to everyone for their input. Hopefully this won't be an issue when we eventually do sell our house (probably in a couple of years).


If you're planning to sell your home in a couple of years, why are you getting a 30 year FRM? What are you going to do with the other 28 years of interest rate guarantee?

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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124409 of 127814
Subject: Re: No comps = no refi? Date: 10/13/2012 11:24 PM
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If you're planning to sell your home in a couple of years, why are you getting a 30 year FRM? What are you going to do with the other 28 years of interest rate guarantee?

Well, we're not positive we're going to be selling in a couple of years, but that's the plan. Regardless, a 30yr FRM is all that Chase was offering as part of this streamlined refi program. If they had a shorter term available I would have taken it.

If I was able to refinance both loans into a new one I was going to do a 5 or 7 year ARM, but it looks like that might not be an option at all given the appraisal hassle. And honestly, the savings between an ARM and a FRM just isn't very large nowadays.

I'll let the LO at the lender I've been working with know about this new turn of events. If it turns out she can make something happen I'd still rather combine the two loans. But since Chase is making this cheap and easy for me she'll have to find something pretty quick.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124411 of 127814
Subject: Re: No comps = no refi? Date: 10/14/2012 8:35 AM
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If I was able to refinance both loans into a new one I was going to do a 5 or 7 year ARM, but it looks like that might not be an option at all given the appraisal hassle. And honestly, the savings between an ARM and a FRM just isn't very large nowadays.

I'll let the LO at the lender I've been working with know about this new turn of events. If it turns out she can make something happen I'd still rather combine the two loans. But since Chase is making this cheap and easy for me she'll have to find something pretty quick.


Quick and cheap. You have to look at the pay back, ie how many months it will take you to recoup your costs with savings. If you no longer have your primary mortgage to reduce greatly, the burden falls mostly on the second mortgage. Since you only expect to be there two years, this could be not worth your while. Do the math.

IP

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