Appraising property--to protect the lender, it takes a pro.

Author:Coakley, Rory S.

THE LAST THING A MORTGAGE BANKER NEEDS is to lend too much money on a property, resulting in a loan-to-value (LTV) ratio that is greater than underwriting guidelines permit. For protection from this highly undesirable set of circumstances, a lender needs a solid appraisal done by a trained and certified professional appraiser.

According to the Appraisal Guidelines used by Richmond, Virginia-based SunTrust Mortgage, "The safety and soundness of mortgage loans secured by real estate depends upon the adequacy of the underwriting supporting the transaction.... Appraisals are an essential component of the loan underwriting process because appraisal reports contain the estimates of collateral values."

The SunTrust Mortgage guidelines go on to state, "A real estate appraisal must convey in writing an independent, impartial opinion of value of a particular property and is the result of a complete appraisal assignment performed by a state licensed or certified appraiser ... in compliance with Uniform Standards of Professional Appraisal Practice, or USPAP."

No doubt, the key to obtaining a reliable and credible third-party property valuation is the professional appraiser, a licensed and trained individual who keeps current on market trends and new laws. By investing in the reasonable cost to obtain the services of a professional appraiser, the property buyers and sellers realize significant benefits.

Most--if not all--mortgage lenders will require the applicant to pay an appraiser to determine the value of the property being purchased. Not only does this allow the lender to know how much the property is worth to set a loan amount, but it also lets the borrower know if the home he or she is interested in buying is overpriced or underpriced.

Appraisals also help sellers list their properties accurately so they can be competitive in the market.

Required training and experience

In terms of professional training and experience, what does it take to become a "pro" as a property appraiser? In Maryland, to cite one state as an example, the Department of Labor, Licensing and Regulation (DLLR) requires a licensed real estate appraiser to have completed 150 hours of courses approved by the state Commission of Real Estate Appraisers and Home Inspectors, and to have compiled at least 2,000 hours of appraisal work experience over a period of at least two calendar years.

In Maryland, there are three categories of licensed real estate appraisers:

* Licensed real...

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