Magazine article Insight on the News

Computer-Aided Appraisals Place Buyers Closer to Homes

Magazine article Insight on the News

Computer-Aided Appraisals Place Buyers Closer to Homes

Article excerpt

To expedite home-buying, lenders are using automated services to check creditworthiness and conduct appraisals. Critics contend the speedy process puts mortgage lenders at risk.

You sign a contract to buy a house, but the real-estate appraiser never shows up to determine the value of the property. The bank approves your mortgage anyway. What gives?

Technology. By accessing a computer database with relevant information about the property, appraisers don't necessarily have to visit a house to determine its worth. This is particularly true in communities in which subdivisions are the norm.

"It really looks like mortgage companies, banks, savings and loans and attorneys might not need us anymore," says Bruce Lazar, vice president of Palma Associates, an appraisal firm near Philadelphia, who defends old-fashioned, on-site inspections. "How do you know a bunch of animals don't live there and the carpet's not shot, or the kitchen cabinets aren't eaten by termites, or the bathtub and ceiling don't leak?"

Michael Magnotti, an appraiser in Vienna, Va., sees the mortgage-approval process speeding up. "A lot of lenders we work with now are giving full approval [for home loans] within five days," he says. "But that means all the people who service the lender have to do their job quickly or else you don't stay in business. And whoever is the quickest and cheapest wins."

Lenders would incur too much risk if they lent money to a borrower for a home sight unseen, according to Richard Sorenson, president of the Appraisal Institute in Chicago. "At some point you need to have human input to keep [the appraisal] on track. There are such diverse properties and homes [in a given metropolitan area], how could you get such variables built into a computer program to take into that part of the business?"

But even the Federal Home Loan Mortgage Corp., or Freddie Mac, has gotten into the act; it uses Loan Prospector, an automated underwriting service that evaluates a borrower's credit, verifies employment and checks the appraisal report, which is based upon computerized data. "Within five minutes, you know whether you can get a loan or not," says Freddie Mac spokesman Douglas Robinson. …

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