Be Totally Objective - Part 2
Don't ever tell any lender to give a loan or not to give a loan on a property!!!! This situation may come up if you do appraisal and/or inspection work for a bank. A mortgage lender may ask you if they should make a loan, or you may throw in your two cents on your own. I'll repeat it again so you don't forget it. Don't ever tell any lender to give a loan or not to give a loan on a property!
Every once in a while I hear an appraiser or inspector saying that they recommended that the lender approve or not approve someone's mortgage loan. That blows my mind when they do that! Your job as an appraiser is to only interpret the market data that you have obtained as it relates to the subject property. You don't include your own subjective opinions or biases.
As an appraiser, you know nothing about the potential borrower's income, personal debts, past credit history, possible court judgments and lawsuits against them, total monthly living expenses, job stability, etc. Only the borrower and the lender know that type of information. So I don't care how nice the house you're appraising is; or how bad the condition of the house is; or what type of area it's located in; or whatever else you find out about it during your field work. And I don't care if it's the nicest house you've ever seen or the worst house you've ever seen. If you tell the lender to make the loan just because the house is selling for a great price and it's in excellent condition, then you better be willing to put your money where your mouth is! Because what happens if that guy borrows the money and then the house is destroyed due to a lack of maintenance and then he stops making his loan payments on the mortgage. (I've seen this happen many, many times with foreclosure appraisals and inspections I've done for banks). The bank is going to get stuck holding the bag for the loan. The bank will end up losing money on the foreclosure sale, even though you told them what a great loan they'd be making!
It's the same scenario if you stick your nose somewhere it shouldn't be by telling the lender not to make the loan. I don't care if it's the worst house you've ever seen or if it's in the worst section of town and you would never buy it. How do you know that the guy buying that house isn't some multimillionaire? What if he's going to renovate that house and donate it to a poor family or to a local charity? If the lender listened to you, then he wouldn't make the loan. (Oh yes, I forgot you have a crystal ball to read the future. You can see that this loan will go sour for the lender!)
You can put all of the objective comments you want in the appraisal report. But just keep your subjective opinions and your nose out of the lender's and the borrower's business.
Don't take any of this personally. It's not meant to insult you. It's just meant to open your eyes to some of the realities of the real estate business. The point I'm trying to make is that you must estimate market value based upon the data you obtain and everything that affects the value of the subject property. You can put all of the objective comments you want in the appraisal report. But just keep your subjective opinions and your nose out of the lender's and the borrower's business. You're not hired to be a nosy "busy body." There are already far too many busy body, know-it-all Realtors and other third parties in the real estate business. You're hired to estimate market value ONLY! There are many times that I see people talk out of ignorance by thinking that they're a know-it-all. And I'm not being a hypocrite myself because I certainly don't think I have all of the answers.