0
0
Processing a Loan Application with an Amended Agreement of Sale? Don’t forget about the Appraiser!
In Circular Letter 26-14-29, the VA issued instructions to lenders relative to their responsibility in providing a copy of the Agreement of Sale on a purchase transaction to the assigned appraiser at the time of the appraisal assignment. In this regard, appraisers are required to analyze the Sales Contract to determine what impact, if any, sales concessions (if applicable) might have on the sales price and/or terms of the transaction.
In Circular Letter 26-14-29, the VA issued instructions to lenders relative to their responsibility in providing a copy of the Agreement of Sale on a purchase transaction to the assigned appraiser at the time of the appraisal assignment. In this regard, appraisers are required to analyze the Sales Contract to determine what impact, if any, sales concessions (if applicable) might have on the sales price and/or terms of the transaction.
Although these instructions are rather straightforward and are considered a standard industry practice, what about those transactions in which an Amended Agreement of Sale is executed after the time of the appraisal assignment but before loan closing?
In order to provide further clarification to lenders on this matter, the VA issued Circular Letter 26-14-29 Change 1 which states that, lenders must “exercise due diligence in determining whether or not the terms outlined in the Amended Sales Contract could be reasonably thought to affect the estimated value of the property being used as security for the loan.”
As a result, it is recommended that underwriters take note of the date of any Amended Agreement of Sale on a loan transaction that they are reviewing. If this date is after the effective date of the appraisal but prior to loan closing and, if there are any substantive changes, this Amendment should be provided to the appraiser for his/her analysis.
In fact, this could even be viewed as a new assignment based on the changes that were made. If it is determined that no substantive changes were made, it is recommended that the underwriter provide a comment accordingly. Failure to follow these procedures may cause the loan to be subject to review for an Indemnification Agreement OR any subsequent claim against the VA guaranty may be subject to adjustment.
So – although ignorance is bliss – lenders need to remember the Appraiser when there is an Amended Agreement of Sale. It could save your Firm thousands of dollars in the future.
