John interviews Earl Judd about the appraisal process at Pemco.


JOE:  Hey, Joe Hafner here with another episode of Tuesday Morning Coffee.  John Jones and I were recently in Atlanta where we visited with Pemco, who’s the asset manager that we work with on selling HUD homes.  John had a great interview with Earl Judd, who is the appraisal manager for Pemco.  Unfortunately, we had some technical issues and John’s intro was lost.  So we are jumping into the interview in the middle of it, but it’s such great info we wanted to share it with you.  So enjoy it and here it is.  Thanks a lot.


JOHN:  So I’ve got some questions.  Appraisals for HUD properties.  Are they different or is it basically the same type of appraisal you get for an FHA loan?

EARL:  They’re all FHA appraisals, but there are a couple of key differences.  One being the property condition report that’s provided to the appraiser before they go out and do the inspection.  That’s going to let them know the functionality of the mechanical systems—the plumbing, the electrical work—if any of that stuff has potential problems.  Because when our appraisers visit the property, the home is shut down.

JOHN:  The utilities aren’t on.

EARL:  Right.  It’s all winterized and shut down to preserve it.

JOHN:  Protect? 

EARL:  Yeah.

JOHN:  Gotcha.

EARL:  So that form, it used to be about 20+ pages under M and M2.  Now it’s limited to a one-page report, provides a little bit more of a challenge to the appraisers because there’s not as much information there.  But because on an FHA appraisal you do have to test the mechanical systems, they must rely on that form in order to ensure that that information is there.

JOHN:  That makes sense.  Is there an advantage to a buyer of a HUD home?  By you already having an appraisal done, do they get to take advantage of that in any way?

EARL:  They certainly do.  Part of our contract is to provide the buyer with an appraisal, and that’s within six months in the hopes that they’ll be able to use that to close their contract.

JOHN:  Okay.  In our market, it saves them $400.

EARL:  Right.  Now unfortunately, there have been some changes in lending validity while there weren’t changes to the marketing validity of the appraisal.

JOHN:  Okay.

EARL:  The lending validity is 120 days and then there’s a 30-day grace period given by the lender in order to close that contract.

JOHN:  So if it runs longer than 150, they may, per lender, may have to get their own appraisal.

EARL:  Exactly.  Unfortunately, there is the time period in between where there’s no lending validity whatsoever and our marketing validity has not expired yet.  So we order an appraisal every six months as we did previously, but now the lending validity has changed.  So there’s the gap there.

JOHN:  What is the timeframe as far as like when you order an appraisal to the time it probably usually ends up being on the market for a buyer?  How long a timeframe is that generally or is there generally?

EARL:  In between the appraisal time and then actually making it to the market?

JOHN:  Yeah.

EARL:  Well, as soon as we get the appraisal back, it is reviewed by our department.  And if there are no problems with it, it meets all the HUD guidelines and there’s no other errors found in it, then it goes right to our listing department and is usually listed within a couple of days.

JOHN:   Oh, okay.  So there’s not like there’s a huge timeframe that goes by that starts getting into that 120 or 150?

EARL:  No, we really try to make sure that we get it out there as quickly as possible so there’s as much time to use on the lending side as they can have.

JOHN:  That’s awesome and that’s great information.  Earl, thanks so much, man.  Thanks for having us today and being such a great host.

EARL:  My pleasure.  Thanks.

JOHN:  We appreciate it.  Thank you, man.  See ya.