TRID closing disclosure: Sales price, appraised property value, estimated property value – which one is it? That’s one of the many questions we get when we cover the closing disclosure requirements. We’re going to cover that in a little bit of detail here today. Let’s talk sales price first. What makes something sales price when we’re talking about TRID? In order to be able to use sales price, you have to have a loan that’s being secured with dirt that’s being purchased with those loan proceeds. Then it’s simple. Once we’ve figured out we have dirt that’s being purchased with the loan proceeds that are in front of us, then we look to the contract sales price. That is, in fact, the number that you will use for the sales price.
Continuing our discussion on TRID closing disclosure, let’s talk appraised property value – we get a lot of questions on this. It’s somewhat of a gray area, so we’ve tried to make it more specific as we’ve moved forward. You may have heard us in prior years in a webinar give a little bit different answer but here’s where we stand today with the appraised property value. First, you have to have acknowledged that it’s not a purchase. In other words, there’s no dirt securing the loan that’s being purchased with these loan proceeds. That eliminates sales price. We’re then able to move onto “All right, do we have an appraised property value that we’re looking at?”, and this one’s pretty straight forward too.
Our take now is that if you are relying on a certified and licensed appraiser that has put together an appraisal, that’s what you’ll use for the appraised property value. If you’re going, “Well, we didn’t do a certified licensed appraiser or appraisal, we just did an evaluation.” Maybe internally, externally, but it’s just an evaluation. Then we would move on to estimated property value. The word that I would tie to this one is what are you planning or what did you use for underwriting? The same could be associated with the appraised property value too, but you’d want to use the appraised number from a certified licensed appraiser. So, it’s not the sales price. It’s not appraised property value. We go back to its estimated property value. What did you use for underwriting? That’s what gets disclosed.
I want to throw one more thing about TRID closing disclosure out here. TRID 2.0 brought another thing to the table that said, “When you’re using estimated property value, if there are any improvements that are going to be made yet not completed to the property that secures your loan, and you’re going to use the value of those improvements that are yet to be made when you do your underwriting, you have to include the value of improvements in the estimated property value.”
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Published
2019/01/21
Jerod Moyer