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  #1  
Old 05-12-2009, 11:39 AM
mstar mstar is offline
 
Join Date: May 2009
State: New York
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Default Recourse for factual mistakes in an appraisal?

I recently contacted my bank to refinance my house, and of course they ordered an appraisal. The problem is that there are factual errors that the appraiser supposedly won’t fix, and I am wondering where I go from here. This is in a New York City suburb.

When I reviewed the appraisal, I noticed a number of errors, both in facts about my house, and in the houses chosen as comps. I went over these issues with my loan officer, who then asked the appraiser to address my comments. After a couple of week, my banker told me that the appraiser is standing behind his work product, and that there was nothing he could do – that he didn’t pick the appraiser (who was randomly selected from a pool), and that I had no recourse. Is it true that I have no way to resolve this matter?

The errors I noticed included:
1) Undersized my house by 250 square feet - 1,500 square feet compared to 1,750 square feet. The town’s Building Department and work permits I have filed for renovations have the correct numbers, so I’m confident the 1,750 is right. The comparable houses are all at the undersized square footage.

2) Ignored recent sales (within 4 months) close to my house, but of larger houses than mine (over 2,000 square feet), in favor of older comps (between 6 and 12 months old) of smaller houses (1,500 sq. ft. because of the square footage error above) a little further away. Because these comps were older, there was a -10% adjustment for market conditions across the board.

3) On page 2 of Fannie Mae form 1004, he adds value to one comp for having less bedrooms than my house (3 vs. 4), but subtracts value for another 3 bedroom house. I had to read that few times to make sure because its so strange, but thats what he did. He also seemingly randomly adjusted the value for kitchen and bath adjustments, anywhere from 0 to $10,000, and listed all of the comps as having new kitchens. I did a gut renovation (down to the exterior studs of house) of the kitchen and first floor bathroom less than a year ago – new electric, plumbing, windows, appliances, etc. I really doubt that all of the comps had new kitchens.

4) Choose comparable houses on main traffic streets – the street I live on is not a main street, but the street does become a main thoroughfare when it crosses a main cross street a block away.

5) One of the comps is on the same block as an elementary school, with the school yard directly behind the comp’s backyard. Another comp does not even have a useable backyard at all. Both of these conditions can be clearly seen on Google Maps.

Since my banker is saying there is nothing he can do, is there anything I can do? Can I contact the appraiser directly or file a complaint about him somewhere? Do I have to pay for a report which contains factual errors such as these?
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  #2  
Old 05-12-2009, 12:53 PM
BRCJR BRCJR is offline
 
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State: Virginia
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1. Hire an appraiser to do a field review for you
2. Hire the same appraiser that does the field review for consultation, after the field review
is completed
3. Follow the lead of the appraiser you hired for the consultation
  #3  
Old 05-12-2009, 02:05 PM
Mountain Man's Avatar
Mountain Man Mountain Man is offline
 
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Location: North of the ATL.
State: Georgia
Professional Status: Certified General Appraiser
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The bank is the appraisers client, so the appraiser really can't discuss the issues directly with you without written permission from the bank/client. Now since you asked the LO about the errors, and the LO in turn asked the appraiser about the errors, it is just a really bad business decision to not address the concerns. You could possible go higher up the food chain at the bank, and possibly make them re-consider this appraiser being on their approved list. But frankly, if the loan package was underwritten and ready to close, the bank doesn't want to have to go through underwriting again with a different appraisal report... sort of let lying dogs lie. (pun intended).

If you didn't get the financing you needed, I'd go else where... you just got a small peek into how they do bidniz and who they use for vendor services.

Last edited by Mountain Man : 05-12-2009 at 07:22 PM.
  #4  
Old 05-12-2009, 03:50 PM
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Cob Cob is offline
 
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I'm going to go out on a limb here and ask anyway, did the appraisal come in lower than you and the loan officer expected??? I assume the answer is yes, as I have never heard of anyone having this many issues with an appraisal that "came in" at what was expected.

I would talk to the bank about getting another appraisal, BUT you assume the risk that the new appraiser may have a similar conclusion as the first, then what do you do, discredit him as well??? Or keep hiring appraisers until you get the conclusion that you want or the appraisal looks acceptable to you. Otherwise I think you have a good carrier ahead of you as an appraiser, review appraiser or an underwriter.

Your bank may have just hired an incompetent or lazy appraiser, if that was the case the only thing I can say is, GET USED TO IT, thanks to the HVCC, oh and you can also start by sending a nice little thank you note to Andrew Cuomo, you see he's from your home state and pushed this whole HVCC thing through in the first place.

Take a quick look at his list of 2002 campaign contributions and you will find that an appraisal management company or 3 was where he got some of his largest sums of money, oh and he was also on the advisory board of AMCO. But hey this will put a firewall between the lender and appraiser and everything will be peachy! No you see that's what they want the general public to think, it's really just about them making an extra $100 to $150 off of every appraiser, because they will charge the borrower $400 to $500, pay the appraiser $200 to $275 and not disclose any of this on you settlement statement.

It's a GREAT system and should work out GREAT for all the lenders and AMC's and not so great for the borrowers, mortgage brokers and appraisers, good thing I waited tables for 10+ years, it should come in handy the next 6-12 months, hell I may even get paid MORE than what most AMC's are offering!
  #5  
Old 05-12-2009, 05:14 PM
Tony V's Avatar
Tony V Tony V is offline
 
Join Date: Mar 2005
Location: East Hopland, Suffolk County, NY
State: New York
Professional Status: Certified Residential Appraiser
Posts: 4,971
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Quote:
Originally Posted by mstar View Post
I recently contacted my bank to refinance my house, and of course they ordered an appraisal. The problem is that there are factual errors that the appraiser supposedly won’t fix, and I am wondering where I go from here. This is in a New York City suburb.

When I reviewed the appraisal, I noticed a number of errors, both in facts about my house, and in the houses chosen as comps. I went over these issues with my loan officer, who then asked the appraiser to address my comments. After a couple of week, my banker told me that the appraiser is standing behind his work product, and that there was nothing he could do – that he didn’t pick the appraiser (who was randomly selected from a pool), and that I had no recourse. Is it true that I have no way to resolve this matter?

The errors I noticed included:
1) Undersized my house by 250 square feet - 1,500 square feet compared to 1,750 square feet. The town’s Building Department and work permits I have filed for renovations have the correct numbers, so I’m confident the 1,750 is right. The comparable houses are all at the undersized square footage.
A sketch of the dwelling should be part of the report with the dimensions. Why not take out a tape measure and check out the #'s with what you come up with. 250 sq ft sounds like it could be an enclosed porch or a screened porch.

2) Ignored recent sales (within 4 months) close to my house, but of larger houses than mine (over 2,000 square feet), in favor of older comps (between 6 and 12 months old) of smaller houses (1,500 sq. ft. because of the square footage error above) a little further away. Because these comps were older, there was a -10% adjustment for market conditions across the board.

If the appraiser has a subject of (per his measurement 1500 he is going to use 1500+/- sq ft homes as comps.

3) On page 2 of Fannie Mae form 1004, he adds value to one comp for having less bedrooms than my house (3 vs. 4), but subtracts value for another 3 bedroom house. I had to read that few times to make sure because its so strange, but thats what he did.
That is an ovious mistatke and the appraiser should be willing to address that
He also seemingly randomly adjusted the value for kitchen and bath adjustments, anywhere from 0 to $10,000, and listed all of the comps as having new kitchens. I did a gut renovation (down to the exterior studs of house) of the kitchen and first floor bathroom less than a year ago – new electric, plumbing, windows, appliances, etc. I really doubt that all of the comps had new kitchens.
Cannot comment on that.

4) Choose comparable houses on main traffic streets – the street I live on is not a main street, but the street does become a main thoroughfare when it crosses a main cross street a block away.
Is there any external obsolescence next to you or very close, Firehouse?, etc...
5) One of the comps is on the same block as an elementary school, with the school yard directly behind the comp’s backyard. Another comp does not even have a useable backyard at all. Both of these conditions can be clearly seen on Google Maps.

Since my banker is saying there is nothing he can do, is there anything I can do? Can I contact the appraiser directly or file a complaint about him somewhere? Do I have to pay for a report which contains factual errors such as these?
If you wish you can send a complaint to the State, include all the info that appears to be wrong or you can do as BRCJR suggests...
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  #6  
Old 05-12-2009, 06:53 PM
Restrain Restrain is offline
 
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Location: Denton, Texas
State: Texas
Professional Status: Certified General Appraiser
Posts: 10,275
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4. If the items are found to be as you describe, with significant errors, turn the appraiser into the state.

5. Go get a new lender as the bank is unwilling to step up to the plate. No one says you have to use that bank.
  #7  
Old 05-12-2009, 09:19 PM
William Rightsell's Avatar
William Rightsell William Rightsell is offline
 
Join Date: Oct 2004
Location: Greensboro, NC
State: North Carolina
Professional Status: Certified Residential Appraiser
Posts: 836
Default

Quote:
Originally Posted by mstar View Post
[On page 2 of Fannie Mae form 1004, he adds value to one comp for having less bedrooms than my house (3 vs. 4), but subtracts value for another 3 bedroom house. I had to read that few times to make sure because its so strange, but thats what he did.
This could be due to differences in the bathroom count. Appraisers usually adjust for bathrooms just to the right of the boxes that have the total room count, bedroom count, and bathrom count. Its a bit confusing if one is not used to reading reports. With this in mind, maybe this section will make more sense??

todd
  #8  
Old 05-12-2009, 10:16 PM
Smokey Bear's Avatar
Smokey Bear Smokey Bear is offline
 
Join Date: Dec 2004
Location: The "OC" in Republican Land (Oh no!)
State: California
Professional Status: Certified Residential Appraiser
Posts: 12,470
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Appraisers use their own measurements, mostly. I always use my measurements because I have no idea whether some data entry person was having a dyslexic day and typed it in wrong or whatever. Also, it could be that some of your living area is below grade or that you have an sunroom or some type of addition that could not be included as gross living area because it wasn't on the main heat/air conditioning system or didn't match the quality of the rest of the house or a variety of other reasons.

Before turning in the appraiser, take out the sketch, and measure yourself and see if your measurements match what's in the sketch. Check the bottom for the different types of space measured. (Are you including a 1 car garage in your measurements? Counties like to include it because it's more tax, but we don't include it as living space).

Did you read the addendum and comments on the adjustments? Did it give explanations for adjustments?

The appraisal was written for the client, the lender, who is expected to have more knowledge of what we're doing than the borrower (although most often they don't).

At least do this much before filing a complaint. The guy might have done a crumby job, or it may be a misunderstanding. But I know it's a real pain to defend a complaint against an appraiser, so please check your meaurements and read the addendum and if you still think he was wrong, turn him in.
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  #9  
Old 05-12-2009, 11:07 PM
SutnNC's Avatar
SutnNC SutnNC is online now
 
Join Date: Nov 2008
State: North Carolina
Professional Status: Certified Residential Appraiser
Posts: 2,208
Default In reponse to doing something

The best advise regarding the sq/ft would be as above: take out a tape measure and measure the house. Although you should not have to do this, tax records are often incorrect and omit/add in various area's for no apparent reason. I have been questioned about this on a few occasions and this has always been the case. The 250 sq/ft does sound like a porch, deck or something similar. If you have a cape style home or a home with irregular measurements, there may be a discrepancy but most often, not to the tune of 250 sq feet.

Recourse for any situation should be handled on a case by case basis. I would not recommend reporting the appraiser to the state until/unless you have all the facts straight and the data is clearly and unquestionably incorrect and further, not deemed credible OR there is a significant level of negligience/incompetence. As strange as this may seem, there may not have been an error there. One question I would have is, did you get the appraisers name and if so, is that the name on the report??

If you have a copy of the appraisal, I see absolutely no reason why you would not contact that appraiser and raise these questions to him or her without any other interest than to get the facts straight if they are not already. But, before you do that, follow the guide below. This way the appraiser can't complain that you are harassing him/her.

Although this firewall has been set up to protect the public, it is clear that it has actually poured a substantial amount of fuel to an already burning fire. And it's got your cash to feed it as well as ours. We are now typically getting about 60-75% of that fee you have, most likely, been overcharged for. You will find no place on your documentation indicating that a good portion of that fee has gone to something/somewhere other than the appraiser. At no fault to you or your loan officer, these companies do often hire the cheapest and fastest in order to retain a greater portion of the fee and to satisfy the lenders time line rather than providing quality in a timely manner.

You will also need to consider that this particular appraiser has probably been doing this job for a number of years and this may be one of the few that you have performed. There often is a difference between your opinion of value and an appraisers opinion of value. This is not unusual. At any rate, this is not to say that some errors may have been made.

What you can do:

There should be a system in place where you can file a "reconsideration of value" with the lender/bank. You would be able to submit a form and indicate what/where your feel there are discrepancies as well (not just value). If you wish to pursue this issue with this lender, ask about this and don't stop until you get an answer. I would advise going over the originators head and getting to an area/office manager. It is typically a form that you would fill out that details your findings (potential errors) and you can submit your comparable sales and why you feel they might be better (and don't make it all about value). We (most of us) compare similarly marketable properties, not properties that are similar to a particular value. The appraiser should receive the data via the lender, have to acknowledge and consider the data then provide an explanation according to the request you submit within a reasonable time. You should then receive a formal response that will cover your concerns (good or bad).

Don't pull the trigger on this appraiser unless you know the facts, it is not a pleasant experience and I have many colleges that have been recklessly reported for reason(s) that did not (and some that absolutely did) warrant the States time and are now paying a premium for insurance as the State is required to due their due diligence. Even without any findings, their E&O must be contacted and it's history from there. We do make mistakes and most of us appreciate the opportunity to make any necessary corrections as we take great pride in the time and effort we put into these assignments. We don't want the wrong data out there and if this is the case, neither should him/her.

This has become more of a frustrating process for you and most. However, having a hair trigger and putting this persons license at risk for reasons that are currently not readily known to be fact yet is not reasonable and should not be considered until the facts are known. Feel free to come back and post your findings or other questions you may have.

Last edited by SutnNC : 05-13-2009 at 01:01 AM.
  #10  
Old 05-13-2009, 01:02 AM
DMZwerg's Avatar
DMZwerg DMZwerg is offline
 
Join Date: Mar 2009
State: Wisconsin
Professional Status: Certified Residential Appraiser
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Quote:
Originally Posted by mstar View Post
The errors I noticed included:
1) Undersized my house by 250 square feet - 1,500 square feet compared to 1,750 square feet.


Like a different poster mentioned this could be a porch or something.
If there is a sketch and you are able to nail it down to a specific area one thing you may want to do is verify that it is HEATED area and that, if heated, that the vent ws not hidden when the interior inspection was made. If there was no interior inspection then that may be your answer.


Quote:
2)
Quote:
Ignored recent sales (within 4 months) close to my house


Were this listed through a real estate agency?
If FSBO then they may not have been among the information readily available. Given #1 above the appraiser may have believed they were too large.


Quote:
3)
Quote:
On page 2 of Fannie Mae form 1004, he adds value to one comp for having less bedrooms than my house (3 vs. 4), but subtracts value for another 3 bedroom house. I had to read that few times to make sure because its so strange, but thats what he did.


I assume that the line that has number of rooms, number of bedrooms and number of bathrooms yet one adjustment for the three. The number may be compounded for differences in each number and not obvious at all. Some appraisers even get confused and accidentally swap positives for negatives. Just double check a few more times matrixing out possibilities for all three (Rm, BR, BA, as well as 0.5 adj for half baths) and see if they may be correct when rounding is applied, or at least somewhat consistant.


Quote:
4) Choose comparable houses on main traffic streets – the street I live on is not a main street, but the street does become a main thoroughfare when it crosses a main cross street a block away.
That could well be unfamiliarity, which CAN be a very valid point on your part if brought up with other solid supporting evidence. Double check the rest first though.


Quote:
5)
Quote:
One of the comps is on the same block as an elementary school, with the school yard directly behind the comp’s backyard. Another comp does not even have a useable backyard at all.


Check the text to see if he explained this or not.
Then contemplate hiring an appraiser to review the report and advise.


Quote:
Since my banker is saying there is nothing he can do, is there anything I can do? Can I contact the appraiser directly or file a complaint about him somewhere? Do I have to pay for a report which contains factual errors such as these?
Yes.
Depends; yes.
Usually yes.

Overall Smokey is right on target and giving good, solid advice, as are the other posters. First step is to figure out how far off he really is (most appraisers round and can do so), inaccurate, and so forth. Two people's opinion of the same thing can be radically different.
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