Considering filing complaint for lack of market conditions adjustment on stale comps

[Sadie]

Don't apologize for having an opinion.

It looks like I might hold the minority opinion on this one.

On the face of it and based on your descriptions it seems to me that placing sole reliance on the dated sales without making any attempt to support a decision to make no adjustments by analyzing more current/parallel sales data (even if less directly comparable) is an example of sheer laziness. The other property types might not be among the most similar sales but they probably bracket at least some of the subject's dominant attributes and might be considered by at least some participants in these markets as substitutes for your subject.

It's a simple process to compare the sales history of your subject's project against the sales histories of these other market segments to see what the historical relationships have been. How close or distant did the pricing from these competing segments of the market parallel each other in the past? If they were close in the past that relationship can be brought forward to apply to these more recent sales.

I think hiding behind the lack of recent direct comparables as a rationale for not analyzing the effects of the current market conditions on this market segment is a copout. And while it's true that the appraiser isn't supposed to be playing for your team or going to heroic lengths to rubber stamp a contract price, they also aren't supposed to be taking the lender's side. We're supposed to call balls and strikes over the plate.

I am no cheerleader for the current market conditions (I think a lot of people are taking a lot of unnecessary risks), and I wouldn't criticize another appraiser's judgement out of hand, so it's very unusual for me to side with a complainant in disputes like this. IF everything you're saying is as you're saying it then a lender blowing this off is not doing their job. Responding to a request to consider the current market conditions is not an example of appraiser-shopping.

For all I know, the appraiser's decision to not apply an upwards adjustment for market conditions may be entirely justified, but in the current market if they didn't show their work in the report to support that decision then they're not doing their job and they're not serving the legitimate interests of their own users. Expressing a conclusion isn't the same thing as supporting it, particularly when that conclusion is being challenged.
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With all that said, if you do submit a complaint you probably won't be getting a speedy resolution. Depending on the state it can take 6-12 months before they even look at the complaint in any detail and even then they may have a tough time meeting the burden of proof it would take to demonstrate a violation.

Thank you Sadie, I appreciate the feedback.

I agree 100% that's it's tough to support an adjustment in an increasing market and that the data included in the 1004MC is insufficient on its own to prove appreciation. I guess where I'm struggling to follow (probably because I'm not an appraiser) is where the distinction between a credible indication and non-credible is. My assumption was that the same exact property sold six months apart for 8% more and a couple of other model matches sold around that same time period for 8-10% more is indicative of an increasing market, but maybe that's not enough. Agree that there are a handful of things that can drive price differentials, but I thought the sale-resale at 8% higher is textbook Case-Shiller-esque as the only differences are the passage of time and six months of depreciation if you want to attempt to be precise lol.

And even trickier is nailing down a specific rate. I can't pretend to know what the right rate is, but based on all of the data I've looked at, I have a hard time believing it's zero.


I sent over some broader market data similar to this, but the argument seems to be that increasing growth rates in aggregated data is spurious. Which could be true, so I stopped citing it as an indicator of growth on its own and turned to more precise data to support my ask.

This must be difficult situation. Sometimes the only remedy is a new lender and therefore new appraiser. Which if you are this far into the process, that can be difficult, but not impossible. Or, this may or may not work, wait for the pending sales to close and ask for a new appraisal with a new effective date so the appraiser will give more weight to the more recent sale. However, if the pending sale closes for less than asking that would be a problem. It has been my experience that there are times that a bidding war results in an inflated price, kind of something to put in the back of your mind.

 

[Fernando]

I working on a purchase appraisal. The price is high compared to the sales over 6 months ago. Has prices gone up at least 10% especially on same block?
While driving taking comps, I was thinking the older comps are older and prices have increased because of the frenzy current market where buyers are buying over list price trying to be winning bidder.
Current market have many buyers willing to pay "above market" prices.
Appraisers are taught to use prior comps to justify current market values.
From our experience in area, we feel the prices are excessively high even though buyers think the high bid prices are market value.
We know that the market can turn when mortgage rates go up. Just as fast as it goes up, it can go down just as fast.

Today, I was thinking about this two different perspectives between buyers and appraisers.
We don't owe a duty to the buyers. Buyers think otherwise. Then Buyers should hire their own appraiser.
Our client is the lender which is why appraisers justify their appraised values based on past sales and not bidding prices.
We do consider the bidding prices but in the end, we give a point value we feel comfortable as demanded by client.

 

[throwaway12345]

Don't apologize for having an opinion.

It looks like I might hold the minority opinion on this one.

On the face of it and based on your descriptions it seems to me that placing sole reliance on the dated sales without making any attempt to support a decision to make no adjustments by analyzing more current/parallel sales data (even if less directly comparable) is an example of sheer laziness. The other property types might not be among the most similar sales but they probably bracket at least some of the subject's dominant attributes and might be considered by at least some participants in these markets as substitutes for your subject.

It's a simple process to compare the sales history of your subject's project against the sales histories of these other market segments to see what the historical relationships have been. How close or distant did the pricing from these competing segments of the market parallel each other in the past? If they were close in the past that relationship can be brought forward to apply to these more recent sales.

I think hiding behind the lack of recent direct comparables as a rationale for not analyzing the effects of the current market conditions on this market segment is a copout. And while it's true that the appraiser isn't supposed to be playing for your team or going to heroic lengths to rubber stamp a contract price, they also aren't supposed to be taking the lender's side. We're supposed to call balls and strikes over the plate.

I am no cheerleader for the current market conditions (I think a lot of people are taking a lot of unnecessary risks), and I wouldn't criticize another appraiser's judgement out of hand, so it's very unusual for me to side with a complainant in disputes like this. IF everything you're saying is as you're saying it then a lender blowing this off is not doing their job. Responding to a request to consider the current market conditions is not an example of appraiser-shopping.

For all I know, the appraiser's decision to not apply an upwards adjustment for market conditions may be entirely justified, but in the current market if they didn't show their work in the report to support that decision then they're not doing their job and they're not serving the legitimate interests of their own users. Expressing a conclusion isn't the same thing as supporting it, particularly when that conclusion is being challenged.
------------------

With all that said, if you do submit a complaint you probably won't be getting a speedy resolution. Depending on the state it can take 6-12 months before they even look at the complaint in any detail and even then they may have a tough time meeting the burden of proof it would take to demonstrate a violation.

Thank you for the thoughtful reply George.

I hesitate to call anyone lazy in this situation based on the reports and email responses I have been provided and recognize that I may not be seeing the full picture of the analyses conducted behind the scenes. That being said, if after all the data / analysis provided the conclusion is still 0% growth, then that is where I was hoping to see some kind of support. It's not owed to me (I'm not the client), which is why I may had to leave it to the lender, and potentially the state board to sort out.

While I agree that buyers today are likely overbidding (I may be one of them), I also disagree with concluding that market conditions are the same as they were 8-10 months ago. That is where I'm frustrated.

Side note: because I am a real estate nerd, I ran correlations for 3 bed 2 bath & 3 bed 2.5 bath condos, duplexes and SFRs in the neighborhood and found ~90% correlations in price movements between product types, which I would argue supports a conclusion that they're substitutable product.

 

[Terrel L. Shields]

Apologies, professional misconduct is not the right term (editing now)

I do not have an appraisal license, does that prevent me from filing any sort of complaint?

I thought you might have been a young appraiser based on the way you were describing the issue- somewhat knowledgeable of the lingo. An appraiser would probably be aware that the law provides that we work for the BANK. The borrower is not an INTENDED USER. Therefore, the issue of privity comes up. The report is for them. Yes, I suppose you can file a complaint with a state board but a lawsuit will likely get tossed out of court. The complaint will cause a lot of grief to the appraiser if you just want to punish them for not bringing in a higher number - which is clearly why you are angry. But what good does that serve? An appraiser cannot just jack up a value, nor should they in light of the AIR provisions of TILA. AIR (Appraisal Independence Regulation) was meant to protect the appraiser from pressure. If the review appraiser has spoken, then I don't see how the state board would not be prone to side with the appraisers. Value is not what they look at, only if it complies with USPAP.

 

[throwaway12345]

Agree with George here. As busy as it is right now, and as big a pain as they are when they 'drop into your lap', I take the time to review each ROV (reconsideration of value) request in detail. If I find that I just missed a comp that would have made a difference, I do not hesitate to slide it into the grid and adjust my appraised value accordingly. (He**, I did it just yesterday on a report).

We are not perfect, nor are we omniscient - no appraiser is. If there is a question about the market analysis, I will take the time to redo my entire data pull and look at the analysis '6 ways til Sunday' to see if there was something I missed. The ability to admit when we may have been mistaken - and then to correct course - is a 'superpower' of a very valuable sort in life.

Having said that, I have no idea if the appraiser's market conclusions here are supportable or not. I am seeing lots of market areas in my own state where general upwards trends are not always supportable within a specific market segment that I am appraising. It happens, and it could be what is happening here.

Now he could have elaborated on the matter very easily by just revising the report to include a more detailed market analysis. I agree with George that it looks like perhaps laziness is at work. That's a bad look. At worst it might be an unwillingness to do the extra work. I also agree that if the report passed a desk review done by another appraiser, its less likely that the analysis was faulty - perhaps just not explained in enough detail.

Thank you Alsie35. Knowing that there are appraisers who take these questions seriously gives me hope lol.

Your last paragraph is exactly the source of my frustration. I have provided as much data as I could get my hands on to support my questions and have received no support in return. For all I know I might be wrong and there's an analysis somewhere that supports a 0% adjustment. If the data exists, it shouldn't be hard to prove me wrong. But as of right now, I have no idea.

That being said, I'm just the borrower in this situation. I am not owed any support for adjustments if the lender deems it so. Which has brought me to my complaint / no complaint decision. If I'm not going to get any answers, all I can do is leave it to the board to get those answers. What I don't want is (if I'm right) for this to happen to someone else in the future who is less able to recognize potentially faulty / lazy work and is harmed as a result. Buying a home here is hard enough as it is.

 

[Fernando]

In my past years during a significantly increasing market. I sometimes couldn't appraised at the contract price.
Some agents have hated me and wanted me banned from ever doing their loans. That comes with being an appraiser.
Those appraisers who hit the target consistently (easy to do by grabbing sales not comps) have gotten in trouble and some lost their license.
At the time I appraised lower than the contract price (I usually appraise as near the high end I feel comfortable), prices did go up later on.
This is good for me because my appraised value in the high end was now longer "too high".
If the market had turn, my values would have been too high. Fortunately, I'd been lucky.

 

[Tim The Enchanter]

the data included in the 1004MC is insufficient on its own to prove appreciation

Not sufficient to prove much of anything it sounds like.
At which point I would expand the search parameters in an effort to get enough data to analyze and hopefully make sense out of.
Expand probably either GLA parameter, or include similar adjacent hoods, if such exist, or both
I also don't know your area, have never been to HI.

I don't know what filing a complaint will do. Might be more trouble than it's worth.
Especially since you got the house.
Congrats on that. Aloha.

 

[throwaway12345]

This must be difficult situation. Sometimes the only remedy is a new lender and therefore new appraiser. Which if you are this far into the process, that can be difficult, but not impossible. Or, this may or may not work, wait for the pending sales to close and ask for a new appraisal with a new effective date so the appraiser will give more weight to the more recent sale. However, if the pending sale closes for less than asking that would be a problem. It has been my experience that there are times that a bidding war results in an inflated price, kind of something to put in the back of your mind.

Definitely pondered both routes, but for reasons outside of the transaction, delaying would make things more difficult than less. In an ideal world the pending sale would close and we'd all know instantly what a fresh comp should price at. But unfortunately due to timing, my transaction will likely end up as the fresh comp for that transaction.

And you're right, I may be the irrational buyer in this situation. But I also believe that I am not being that irrational.

 

[Alsie35]

Thank you Alsie35. Knowing that there are appraisers who take these questions seriously gives me hope lol.

Your last paragraph is exactly the source of my frustration. I have provided as much data as I could get my hands on to support my questions and have received no support in return. For all I know I might be wrong and there's an analysis somewhere that supports a 0% adjustment. If the data exists, it shouldn't be hard to prove me wrong. But as of right now, I have no idea.

That being said, I'm just the borrower in this situation. I am not owed any support for adjustments if the lender deems it so. Which has brought me to my complaint / no complaint decision. If I'm not going to get any answers, all I can do is leave it to the board to get those answers. What I don't want is (if I'm right) for this to happen to someone else in the future who is less able to recognize potentially faulty / lazy work and is harmed as a result. Buying a home here is hard enough as it is.

I have to make one last observation - when I get an ROV request from a borrower who clearly knows what they are doing (in terms of the suggested market analysis and comp suggestions) - as happened to me just yesterday on a file I referenced earlier - I work even harder to see if I might have missed something. I figure at the least I owe it to them - they clearly put work into it. (As an aside - most ROVs we see tend to be for suggested comps that are clearly irrelevant due to some obvious difference from the subject - it is rare to see a well reasoned and well-supported ROV).

I can't believe the fellow you were dealing with didn't do the same thing with the data you provided. You know which doctors have the fewest malpractice complaints? The ones with a good "bedside manner" - to mix professional metaphors if I may.

Beyond all this - congratulations on your home purchase. I have old military acquaintances who have lived in Hawaii for a couple of decades and some of the stories I've heard about the costs of home ownership out on the islands are truly scary!

 

[Fernando]

The agent gave me a packet of info of property. Very nice of her. Even a list of sales.
Some of the sales were out of the area.
Her data didn't really support the purchase price but now I'm obligated to check out some promising ones which I had to drive by.
I don't know what my appraised value will be until I complete my report.