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

[throwaway12345]

“Appraiser said they pulled detached SFR data in the neighborhood and couldn't justify a time adjustment. I sent them my analysis. I did not receive a response other than that they're not changing their value.”

And the above was stated in the copy of the report you received from Lender?

I presume mean to say you sent “them” (the Lender) who is actually the Appraisers client the results of your own research and data - who obviously has reviewers?

If you don’t mind my asking - Why didn’t you buy a different product? A SF or Condo? What was your motivation for purchasing a Duplex. And Now that you have purchased a Duplex - Do you intend to occupy both units?

The "appraiser said they pulled detached SFR data in the neighborhood and couldn't justify a time adjustment" was not included in the copy of the report I received from the lender. The statement was relayed to me by my lending officer, who received it from the lender's appraisal department, who received it from the appraiser.

I sent my analysis (which included both the raw MLS data and analyzed data / charts) to my lending officer, who I assume sent it through their appraisal department, who I assume then send it through to the appraiser. The lender and appraisal department told me they would send it through, so I have no reason to believe they didn't, but also no proof they did. And yes, the lender obviously has reviewers.

I had assumed, perhaps falsely, that the lender and appraiser would be interested in seeing potentially relevant data that could lead to the best answer. I never demanded the appraiser hit a certain value or that any of the analysis be used for any specific purpose. I provided what I thought could help lead to what I believe is a better answer (i.e., a non-zero time adjustment vs prices from 8-10 months ago). Instead, I was dismissed.

I don't mind you asking at all. And to clarify, I purchased half of a duplex (only one unit). The reason why I didn't buy a condo is because I have a small, but growing family and value having a yard and a two car garage. I wasn't able to win the bidding war for a couple of detached SFRs (I guess I bid what I thought were rational prices) and a lot of detached SFRs would probably stretch my DTI to a level that I'm not comfortable with. Layering on the risk of the property not appraising at SC (and needing to make up the difference in cash), I ended up filtering out a lot of detached SFRs.

 

[throwaway12345]

I would definitely loosen my criteria for comparable sales and expand my search for more recent comparable data. Most reconsideration of value requests require proof of errors in reporting the subject’s amenities or additional COMPARABLE SALES that would better represent the subject property or current market conditions. I read multiple times in this post that “the appraiser’s comparable sales were the best available” which indicates no additional COMPARABLE sales were provided. In a hot market with multiple offers on most properties and people overbidding each other with escalation clauses and such, your scenario (appraisal under contract price) is common. I’m guessing the underwriter and reviewer moved along to the next reconsideration of value which had support from comparable data.

"No additional comparable sales were provided" wasn't the case. Please let me attempt to clarify.

The subject is an 3 bed, 2.5 bath, 1,300 SF attached SFR. The appraiser's comps are all 3 bed, 2.5 bath, 1,200-1,300 SF attached SFRs in the same neighborhood, but sold 8-10 months ago. These are the best available comps in terms of neighborhood, product type, GLA, # of beds, # of baths, etc. These are poor comps in terms of timing (and potentially market conditions).

So, as you stated, you loosen your criteria for comps in an attempt to find more recent data. I chose to expand product type to find more recent sales of what I believed to be substitutable comparable properties. So I provided an MLS pull of 3 bed, 2 bath or 2.5 bath detached SFRs (1,100-1,500 SF) and condos (1,300-1,500 SF) sold in the same neighborhood over the past 8 months. In addition to the raw data, I provided three paired sales to illustrate what I believe are additional comparable sales that would better represent (relative to the stale attached SFR sales) current market conditions.

1. Detached SFR model match - 3 bed, 2 bath 1,100 SF. Sales occur 9 months apart, price is 8% higher second time around (late December 2020)
2. Exact same detached SFR (3 bed, 2.5 bath, 1,300 SF) sold twice 6 months apart, price is 8% higher second time around (late December 2020)
3. Condo model match - 3 bed, 2.5 bath 1,500 SF. Sales occur 7 months apart, price is 17% higher second time around (early March 2021)

I thought this would be sufficient to be classified as additional comparable sales, but please let me know if I'm wrong. I don't know that the quantity or quality threshold is from the outside looking in.

I understood the risk of the appraisal coming in below SC and that I'd be facing a higher probability in the current market. And sure, I can accept an appraised value less than SC if it is supported. What I am not able to accept is using 8-10 month old prices, not considering the above analysis that you outlined, and not providing support for a 0% market conditions adjustment. If it goes against the data, shouldn't the burden of proof be just as high for a 0% adjustment as it is for a 25% adjustment?

 

[Jayjay25]

"No additional comparable sales were provided" wasn't the case. Please let me attempt to clarify.

The subject is an 3 bed, 2.5 bath, 1,300 SF attached SFR. The appraiser's comps are all 3 bed, 2.5 bath, 1,200-1,300 SF attached SFRs in the same neighborhood, but sold 8-10 months ago. These are the best available comps in terms of neighborhood, product type, GLA, # of beds, # of baths, etc. These are poor comps in terms of timing (and potentially market conditions).

So, as you stated, you loosen your criteria for comps in an attempt to find more recent data. I chose to expand product type to find more recent sales of what I believed to be substitutable comparable properties. So I provided an MLS pull of 3 bed, 2 bath or 2.5 bath detached SFRs (1,100-1,500 SF) and condos (1,300-1,500 SF) sold in the same neighborhood over the past 8 months. In addition to the raw data, I provided three paired sales to illustrate what I believe are additional comparable sales that would better represent (relative to the stale attached SFR sales) current market conditions.

1. Detached SFR model match - 3 bed, 2 bath 1,100 SF. Sales occur 9 months apart, price is 8% higher second time around (late December 2020)
2. Exact same detached SFR (3 bed, 2.5 bath, 1,300 SF) sold twice 6 months apart, price is 8% higher second time around (late December 2020)
3. Condo model match - 3 bed, 2.5 bath 1,500 SF. Sales occur 7 months apart, price is 17% higher second time around (early March 2021)

I thought this would be sufficient to be classified as additional comparable sales, but please let me know if I'm wrong. I don't know that the quantity or quality threshold is from the outside looking in.

I understood the risk of the appraisal coming in below SC and that I'd be facing a higher probability in the current market. And sure, I can accept an appraised value less than SC if it is supported. What I am not able to accept is using 8-10 month old prices, not considering the above analysis that you outlined, and not providing support for a 0% market conditions adjustment. If it goes against the data, shouldn't the burden of proof be just as high for a 0% adjustment as it is for a 25% adjustment?

I completely agree with the methodology utilized. The problem we face as appraisers is that the lender/client/underwriter/reviewer will often send a “revision” requesting a more recent sale of a similar duplex be provided to support the time adjustment. There can be specific lender guidelines which are overlays in addition to Fannie/Freddie guidelines. Not all bank/lender are created equal and underwriting guidelines can vary greatly. So much happens behind the scenes that it can be difficult to determine what is really going on and the easiest person for the lender to blame is........wait for it...........wait for it...........the appraiser!

 

[Zoe]

Obviously the hypothetical counter example is not realistic, that is the definition of hypothetical (wow you must have been every professor's joy in classes). Thank you for pointing that out; in other news, water is wet.

The scenario is not presented for my self satisfaction, that would be quite sad if I derived any out of this lol. It's a rhetorical question intended to illustrate a point as anyone with two brain cells knows the answer. The point is if the shoe were on the other foot (i.e., all market indications show stable while the appraiser claims increasing), nobody (appraiser or not) would find the appraisal to be credible. If the appraiser is going to deviate from the market indications, they had better be able to prove it to arrive at a higher value. They are putting a stake in the ground saying a +20% adjustment gets you to the FMV, going against the trend in observable data.

Should the claim for a 0% market conditions adjustment be any different? If they admittedly say prices are increasing, but still put a stake in the ground at 0% against the observable data, why is that not treated the same as the hypothetical example? 0% or 20%, it's still a stake.

In general, I seem to have struck a nerve with you by asking a question that others on this forum seem to view as legitimate. I'm not sure why you continue to characterize me as an uniformed, angry idiot who is here to whine before I attempt to exact my revenge on an innocent appraiser who won't be able to feed their kids. I don't blame you, you may have experience with those kinds of folks and illegitimate questions in the past and maybe are projecting that onto me. I have acknowledged my bias in the second sentence of this entire thread and have stated repeatedly that I benefitted financially from the lower appraisal. I'm obviously not going to change your characterization of me at this point, but feel free to carry on.

All of your responses in this thread seem to focus on the who and never the what. I wasn't aware that not having an appraisal license meant that you aren't qualified to ask questions, but that's exactly the attitude the appraisers I have dealt with have shown. So in that sense, I appreciate you continuing to dismiss anything I have to say. That unfortunately very much represents my real life experience with residential appraisers thus far and your behavior is fairly indicative of what I can expect to face in the future should this proceed to a complaint. In the meantime, perhaps I should go study the esoteric subject of paired sales, so that someday I may be able to be trained to conduct such a rigorous analysis.


I had to google who Sollozzo is, but here we are again focusing on my motivations rather than the content. I don't need you to believe anything about my intentions on this matter, and really it shouldn't affect how the facts of the situation are viewed.

I will give you credit for addressing some of the what here in response to George. But again your focus is on who is asking the questions, not whether the question has merit, which quite clearly shows your bias.

I have focused on what. I have told you to supply data to lender and request ROV. Don't play with me.

 

[Zoe]

Talk is cheap. I can handle it. It will cost you $4k to $10k. I assume I can get a temporary license in Hawaii.

 

[Zoe]

Am I focused on "what"? LOL

Definition of WHAT

—used as an interrogative expressing inquiry about the identity, nature, or value of an object or matter; —often used to ask for repetition of an utterance or part of an utterance not properly heard or understood… See the full definition

www.merriam-webster.com

Can I make it clearer? More clear? What is your definition of "what"?

 

[CGinMN]

Obviously the hypothetical counter example is not realistic, that is the definition of hypothetical

Who wants to be the one to tell him?

The scenario is not presented for my self satisfaction, that would be quite sad if I derived any out of this lol.

The 6 hours you spent here last night pounding out paragraphs says otherwise.

It's a rhetorical question intended to illustrate a point as anyone with two brain cells knows the answer.

Again, all for your own self satisfaction. There is no question as to what the answer must be, because you designed the question to provoke only one answer. If you can't answer it correctly you have one or less brain cell. This is basically the reason why I object to appraisers entertaining this post. There seem to be plenty of appraisers here willing to give you a tug, I'm not going to get in the middle of that. Based on all the information you provided, yes, a market conditions adjustment was warranted and no, the appraiser did not support their lack of an adjustment. However, it is NEVER as simple as you make it out to be. First we have what the market is doing, which can be irrational, volatile, and challenging to interpret. Second, we have how the appraiser chooses to analyze that market (methods). Third we have how an appraiser interprets and reconciles that data and comes to an opinion. Fourth, we have how that information and analysis is summarized to readers in their report. Fifth we have how that summary is interpreted by intended users of the report, which you are not. Reports are written for intended users understanding. After all these stages where things can easily get muddied, misinterpreted, miscommunicated we have you, a non-intended user, presenting your biased interpretation of the appraisers communication of an analysis. You hold the keys to what we know and what we don't. You have given us a small slice of a larger work product and based on that we are supposed to give you the OK to toss two appraisers to the state board.

The point is if the shoe were on the other foot (i.e., all market indications show stable while the appraiser claims increasing), nobody (appraiser or not) would find the appraisal to be credible.

It is the appraiser doing the analysis, not the borrower. The lender, reviewer, and appraiser found the report credible. You do not. It is that simple.

In general, I seem to have struck a nerve with you by asking a question that others on this forum seem to view as legitimate. I'm not sure why you continue to characterize me as an uniformed, angry idiot who is here to whine...

I said you were an "untrained, aggrieved, and biased borrower," all of which you have admitted to. Knowledge of statistics and regression does not make you an appraiser, although there are some here who might be willing to give you an honorary certification of some sort.

I don't blame you, you may have experience with those kinds of folks and illegitimate questions in the past and maybe are projecting that onto me. I have acknowledged my bias in the second sentence of this entire thread and have stated repeatedly that I benefitted financially from the lower appraisal. I'm obviously not going to change your characterization of me at this point, but feel free to carry on.

I'm not saying your questions are or are not legitimate. However, in my opinion, the appropriate avenue was an ROV. Sorry you didn't get the answer you wanted, but again two appraisers and the lender found the analysis credible. So we are left with that and your biased complaint. I don't think appraisers should make opinions of a peers work without reviewing the work an based solely on a biased complaint.

All of your responses in this thread seem to focus on the who and never the what. I wasn't aware that not having an appraisal license meant that you aren't qualified to ask questions, but that's exactly the attitude the appraisers I have dealt with have shown. So in that sense, I appreciate you continuing to dismiss anything I have to say. That unfortunately very much represents my real life experience with residential appraisers thus far and your behavior is fairly indicative of what I can expect to face in the future should this proceed to a complaint.

Yep, honestly, all I hear from your posts is smarm, entitlement, disingenuity, and contempt. Maybe I'm misreading...

But again your focus is on who is asking the questions, not whether the question has merit, which quite clearly shows your bias.

I think it shows my unwillingness to be entertain bias.

 

[Evincere]

Who wants to be the one to tell him?



I

“information and analysis is summarized to readers in their report. Fifth we have how that summary is interpreted by intended users of the report, which you are not. Reports are written for intended users understanding. “

in summary? The rude awakening for any borrower is when they realize they are NOT considered an intended user Regardless of their analytical/ statistical expertise

USPAP only requires that appraisals be Credible and worthy of belief. Not accurate.

 

[Elliott]

Is this Doc Manhattan? You got us, damn.

Throwaway, I think it would be easier to sharpen your nose on a grindstone wheel than come up with a explanation which would satisfy your appraisal issue. I think you should file a complaint and let the state board deal with it.

 

[slap happy]

Greetings AF!

I am considering filing a formal complaint against the appraiser my lender hired and the lender’s in-house appraiser (who conducted the desk review of the appraisal). Before you all attack me for my biased perspective (I am the buyer in this situation) and write this off as another person whining about a low appraisal, I will do my best to lay out the facts of the case in an objective manner. Trust me when I say writing up a complaint is the last thing I’d like to be doing, so before I do so, I thought I’d turn to AF’s wisdom / expertise to make sure I’m not way off base here.

Subject property is a 3 bed, 2.5 bath, ~1,300 SF attached home (i.e., half of a duplex on its own separate lot) in a newer master planned community (built in 2018). The appraiser defined the market as strictly homes sold within the master planned community. The comps selected were three 3 bed, 2.5 bath attached homes in the same master planned community that range from 1,200-1,300 SF (one model match, two slightly smaller). All the comps have sold for ~700K around 8-10 months ago. I agree with the appraiser up until this point.

Where we disagree is that the appraiser believes a market conditions adjustment (between now and 8-10 months ago) is not needed, while I believe it is. The appraiser’s 1004MC says that “while prices for similar dwellings have increased in the neighborhood, the small data sample and variety of product sold in any one period has lead the appraiser to conclude that the market is stable and an adjustment for time is not necessary”. What?! In my opinion, a small data sample is not enough to conclude anything about the market and further analysis of the available market data is required. Nothing other than the 1004MC was included as support for market conditions.

To support my questioning, I provided some analyses and a handful of data sets pulled from MLS (I work in CRE so I have access) to the lender to be forwarded to the appraiser (summarized below):

• County median SFR prices have increased 13-19%, inventory is down, and DOM are down over the past 8-10 months
• Market area (includes subject’s neighborhood and a bunch of others nearby) median SFR prices have increased 8-11%, inventory is down, and DOM are down over the past 8-10 months
• Scatter charts of 3 bed 2.5 bath and 3 bed 2 bath closed sales in the master planned community show an upward price trend and downward DOM trend since 2018 and over the past 8-10 months

Obviously like many other places in the US, the market here is hot. Our offer on the subject property was one of 37 after 8 DOM, and we weren’t even the highest bidder (I’d like to think we wrote a charming cover letter). The seller's agent even met the appraiser at the subject to provide copies of all 37 offers. But sure, maybe the data above are an artifact of medians and coincidentally higher priced homes are being sold more and more recently. So I zoomed in further on the specific neighborhood:

• Pending sale of another attached home with a 770K SC price (I verified by calling the selling agent). This showed up in the appraisal at list price (735K), but was given no weight as it wasn’t a closed sale. I won’t argue assigning it no weight, but this is an informative data point (IMO) showing SC price well above list and both well above 700K
• 3 bracketed paired sales (2 model matches, 1 sale-resale of the same SFR) of 3 bed, 2.5 bath 1,100-1,500 SF detached SFRs and condos (I would argue substitutable competitive products based on beds, baths, SF & price point) that occurred at points across the past 8-10 months, each showing a CAGR of 10-30% (point to point it's 8-17% growth over 6-9 month periods)

Despite my best attempts over the past week to ask for any data supporting a stable market (via email routed through the lender), the appraiser refuses to change their FMV (700K) or provide support for their lack of a market conditions adjustment. Fine, I’m not their client, the lender is. When I asked my lender for a desk review, they said they already did one and agree with the appraiser’s conclusion and aren’t willing to order a second appraisal as they’re “not supposed to value shop”. I feel like I’m taking crazy pills in believing, based on the data, that market conditions are fundamentally different than 8-10 months ago and that a non-zero time adjustment is required. After feeling backed into a corner, the seller and I have agreed to split the difference to salvage the deal.

I am having a difficult time believing that using non-time adjusted prices, while the neighborhood data shows near double digit growth, can be classified as USPAP 1-3 compliant. Give it to me straight AF, am I (the armchair appraiser) off-base here or do I have a legitimate complaint? Does failure to support a lack of an adjustment (in light of all the market data) qualify as worthy of a complaint?

throwaway12345

You have presented a cogent argument. I am a 35-year appraiser and have done nationwide reviews since 2011, and I could write a book about the lack of competency in this profession. The appraiser stated prices had increased, but a stable market was concluded due to the small data sample?! That’s laughable. If the data sample is too small, you’d better extend your research and compile enough data to accurately assess the market. For this appraiser to rely on sales from 8-10 months ago in the face of 37 competing offers within 8 days is disturbing. Most compelling to me is the listing for $735k that was under contract for $770k. My question is, was it under contract as of the effective date? If so, that is misleading. I am sick to death of lazy appraisers who will not do even basic due diligence and are often the cause of dead transactions and angst for multiple parties. Thankfully, you and the seller were able to compromise. You have a legitimate complaint.