Acceptable Differences In Appraisals

[Bill_FL]

Jen,

Something else to consider, is that if you have the biggest house in the area, one that is much different in terms of style than everything else in the neighborhood, it can be difficult for an appraiser to estimate the market's reaction to such differences.

Remember the law of diminishing returns? If your house is much bigger than everything else in the area, how many square feet are too many before they stop adding significantly to value? How would a typical buyer react to the outside of your home if it looks a lot different that those that conform to the subdivisions overall style?

Perhaps the first appraiser was correct, as George has stated or perhaps the second was correct. Given the further information on your home, the 6% difference would appear well within an acceptable range to me.

 

[Jim Onderisin]

This may have been mentioned, but there are also competence and ethics differences between appraisers. Unfortunately, the state licensing programs have created a playing field on which all appraisers appear equal. And there is truly no way for the public to know which are which.

If you feel that you have been wronged, you can submit a complaint to your state's office of appraisal licensing and regulation. I'm not sure what they call it in your state. They'll likely ask you for a copy of the appraisal performed for you and for your version of the problem. They should be able to look at your appraisal with a trained eye. If there is a problem with it, they'll deal with it or at least make your appraiser a little nervous with their inquiry. If they determine that there's no problem with it, they'll let you know that, too, and your appraiser may never even find out about the inquiry.

 

[Mike Garrett RAA]

My personal opinion....the spead is too large, someone is wrong. I can't say who because I don't know your market and haven't seen the reports. The fact the first appraiser offered to "re-address" the report makes him more suspect...but, again, I don't know your market.

 

[Jen Merryman]

First, let me say thank you to everyone that responded. This site is great and you all are so nice to give your time.....

I think that to really see whether the appraiser I hired was competent, I need to see a copy of the second appraiser's report. How do I get ahold of this? Do I have to sweet talk the buyer? Will they have it? I called and offered to pay the second appraiser to come perform the appraisal for me, but they said they couldn't because then there would be a conflict of interest. Since really I want to see what they would have appraised the home for on the same date that the first appraiser did his appraisal, should I call back with that request. Can you do a retrospective appraisal? I assume you can, since you would just ignore comps after the point in time you are looking at. Would this still be a conflict of interest for the second appraiser. I have scheduled a meeting with my attorney on June 2 (prepaid legal plan - no cost for her to talk to me) But I can't build a case on suspicion the first appraiser was way off base. MAybe he wasn't. I need to see the second report to see if the market changed suddenly and to look at that report's comps. I have learned that my appraiser, the low appraiser, was just licensed in 10/04 and it was his uncle who signed off on my report. The second appraiser looked about 50 rather than my appraiser's 22 or 23 years of age. This makes me guess, though of course I can't be sure, that he was the more experienced of the two. And yes, he was also a local appraiser.

 

[cgjerdetu]

I think the only way you will able to get a copy of the second appraisal is from the buyer. The only way the buyer can get a copy is through the lender. I don't think it is in the buyer's best interest to give you a copy of the appraisal.

Also, keep in mind that if you have not actually seen a copy of the appraisal, you do not know 100% that the opinion of value was really $187,000. Sometimes people throw around numbers that are not always correct. I've had times where borrowers have seen a certain number mentioned somewhere in the body of the report or the cost approach and have misunderstood that to be the final opinion of value. You are probably aware that on the standard appraisal form report there are four places values are given. There is an indicated value by cost approach, indicated value by sales comparison and also an indicated value from income approach. These numbers do not always equal the same amount. The final number given on the form is the reconciled value considering all value approaches.

Your first appraisal sounds suspect, but until you see the actual report, you really can not be certain the $187,000 was the reconciled opinion of value.

I hope your move goes smoothly and congrats on the new baby on the way. I also have a one year old who just gets more fun to be with every day.

Carolyn

 

[Jen Merryman]

The lender's bank called me to tell me the appraisal value. I had called the day earlier and requested it because I wanted to make sure it had come in high enough for the buyer's loan to be approved. Yeah, it did and then some.

 

[Jungle Boy]

Originally posted by Jen Merryman@May 18 2005, 06:52 PM
I got an offer two weeks after I put the sign in my yard. It was for the price I had been quoted as the fair appraisal value so I accepted.

If you could prove that the appraiser was in any way co-operating with the buyer of your property, you could really do him in.

 

[wyecoyote]

Jen,

Are you in a rural market? Acreage type property? Unique type property? A 6% spread would not be unusual for a Rural type property. Or are you located in a subdivision? You seem to automatically assume that the lower of the appraised values was incorrect. It could also be that the appraiser that appraised higher did it based upon pressure from the lender. Maybe the Loan officer said get me $187K so that their ltv ratio would be 90% so they can qualify for an easy 80% and 10%. That also may be the case. Perhaps the higher appraiser was way off base. Or perhaps in that 4 weeks there was a house or two that closed similiar to yours that the first appraiser did not have available. Also consider that had you sold through a listing agent you would have had to pay 6% commission (typical in my market).

As to the age of the appraisers. I would not automatically assume that the 50 year old appraiser has more appraisal experince than the first appraiser at 22-24. I know of at least one appraiser in WA state that started when she was 13. She also waited to get certified until she was in her mid 20's after her college was completed. Also most appraisers that I meet in their 50's are just getting into appraising as a second carrear.

Also as the sellers you are not entitiled to a copy of the appraisal report. The only way you can prove anything is to have the first appraisal reviewed. By a different appraiser. You would have to pay for a standard 3 review. Provide them with a copy of the appraisal and let them have access to your house. Then see what they say. I would not mention anything about the bank value of $187K. Just let them see and say what they say. Otherwise you probably will never see a copy of the second appraisal report.

 

[hal380]

Hi Jen;

This may sound like a slap at you, but it's not. I think you made a fundamental misteak when you did a FSBO. I know many of my firends here will dissagree with me, but I think Realtors have a very good handle on the market. They meet with prospective buyers almost every day and they hear remarks from the buyers as to what they like and dont like about the various houses they show.

It is clear to me that the house was marketed at too low a price. I would not be happy with any offer within a few days of putting on the market, and offers at full price. I think it is likely that the realtor would have listed the house for considerably more. And who says 6% is cast in stone.

As far as which appraiser is correct, I would say the second. Just because of the near spontaneous offers based upon the 1st guy's number.

REgarsd

Hal

 

[Edd Gillespie]

Originally posted by Jen Merryman@May 19 2005, 10:30 PM
I called and offered to pay the second appraiser to come perform the appraisal for me, but they said they couldn't because then there would be a conflict of interest.

Is this the classic "THE LOW APPRAISAL MUST BE WRONG" scenario. Maybe we should automatically suspect the high appraisal. That's what do daily on here guys.
The second appraiser may speaking from a business perspective and not a legal one when he says he has a conflict of interest. Baloney! He should be able to complete an appraisal for you just as your appraiser could complete a new assignment for another client (he called it "switch names"-we appraisers go berserk with that language because we place special and obscure definitions on commonly used terms, but in the common perception that is exact thing, with care, is done a lot when we get a new assignment for recently appraised property). He has a confidentiality issue, but not a conflict issue. Saying conflict of interest makes me suspect the second appraiser. Who's he protecting? You asked him to do an appraisal which was supposed to be what he did for the bank. Maybe the rate was better with a higher value. Maybe some LO or MB got a big commission. Maybe your buyer wanted to get more money than you are being told. Maybe the buyer wanted to redecorate or go to the Bahamas and got talked into a higher loan-so the second appraiser made it happen.
I think you do need to get that second appraisal before you put flesh on your suspicions. But you could get some better info about your first appraisal. What if a third opinion is different than either one of the existing ones?
Why don't you hire a review of the first appraisal? That would give you an opinion from somebody who gets to see and analyze the first appraisal instead of us guessing. Call the state AI for referrals if you don't know anybody else. Be careful about lawyers. Most of them don't know anything about appraising let alone USPAP, which is pretty much the applicable law in this deal. I doubt the lawyer will admit to incompetence as they try to advise you about any legal remedies. The best they can do is to give you some generic advice. Ask the lawyer how many appraisal centered ckases he/she has handled and take the advice with that in mind.
Oh on another point, old guys don't automatically know more about appraising than young guys do. Wait maybe you're right, Mike says he's an old guy and come to think of it I don't think he's been wrong.