Bank Appraisals & Time-of-sale Adjustments

[Frank.Sharp]

Hi,

I'm in a situation where a co-owner (ex) has obtained a bank appraisal as a result of her application for refinancing, and is insisting that we use the bank's appraised value as the basis for settlement (buy-out).

My problem (aside from the fact that I wasn't allowed to obtain my own appraisal), is that a review of the bank's appraisal even as a layperson seems to have some problems. Most disconcerting is that the appraiser used an 8 month old closing as a comparable, but didn't apply any time-of-sale adjustment. This is in an area (Monmouth County, NJ), where the local newspapers have been publishing articles claiming a 24.1% increase in median existing home sales during the prior year.

I've looked frantically for some written guidelines that clearly states whether time-of-sale adjustments *must* be made or not, but I can't find any concrete reference (for court). I've searched the Uniform Standard online, I've scoured the how-to shelve at Barnes-n-Noble, etc. And I've found tons of references that say conversion to present value is part of the methodology (which seems pretty intuitive), but I've found no references that *clearly* state any standard for when it *must* be applied.

Today, I spoke with an appraiser to enlist his service for an Appraisal Review, but time is short and he was too busy to visit the site prior to the scheduled closing. He immediately agreed that time-of-sale adjustment should have been applied, and said that he has been using 1% per month, but he said he wouldn't publish an Appraisal Review Report without actually visiting the site... I told him that I had read an Advisory Opinion (AO-20) from the USB that seemed to imply that an appraiser could issue a statement which corrected the math WITHOUT issuing an Opinion of Value... but he didn't want any part of it. Is there *any* appraiser in New Jersey with the qehones to publish a review without opinion of value? Or, perhaps the more important question is... I'm I all wet, and the "time-of-sale adjustment" is just some nebulous magical thing that can be applied at the whim of the appraiser without regard for whether the market dynamics clearly call for it?!?!

If *any* licensed appraiser in NJ is out there, who is willing to issue a certification to the effect that "In an increasing market it is very important that any comparable that is more than 3 to 6 months old be subjected to time-of-sale adjustment to account for market appreciation, and that the appropriate rate of adjustment for Monmouth County, NJ from August 2001 through today is x.x%"... the PLEASE contact me privately via email... I will compensate you in the form of a one-hour consultation to cover your trouble of signing such a certification and faxing it to me... PLEASE!!! I'm about to have what I feel is a *very* unfair appraisal shoved down my throat :/

Of course... If I'm full of it... I'd hope to hear that as well... as I just want to find a "fair" price... It's just that by all appearances, this Bank appraisal is *not* fair!

thx,
Frank
sharpf@iop.com

 

[Farm Gal]

Frank:

For lack of a better term the appriaser you spoke to is right in that it would be very difficult (you can read this as impossible) to correctly do a proper review without fully researching and developing a value opinion IF there is a value discrepancy situation.

Closings do NOT have to happen unless court ordered, Unless Guido and all the Sopranos are standing behind you... Don't sign!

I suggest you seek legal advice immediately and perhaps insist on a seperate appraisal, Plan on paying for it and DO let the appraiser know in advance of accepting the assignment the purpose and your concern. If you are as uncomfortable as you sound with the value... DO something.

You might want to approach the individual you spoke with, and ask that as the basis for delaying the closing that he provide you with just the type of statement you indicated, if he flat refuses tell him you intend to quote him and then make darn sure you quote correctly.

Out of curiosity why were you not provided with access to and notice of this value more than a few days(s) prior to settlement?

Your options appear to be fight or foget it.

 

[Ross (CO)]

Frank, you should have an attorney at your side on this one, and you can not sign something ...... if you are not there. Closings should generally be mutually-agreed appointments for all participants and not forced. So very, very hard to believe that with all the millions of people and hundreds of thousands of homes in the n. Jersey shore area that there are no other sold properties with closing dates in April or March or February....why not seek your own appraisal to represent your side of the settlement ? I see no direct benefit to secure a review on this poorly-done appraisal which the bank had done (for your ex). The insistence that an appraiser drop everything and crank out a time adjustment and a letter of explanation to support one element of a bad appraisal is not your best call. Use those recent sales in your immediate market area of the home and reap the benefit of this 24.1% value growth which your newspaper is writing about. After all, that August 2001 sale is pre-Sept. 11th, and that date and its national significance has had, to varied degrees and in varied locations, some definite effects on realty markets and values. Best wishes.

 

[Anonymous]

Who was the intended user of the appraisal? I'll bet you that it was the bank for financing purposes only. You MUST obtain a new appraisal of the property immediately. I generally don't work in Monmouth County but I know several appraisers there whose work I respect. You should not have any problem finding a competant appraiser who understands that market.

If the Bank was the intended user of the report I'll bet that the appraiser who prepared it will not defend it in court, ask your lawyer about that.

 

[Anonymous]

Frank,

Local media says 24.1% in the last year? Based on? Median price jumps are meaningless as a relation to appreicaition. Was there a new subdivision of high end homes opened? This would cause the median to jump.

Any appraiser who tells you, I am adjusting by $$, is cazy. Are they going up everywhere the same? My guess is they are not. Some areas have more increases than others. I hear appraisers say all the time, a garage is worth $x. Stay away from those appraisers. Is it worth the same thing on a 700 sf bungalow as it is on a 5000 sf custom home? Of course not.

 

[Frank.Sharp]

Thanks all...

Walt... yes, the Bank was the intended user... it was from a refinancing application.

Bill-NC... 21.3% according to National Association of Realtors (sorry, misquoted at 24.1% earlier)... published in the Asbury Park Press on Feb. 17th, 2002... "Prices of single-family homes in Monmouth and Ocean counties in the fourth quarter of 2001 from the same period a year ago, the third-highest rise in the nation, according to the National Association of Realtors." I've also read articles (can't remember where) that explained that high-end housing in this area is severely depressed (post 9/11) and that the exodus from high-end housing is putting even *more* pressure on the affordable end ($200's in these counties is considered "affordable")... Supplies of < $350k homes in this county are *very* limited... and average time-on-market for sub-$300k homes is very short...

I *finally* managed to get my own appraiser in after about the 10th request since mid February (ex-lover's quarrel, hehe... That appraisal came in substantially higher than the bank's appraiser (as I expected, and as some of you predicted)... I think the new appraisal is much more realistic given the local market, but even this one didn't do any time-of-sale adjustments :/

It's dated May 1st, and uses comps that are 9 months and 4 months old, but it doesn't include *any* time-of-sale adjustment... This just doesn't make sense to me... I've heard of three separate $300k homes nearby that sold in under 7 days within the past month (two of those sold within 48 hours)...

My new question.... I paid for this new appraisal... is it "inappropriate" for me to contact the appraiser and ask her to provide some basis for how she has determined that there has been "no noticeable market appreciation" during the past 9 months? Or would I just be wasting my breathe?

We've pretty much settled at this point, so my questions is really more of an acedemic pursuit... is it okay to politely ask an appraiser to justify their choices if the report doesn't include an explanation?

thanks again to all who answered earlier...
Frank

 

[wyecoyote]

Frank,

You paid for the appraisal who is the intended user? What is the intended use? Some appraisers don't like to make time of sale adjustments. And your also quoting realtors. They will for the most part state that things are going up up up. This does not mean that it is true. Could also mean at one point in time that it did increase. Say that you take all sales the couple of days after 9/11 then all sales six months later and there is your magic 21%. I took a course on statistics awhile back. The big thing with statistics is that you can prove anything your really want to given that your broaden and/or narrow your market down.

My suggestion is that if your going to be using the appraisal for divorce puposes. Find an appraiser that does divorce appraisals. This will cost you more than a typical appriasal but it could be worth it in the long run. And be upfront with the appraiser if it may eventually go to court. That way the appraiser is prepared and fully understands everything involved.

Ryan

 

[Anonymous]

If the appraiser prepared the appraisal for you, you are of course justified in asking for an explanation of any adjustments or lack of adjustments. Four and nine month old comparables are about as recent as you can get in your market area, your appraiser may not have thought that a time adjustment was necessary.

Your appraiser may have given more weight to the most recent sales or may have been guided by current listings. Don't hang your hat on a percentage printed in the media, a good appraiser understands the market better than a newspaper reporter. Remember an appraisal is an estimate of value. If you trust your appraiser's knowledge and judgement you can trust her conclusions.

 

[Farm Gal]

Frank:

A well written appraisal will always have some sort of summary statement on page 2 (or addenda) of the URAR which should in brief explain the reasoning behind the final estimate of value. (Assuming that is the form your appraiser used...). However, even professionals may speak in some shorthand and not summarize well enough for a novice reader in the area of valuation!

As mentioned by others, a time adjustment may not be necessary, and given the state of the economy, it is entirely possible that your specific sub-market flatted out or even marginally (not enough to require adjsutment) declined in the period you mentioned, regardless of what the larger area values did. This is the professsional opinion you were seekeing, if you were hurried, tried to run to the bottom of hte fee spectrum or otherwise had to select a cut-rate or low qualification appriaser you may have gotten what you paid for!

I personally do not have a problem with a homeowner asking me a few brief questions as long as they realize that I CANNOT answer to every homeowner, LO Underwriter and senior reviewer out there on every report.

I think you are interested (and SHOULD be given the circumstances) but it is beyond the original contract to have the appriaser seriously educate you in the art/scince of appriasing. If you have serious concerns or questions present the appraiser with at a minimum of a gift certificate to a restaurant or a check in the amount you would expect to pay a doctor or lawyer for a similar consultation service, and then get the education you seem to want.

Good luck!

 

[Anonymous]

Frank,

We all love those articles. I live near Asheville, NC. We now have the honor of being the most expensize housing market in NC. We actually have higher housing costs than many metro areas around the country. We have seen so many of those articles it is scary. I once followed up on one with a local reporter. She did the story. I asked her where she got her numbers> She said from the Chamber. Went there, they got them from the local Realtors. Went there, they got them from median sales prices. Check it thoroughly and you find out 2 new high end subdivisions opened that account for the increases.

My question to you is, you state the appraisal has sales from 4 to 9 months old. By looking at the adjusted sales prices, were there major differences in the adjusted sales prices? IS it evident that there should be a time adjustment? Did the newer sale adjust so much higher than the older sale that it is obvious there should be this 20%+ time adjustment?