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

[glenn walker]

I think the transaction has been finalized He/She came up with the difference in cash so it's a mute issue : )

We do not adjust the "Subject Property for Concessions. We only adjust any comparables for they dollar amount they had paid and the subjects 3% has no bearing on its value. And again Fannie Mae only addresses the way we handle seller paid concessions on the comparables and NO you are not doing a Appraisal for Fannie Mae Mae unless you are doing a post closing review or have been directly engaged by them for a service. Fannie & Freddie typically do not make loans, they purchase loans after they have been closed and recorded by the Banks and lenders. In fact in most cases you will never know where that loan that Bigger Banks USA funded ends up.

 

[Zoe]

Glenn said, Fannie Mae does not tell appraisers what adjustments are to be.

When was the last time on a 1004 you made an adjustment for a comparable sale where the seller paid 3% of the buyer's closing cost?

That depends on qualitative analysis. quantitative some somtimes.

 

[Zoe]

bottom line is if you give me $10,000, its $10,000 to me.

 

[NC Appraising]

Time-based market condition adjustments are very difficult in the scope of work that the lenders want at the price point they want the project completed.

It is almost impossible to conduct a fundamental market analysis that supports a market condition adjustment in the time and cost of a lending appraisal.

You may have received what your lender paid for. The sales statistics might support your hypothesis, unfortunately, your lender selected a set of experts that didn't analyze deeply enough to opine on the application of those facts.

Whether or not your fair use of the appraisal report and reliance on the lender's possible duty to you resulted in damages or losses to you is a good point for the regulatory authorities. Perhaps consider complaints to all authorities.

Russ, you are one of my favorite posters and I agree in theory with the above, but...

Fannie Mae only says that the appraiser must provide data and support when the 1004MC is not reliable. Correct me if I am wrong, but I believe Fannie or someone even gave examples of other data, such as Fannie, FRED, Case/Shiller, etc.

The appraiser can rely on Fannie Maes market condition reports, Zillow, FRED, Corelogic, REALTOR, the local MLS or simply run more data from the MLS.

Most of the above takes 1 minute to produce. So I cannot give a residential appraiser a "out" on this one for mortgage lending. Other assignments, yeah, I agree and I would charge $1,000+.


Here is a example, took 35 sec.....

 

[glenn walker]

That depends on qualitative analysis. quantitative some somtimes.

Your seller paid concession analysis can be done numerous ways but one equation never changes and that is we adjust only the comparable sales that had concessions not the Subject Property. And that is based on protocol, proper methodology and Fannie-Freddie-FHA-VA Guidelines.

 

[Mark K]

I think the transaction has been finalized He/She came up with the difference in cash so it's a mute issue : )

Moot.

That is....unless you intend to mean that the issue is unable to speak.

 

[KONA]

Well said, Post 114

 

[Deleted member 152047]

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

So I am sure many others have a similar opinion, and I have not read through all the comments.

First off, let me say that you have approached this in a logical manner and have made a compelling argument. Bravo for that, as a non-appraiser, your approach and explanation is superior to many within our profession.

That said, I think you need to let this one go. I understand that you are ready for a fight, but it is highly unlikely that anything will come of this. It will create a headache for you and for the appraiser and will not change his/her appraisal, nor where you stand on your purchase. If you file a complaint, the appraiser will defend themselves and it is highly unlikely that the State will consider this to be misleading or negligence.

You might consider going to a different bank, that is likely the best remedy.

 

[Russ Kitzberger]

Russ, you are one of my favorite posters and I agree in theory with the above, but...

Fannie Mae only says that the appraiser must provide data and support when the 1004MC is not reliable. Correct me if I am wrong, but I believe Fannie or someone even gave examples of other data, such as Fannie, FRED, Case/Shiller, etc.

The appraiser can rely on Fannie Maes market condition reports, Zillow, FRED, Corelogic, REALTOR, the local MLS or simply run more data from the MLS.

Most of the above takes 1 minute to produce. So I cannot give a residential appraiser a "out" on this one for mortgage lending. Other assignments, yeah, I agree and I would charge $1,000+.


Here is a example, took 35 sec.....

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Thanks for the compliment, It seems that the OP indicates that the appraisal report didn't include any significant market analysis or support for the opinion: quoting op:

“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”.

As far as the reliability of the 1004mc; utilize the FNMA instructions: it is not going to be statically correct, because the removed video instructions for the 1004mc included a search utilizing price range. Which, has been established that results in generally stable statistical dataset output. You can experiment by placing a group of random variables of price points in a range in excel, placing a second group of random variables, and then gauging the median or mode of the variables. Output will be generally of little difference (stable). Like much FNMA says to do, it is not reliable, I concur with other thought leaders who have long advocated that GSE work should include a jurisdictional exception. I will leave that for another argument though.

Your graphs are great, it is highly unlikely that the OP's appraisal included that. I utilize graphical analysis in my work, and have paid $1000+ for my own home appraisals and seen that level of analysis and images, however, very seldom have seen it in a typical lending appraisal. According to the OP, a large group of data was not included and the appraiser(s) ignored the increase in neighborhood sales prices.

I would refer your graphing to enhanced market analysis, and a minimum required for a highly changing market. Good job!

 

[Alsie35]

Thank you all for the lively discussion. I appreciate getting an appraiser's perspective on my situation and whether you agree with my frustration or not, your points are taken all the same.
*SNIP*

Your thread - like chum in the water - has now attracted all of the "characters" on this Forum. May God help you.