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

[throwaway12345]

It sounds like the OP was hoping for across the board positive time adjustment for all the comparable sales utilized as they are the only comparable sales available. This is most often seen as unacceptable in the eyes of underwriters as they require proof of time adjustments by the sale of a recent COMPARABLE property. Not to mention of all comparable sales are adjusted upward it would result in a non bracketed appraisal which is also an underwriting no-no. Sometimes the appraiser’s hands are tied by a lack of data and underwriting requirements.......don’t hate the player, hate the game.

Honestly I may actually hate the game more at this point. I wasn't aware that positive time adjustments across the board were a red flag for underwriters.

If you're in that situation, how would you approach it? Honest question. My guess would be you'd need to loosen your criteria for comps, so maybe expanding geographically or by product type to find something that the market would view as a close substitute, then finding a recent sale and then adjusting it from there to match the subject.

 

[throwaway12345]

You may be able to determine the Scope of Work for the original work product (appraisal development and reporting). A letter of engagement most likely exists.
How do you know the Scope of Work for the lender "review appraiser"? Can you confirm it? Do you have a copy of their job description?
The "review appraiser" might take you to court if you cost them time, money and/or reputational damages.
Just something to think about. This is all in your control.

I have none of that information and don't really have a clue as to where I'd find it.

Thank you for your advice, I also was not aware that I could be sued for filing a complaint, that seems quite extreme. Good luck to any of those potential whistleblowers out there.

 

[throwaway12345]

One of the things that most appraisers don't know it that FNMA's CU will tell the person looking at it that there is/isn't price increases on any time period. CU has a lot of layer's that give the underwriter a lot of info that we can't get. unfortunately, appraisers and normal people don't see that info when CU spits out a report on the appraisal. a lender's own reviewer usually has access to that info. an independent reviewer doesn't see that info. most appraisers do not have the knowledge, or tools, to determine time/price increases over any time period, or over any amount of sales data.

your original post, i'm impressed. you sound more appraisal educated than a lot of appraisers. you have to prove your point. lawsuits take years, and lots of money to resolve. the state could help if they go against the appraiser. do you really have the time (years) and money for this. you want a house, go back looking. just like that book title, the best laid plans of mice and men go astray. besides appraising, i also do appraisal therapy.

Thank you for the compliment. I have no intention of turning this into a lawsuit as there aren't really any damages to speak of on my end. I got the house (after putting up more cash) for cheaper than SC price, so I have nothing to gain from this really.

 

[throwaway12345]

You are right, pretty much. If you want to conclude prices have either headed up, down or stayed flat, you need the best evidence in each case. This appraiser is biased in terms of no price change. He calls this "stability" or "stable" perhaps. But, in fact, we know that the markets are not stable when there is an imbalance between supply and demand exacerbated by fears of a worsening pandemic that makes buyers act hastily rather than take their time searching the market - even if the the market provided more selection.

What you are seeing here is the impact of statistical courses based on Gaussian or parametric statistics taught by the Appraisal Institute and other appraisal education providers. This form of statistics isn't even suitable for Real Estate. They should be teaching non-parametric statistics. Parametric statistics makes the assumption that the data you are using is a sample from a population with known parameters such as the Normal Distribution. This is almost never the case in typical complex markets that are the backbone of most high density markets composed of mixtures of very old, old, medium aged and newer homes of all styles and design, including condos, townhouses and subdivisions, with and without HOA fees. Our data does not fit parametric distributions. When we lack sales we have to data mine for sales data wherever we can find it, spanning property types, dates and locations. We have to deal with chunky data. And we get so little, we deal with the entire population, not a sample.

So, we don't need to talk about "small" data sets providing "inconclusive" results. Small data sets are all we have and we need to extract every bit of information we can from them and use it to provide the "best" conclusion of value regardless of its reliability. The client wants the best indication of value. "Best" certainly does not mean perfect. It just mean best. So, we engage in data mining techniques using tools like MARS.

The statistics courses for appraisal need to be fundamentally changed.

The Appraisal Institute, TAF and others have been guided for years by Real Estate Statisticians's who have Ph.D.'s from third rate universities and simply don't know what they are talking about. They are writing books for a virtual audience.

Caveat: There are a few simple markets around, where things are sufficiently simple enough to use simple averages and means and multi-linear regression. But don't try that in the SF Bay Area.

And in this day and age, ..., well I was just talking to a realtor in Mill Valley who said that buyers who are able to buy are coming in with enough cash to pay 30% - 40% down on $1M - $2.5M homes. They get snapped up fast; - and he said, if buyers have that much cash, how important are interest rates, really? And, if the appraiser wants to be able to deal with these issues in many areas, he needs to be adept at dealing with non-parametric statistics just to stay afloat in a sea of erratic complex decision making often by highly intelligent individuals who need certain functionality specific to their situation in terms of family (children?), relatives and guests, business considerations, first and foremost, followed by quality, condition and other less important considerations.

Another Caveat: Many will decry that appraisers are simply neither smart enough nor equipped with the tools to handle non-parametric statistics. Deal with it.

The other AI (artificial intelligence) is a fantastic tool for non-parametric statistical applications. Perhaps that is where the future of determining pricing trends is headed.

 

[Alsie35]

Honestly I may actually hate the game more at this point. I wasn't aware that positive time adjustments across the board were a red flag for underwriters.

If you're in that situation, how would you approach it? Honest question. My guess would be you'd need to loosen your criteria for comps, so maybe expanding geographically or by product type to find something that the market would view as a close substitute, then finding a recent sale and then adjusting it from there to match the subject.

If I come to the conclusion that the market is indeed rising, but lack contemporaneous comps for a half-plex like yours, I would HAVE to find a recent sale of the most similar functional product (townhouse or even a detached home).

I would then do a historical match pair analysis to determine how much of an adjustment to make to that recent sale for the difference in design.

Then I would have the freedom to apply the positive time adjustment to the similar, but dated comps. I would "hang" my value on one of those similar, but dated and time adjusted sales, and only use the recent dissimilar sale as an "anchor" in terms of the date to make the time adjustment to.

THAT is how I would make a time adjustment in this case, IF (and this is the BIG IF) I come to the conclusion that the market is indeed rising.

Is this a lot more work than I usually do for a residential appraisal? Yes, of course. But once in a while you "have to do what you have to do".

There is no way, knowing what was riding on it, not to mention my integrity, that I would try to ignore the issue on a purchase wher it would clearly make a difference - one way or the other. (But again, I have NO IDEA if that is what went on in your case. This is a HYPOTHETICAL only). That is the HOW I would do it.

(Too many people are on this thread hallucinating a meaning or motivation into your posts, or just not reading them completely, and having knee-jerk reactions to the idea of a complaint being filed. I get that, as appraisers none of us like that idea, but I am impressed by the thought you have put into this thread.

As in all my posts, you will notice that I am silent on the "complaint" part because I have no information to inform my opinion on that point one way or another. I do agree with some of the posters in that outside of the aggravation it would cause to the appraiser, no one will likely lose his/her license over something like this.

 

[throwaway12345]

I am going to make this quick, as I have a 9 am appoint. Keeping it "real" here.

Appraisers fear people like you....just enough info to be dangerous. LOL.

1. Should you turn him in. Yes and no. No because he came in low, seems like a honest appraiser. Would you have turned him in if he came in high or above the contract price? No. The number hitters or unethical appraiser rarely gets turned into the board because they make everyone happy. Yes, if there are other multiple mistakes. There are several different appraisers....conservative, number hitters, volume churn and burn, etc. Like in any profession.

2. This is a screwed up profession. Like others have said, we were trained to check the middle boxes...stable, in balance, etc. I really do not know why, I guess it avoids lender buy backs, better rates for the borrowers, and keeps the UW happy.

3. Fannie Mae has came out and said for appraisers to make market condition adjustments.

4. As others have said, UW hate across the board adjustments. Blame the lenders too. ALTHOUGH, I have been making across the board market condition adjustments for over three years. I once had a UW tell me that I could not make market condition adjustments for 0-3 month time period. I said show me that appraisal theory or guideline...they could not. See the STUPID crap we put up with??

5. In my market, the past two months have seen rapidly increasing market trends. We are talking $20k in a month in some markets. So it is not a linear appreciation rate. So how does one account for that with no sales. Many have appraisal waivers (borrower will pay the difference or are paying cash).

6. It appears that the appraiser should have made market condition adjustments, even if it still came in below the contract price.
If he was a number hitter, he would have used superior comparable sales to meet the contract price. It appears this appraiser was either honest and was just trained to not make market condition adjustments or is a "Skippy" churn and burn volume AMC appraiser that produces a canned appraisal. Skippy uses canned statements, marks stable, makes very little adjustments.....more adjustments=more explanations. The thing above Skippy appraisals is that on the surface it looks like a clean and great appraisal!!! But it is worthless. So take a close look to see if it is a Skippy appraisal. If it is, TURN him into the board.

Skippy appraisal: neighborhood section can be anywhere USA. Zoning, anywhere USA. Minimal or no adjustments for condition, quality, end unit, and other factors. They typically only adjust for GLA.

I appreciate you keeping it real! Lots to unpack here:

1. Complaints are definitely asymmetric, I agree with that. Honestly, I probably wouldn't think of filing a complaint for someone who came in too high nor would I examine the appraisal as closely as I have. Multiple mistakes is another matter, which I'll get into in the later points you raised.

2. Fair, rules of thumb exist for a reason.

3. Seems like FNMA also forces appraisers to use a pretty poor tool to extract those adjustments.

4. I don't doubt appraisers put up with stupid crap. I hope that what I asked of my appraiser or what I've posted here isn't stupid crap lol.

5. I paid the difference in cash after convincing the seller to come down some.

6. A non-zero market conditions adjustment would maybe have gotten me to go away quietly. The rest of your points are starting to make me think I may be dealing with a skippy appraisal (I think I am following what that means), but this needs to be broken down a bit. Looking back at the appraisal, there are some definite signs of it.

The comps are all duplexes too and were all built at the same time, so condition and quality are all roughly equal. I wouldn't call no condition or quality adjustments a skippy sign yet. You did hit the nail on the head for GLA though. That's one of the few adjustments in there, which result in a <1% change. Similarly, a land size adjustment is in there as well.

The language throughout is quite generic. One thing that set an alarm bell off just now is that there's a bullet point in the "Explanation of Adjustments" section that talks about adjusting for bathroom count and air conditioning, but none of those are actually adjusted for in the grid. The subject's bathroom count and HVAC are exactly the same as all the other comps.

Related to your end unit point, I did ask whether an adjustment for the subject's location at the end of a cul-de-sac was warranted (vs the comps who are located in line with / between other homes). Didn't get a response, so I'm not sure how to interpret that as a skippy job or whether the market doesn't assign a premium to being located on a cul-de-sac.

Thank you for giving me lots to think about.

 

[throwaway12345]

Put yourself in the shoes of the appraiser. Would you (as the appraiser) consider it reasonable for a home buyer to potentially ruin your career over a single appraisal? If you (the appraiser) really don't understand valuation methodology - including support for making the determination of whether a market is appreciating, stable, or depreciating, then the answer should be yes (for you, the home buyer). If, however, you (the appraiser) believe the motivation to be one of spite or revenge, the answer should be no. Which is it? An honest desire for this appraiser to be better trained, or a motivation of revenge/spite for the appraisal not meeting your expectations?

I have considered that scenario and can honestly say I am not looking for revenge or spite.

Regarding my expectations, I think there are two distinct, but related, expectations that I had going into the process. The first is that the appraiser provide an unbiased, supported opinion of FMV. The second is my expectation for FMV (if you don't have one, you're lying). If the former were met, but not the latter, I am in no position to judge the appraiser's opinion. My issue is neither were met.

From an analytical standpoint, I cannot understand how the appraiser looked at the data and arrived at their conclusion. I have provided support for my view (including the raw data), asked and asked, and then received no response or support for their position.

 

[throwaway12345]

Forget about the OPs motivations for a moment and consider the facts being asserted by the one side of this dispute. Certainly there's another side to the story and that bears consideration as well. But IF the facts of the appraisal are as the OP says they are, and IF the appraiser didn't apply a market conditions adjustment to sales that entered into contract 10-12 months ago and closed 8-9 months ago and IF the appraisal report doesn't provide any support for that lack of adjustment beyond the point that these are the most recent sales then THE APPRAISAL needs to be cleaned up.

The work gets judged on its own merits (the appeal to reason), not on the fact that the person signing it is an appraiser (which would be the appeal to status or authority). Forget the appraiser and consider the appraisal and appraisal report.

If it was my report and someone was challenging my conclusions it would be in my own best interests to fix my problem - including going back to add the support I should have included in the first place if that's what it takes. It is not in my interests to allow to stand an appraisal report that is based on conclusions that are not supported and are contraindicated by the other sales data in the market involving the less directly comparable sales.

Direct comps or not, an opinion of the effects of the current market conditions can be developed for this situation. An adjustment of "0" is still a value. We don't get to just walk away because this analysis is going to require more work to complete. Or because we didn't get paid as much as we wanted to for doing the work. Or because we're busy. None of that is professional practice.

The appraiser isn't going to get significantly disciplined by the state over such a complaint; they're certainly not going to lose their license. But if the question was put to the appraiser and their response was limited to "I considered it but decided not to change it" without any further support then that's them allowing the state to do what it does. That's on the appraiser, not the complainant. The complainant is being forced by the appraiser to exercise their option of last resort. And regardless of what the value of the property actually is, there's no good reason for the appraiser to have allowed this situation to get to this point.

This OP has repeatedly acknowledged that they aren't an appraiser, but it's clear they have the capacity to research, identify and analyze specific market data for pricing trends such as appraisers do in their work, and it's clear that they're using some critical thinking in their analysis. Moreso than any other "layperson" that I can recall coming here and complaining about an appraisal. And that's saying something. So gaslighting them despite what they clearly are capable of doing is not helpful in this discussion.

IMO

George, thank you for expressing what this layperson was trying to convey

 

[throwaway12345]

Was the appraisal contingency waived? I see a lot of buyers get into bidding wars, then when the property doesn't appraise, they feel left holding the bag.

Yes it was. My amateur appraisal (with a market conditions adjustment) got me to a number higher than the appraised value, so I put my money where my mouth is and made up the difference in cash. The way I saw it was if I truly believe I'm right, I shouldn't have a problem moving forward with the transaction and sleeping at night.

 

[throwaway12345]

1. You state that you agree buyers are / maybe paying too much. As a Buyer what is the basis of your belief. As a Buyer, had positive time adjustments been made increasing the EMV would this not have been in conflict with your belief. Would this be advantageous to other buyers you claim concern about? Would positive time adjustments have made up the differential between your cash outlay and setttled SP?

2. You agree with the Appraisers comp selection but Say you expanded “your” product search within the neighborhood to support your research and need for positive time adjustments - how so - what type of “products” would they be?.

asking for a friend

Having a background in RE surely you are familiar with AIR regulations- surely you are aware that complaints about the Appraiser not meeting CP would go straight to a an ethereal bin in the ether. Surely, you must be aware that All else being a non issue or cause for a complaint couching time adjustments Would ring some bells

These are interesting questions!

1. The basis for my belief is that for my day job, I'm running a cross-sectional multiple linear regression using detrended property prices and a handful of characteristics of the properties over the last 20 years. Properties are definitely selling for above the long term trend in my market in recent months to a statistically significant degree. Qualitatively, I was shopping for a house not too long ago and have seen what closed prices looked like and have not been living in a cave for the past year.

Not sure how a positive time adjustment would be in conflict with my belief. I didn't say buyers overpaying is the sole cause of an increase in prices, that would be silly. And really, I don't care who it is advantageous for or not, shouldn't the goal be to get the most accurate FMV? In my case, it is unclear whether a positive time adjustment would have made up the differential, it depends on the magnitude of the adjustment (I wasn't short $1, nor was I short $100,000). My issue was that 0% is probably not only incorrect in terms of magnitude, but also incorrect in terms of direction.

2. The subject is a duplex, the comps are duplexes in the same neighborhood. The comps sold 8-10 months ago. There haven't been any duplex sales in the most recent 8 months in the same neighborhood. There clearly isn't enough data to justify any kind of time adjustment, so you look for clues in substitutable products. I looked at similar sized, same # of beds / baths, detached SFRs and condos in the same neighborhood. Scatterplot shows increase. I pulled together some paired sales. All have increased. I thought this was laid out pretty clearly in the OP, but if it isn't, my apologies.

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.

For your last sentence, yes I am familiar and do not believe I ventured into AIR territory. Nowhere did I ask for a specific value, just a supported value. A value well below SC but supported by an analytically valid process would have been fine with me