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

[throwaway12345]

I working on a purchase appraisal. The price is high compared to the sales over 6 months ago. Has prices gone up at least 10% especially on same block?
While driving taking comps, I was thinking the older comps are older and prices have increased because of the frenzy current market where buyers are buying over list price trying to be winning bidder.
Current market have many buyers willing to pay "above market" prices.
Appraisers are taught to use prior comps to justify current market values.
From our experience in area, we feel the prices are excessively high even though buyers think the high bid prices are market value.
We know that the market can turn when mortgage rates go up. Just as fast as it goes up, it can go down just as fast.

Today, I was thinking about this two different perspectives between buyers and appraisers.
We don't owe a duty to the buyers. Buyers think otherwise. Then Buyers should hire their own appraiser.
Our client is the lender which is why appraisers justify their appraised values based on past sales and not bidding prices.
We do consider the bidding prices but in the end, we give a point value we feel comfortable as demanded by client.

Thank you Fernando, I don't disagree with all of the points you mentioned. A few naive questions from a non-appraiser:

So based on your assessment of the market and your experience in the area, you would conclude that recent closed transaction prices are not representative of the market values? Do you adjust those downward or disregard them altogether in favor of 6 month old prices?

As for predicting prices when mortgage rates go up, isn't that considered outside of the scope of "FMV as of"?

In my past years during a significantly increasing market. I sometimes couldn't appraised at the contract price.
Some agents have hated me and wanted me banned from ever doing their loans. That comes with being an appraiser.
Those appraisers who hit the target consistently (easy to do by grabbing sales not comps) have gotten in trouble and some lost their license.
At the time I appraised lower than the contract price (I usually appraise as near the high end I feel comfortable), prices did go up later on.
This is good for me because my appraised value in the high end was now longer "too high".
If the market had turn, my values would have been too high. Fortunately, I'd been lucky.

I agree buyers may be overpaying and that appraising at contract price isn't supportable. And I never asked for anyone to hit any price at any time. My question is centered more around the application of a time adjustment (or lack thereof) at the time of appraisal. Not trying to go down the path of predicting future market conditions as neither I nor my appraiser should be charged with that duty.

The agent gave me a packet of info of property. Very nice of her. Even a list of sales.
Some of the sales were out of the area.
Her data didn't really support the purchase price but now I'm obligated to check out some promising ones which I had to drive by.
I don't know what my appraised value will be until I complete my report.

Not sure where this came from, but if it's related to my situation: I didn't suggest the appraiser use different comps (I actually agree with the 3 selected), I didn't go outside of the neighborhood (just expanded product type) and didn't ask for supporting a purchase price (just supporting an adjustment for market conditions)

 

[Fernando]

I don't know if the appraiser appraised too high or too low.
You may be right but I look at past sales and current sales.
I put more weight on most recent comps but will consider close proximity comps on same block even if older.
I working on a property with two comps on same block but sold lower 6 months ago. Did prices increased more 10% since then. Maybe.
Ask for a ROV with more current sales that you think appraiser missed. Also, ask your agent to call pending sales to see what is the ratified offer price.
Some agents have been nice to tell me the price for pending sales especially if soon to close. If significantly high, share it with the appraiser. If not, forget about it.

 

[Elliott]

In the last 3-months the Ten Year Treasuries are up by 3/4%, from 1% to 1.75%, a 75% increase. Mortgage rates have risen from 2.5% to 3.0+%. Do you think that might have an affect on the market going forward? Looks like the FED is taking the air out of the baloon, doesn't it? Maybe the market isn't increasing, and just possibly 'stable' is a reasonable observation or opinion.

So the original appraisal and the desktop review agree? So you expect a complaint against them will get you the loan?

None of us on this forum know your property, your market, what the market trends are in your market. Probably 95% of us are just doing our job the way we understand it. We have experience with dealing with lenders, AMCs, Fannie, Freddie, FHA, brokers, buyers, and sellers, and we view our responsibilities as important to the general welfare of the financial community.

 

[Fernando]

I noticed my number of orders have dropped significantly past few days. Less people refinancing. Recently, I've been doing more sales.
Are the increasing mortgage rates a canary of what's to come?

 

[Russ Kitzberger]

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.

 

[Alsie35]

In the last 3-months the Ten Year Treasuries are up by 3/4%, from 1% to 1.75%, a 75% increase. Mortgage rates have risen from 2.5% to 3.0+%. Do you think that might have an affect on the market going forward? Looks like the FED is taking the air out of the baloon, doesn't it? Maybe the market isn't increasing, and just possibly 'stable' is a reasonable observation or opinion.

So the original appraisal and the desktop review agree? So you expect a complaint against them will get you the loan?

None of us on this forum know your property, your market, what the market trends are in your market. Probably 95% of us are just doing our job the way we understand it. We have experience with dealing with lenders, AMCs, Fannie, Freddie, FHA, brokers, buyers, and sellers, and we view our responsibilities as important to the general welfare of the financial community.

I think that if you read all of the author's posts on this thread, you'll see that he is mostly miffed at the perception that his suggested market data was "blown off". Had the original appraiser simply discussed it and elaborated on his own analysis in a revision to the report, this thread would probably not have existed. (And I believe that he said that he 'got the loan' and closed - just had to come up with a bit of cash to do it).

I reiterate my earlier comment about having a good "bedside manner". It goes a long way - even outside of medical circles.

 

[glenn walker]

Apologies, professional misconduct is not the right term (editing now)

I do not have an appraisal license, does that prevent me from filing any sort of complaint?

Yes you can file a complaint -BUT- A State Board cannot pay monetary damages and only deal with the appraisers work so you have to know what your goal is ? If you are looking for monetary damages ? That goes to a court of law and a lawsuit and your attorney will have to prove what damages you suffered ? And your lender is the client so you need to get $20,000 set aside to defend the claim. The appraiser typically has E & O insurance-- AKA errors and omissions insurance for $500,000 to $1,000,000 and his-her insurance carrier will normally run you out of money unless they offer what I call a go away fee . ( You need legal advice and money ) otherwise it's normally a waste of time and energy unless you just want to prove a point..

 

[George Hatch]

Here's the problem I have with suggestions that the borrower take their business elsewhere: The appraiser is being paid to provide a competent service, which means they owe their client and users a competent service. I know people are busy but I don't consider throwing 3 dated sales at a contract price to conclude to a much lower value conclusion to be an example of a reasonably diligent effort. What reader *wouldn't* look askance at such a minimal effort?

I kill report the obituaries of a lot of deals in my day job, possibly more than anyone else on this forum due to the types of properties I appraise. I don't use 3 comps for ANY assignment unless the property in question is so unusual that I'm struggling to even come up with 3. And I certainly don't lowball a value without taking additional steps to demonstrate why that contract price *cannot* be considered a reasonable expression of MV. If I'm coming in low then the burden of proof is on me and I need to show my work. Devolving to "trust me, I have a license" is not an example of professional practice.

IMO

 

[Fernando]

I don't know what my peers are doing but I put 6 comps in all my reports (since lender requires at least 1 listing).
Some more recent and some more current. Since some comps already in my workfile why not include some in my report.
If appraisers just consider 3 comps and have no other comps in workfile, I personally think that's not appropriate to come up with value.

 

[glenn walker]

I don't know what my peers are doing but I put 6 comps in all my reports (since lender requires at least 1 listing).
Some more recent and some more current. Since some comps already in my workfile why not include some in my report.
If appraisers just consider 3 comps and have no other comps in workfile, I personally think that's not appropriate to come up with value.

Agree unless tha'ts all you have : LMAO