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

[Fernando]

Lately listings have not been helpful because lazy agents list significantly below market. I prefer not to put them in but lenders want them.

 

[Sadie]

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

I was just the options for the OP at that point.

 

[throwaway12345]

I thought you might have been a young appraiser based on the way you were describing the issue- somewhat knowledgeable of the lingo. An appraiser would probably be aware that the law provides that we work for the BANK. The borrower is not an INTENDED USER. Therefore, the issue of privity comes up. The report is for them. Yes, I suppose you can file a complaint with a state board but a lawsuit will likely get tossed out of court. The complaint will cause a lot of grief to the appraiser if you just want to punish them for not bringing in a higher number - which is clearly why you are angry. But what good does that serve? An appraiser cannot just jack up a value, nor should they in light of the AIR provisions of TILA. AIR (Appraisal Independence Regulation) was meant to protect the appraiser from pressure. If the review appraiser has spoken, then I don't see how the state board would not be prone to side with the appraisers. Value is not what they look at, only if it complies with USPAP.

I take that as a compliment. I have been involved in CRE for the past 10 years, which is probably why I'm somewhat familiar with the lingo. And thank you for pointing out that the lender is the client and I am not. I included that in the OP, but if that's not clear, I apologize.

I also never stated I wanted to file a lawsuit, punish the appraiser for not hitting a higher number, or that I'm angry. If anything, I should be grateful since I benefit financially now that the seller agreed to bring the price down. I'm not sure how my actions (asking questions or providing publicly available market data) could be construed as attempting to pressure the appraiser. If asking questions and providing data to support my questions with data is considered a violation, then why don't appraisers cite that anytime a ROV comes up.

There seem to be a lot of assumptions about me in your statements at the expense of examining the core question I'm trying to get answered. If all available data seem to indicate market conditions are different than those 8-10 months ago, should a market conditions adjustment be applied or should it be assumed that the FMV is exactly the same as it was 8-10 months ago?

 

[Elliott]

Alsie said, "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)."

Hmmm, so if the OP 'had' got his full loan would he had been as concerned about filing a complaint? Only he can honestly tell us. We don't know very much about the ROV request, how the OP presented it, or who it went to. The original appraisal or the desktop reviewer? It has been my experience that some AMCs re-phrase or re-write ROVs and the appraiser's response, and when I get a ROV, the lender is asking the appraiser if there is something being presented which the original appraiser and/or review overlooked and if it would change their opinion of value. It is just as probable the comparables used were the best available in the appraiser and/or reviewers opinion, then they were, if only, lacking a better bed side manner when presented with a ROV.

 

[throwaway12345]

Not sufficient to prove much of anything it sounds like.
At which point I would expand the search parameters in an effort to get enough data to analyze and hopefully make sense out of.
Expand probably either GLA parameter, or include similar adjacent hoods, if such exist, or both
I also don't know your area, have never been to HI.

I don't know what filing a complaint will do. Might be more trouble than it's worth.
Especially since you got the house.
Congrats on that. Aloha.

Thank you for the congrats!

I agree with your methodology in looking elsewhere for data. I tried to provide that as support for my questions and did not receive a response (from the appraiser or the lender). I also agree that filing a complaint may be more trouble than it's worth. At this point, my only motivation is preventing this from happening to someone else. This level of (potentially) lazy analysis is harmful to first time homebuyers like myself, especially in an expensive market like Hawaii where coming up with the cash to close the gap is near impossible.

 

[Alsie35]

*SNIP*

If all available data seem to indicate market conditions are different than those 8-10 months ago, should a market conditions adjustment be applied or should it be assumed that the FMV is exactly the same as it was 8-10 months ago?

Well, that depends on whether the subset of properties that compete directly with your home show that a positive time adjustment is indicated. The problem there could be that there is not a very big data sample for that subset of properties, so there is no conclusive answer. I suspect that this is what the original appraiser found.

Now the secondary question is "Is there basis to go outside of that data set to the larger market data set to justify a positive time adjustment?" That is not an easy question for an appraiser to answer, and I'll fall back on my observation that the original appraiser may not have discussed this clearly enough in response to your ROV.

If the seller lowered the price to come closer to meeting the appraised value, I'd call that a victory and move into the home.

 

[throwaway12345]

I have to make one last observation - when I get an ROV request from a borrower who clearly knows what they are doing (in terms of the suggested market analysis and comp suggestions) - as happened to me just yesterday on a file I referenced earlier - I work even harder to see if I might have missed something. I figure at the least I owe it to them - they clearly put work into it. (As an aside - most ROVs we see tend to be for suggested comps that are clearly irrelevant due to some obvious difference from the subject - it is rare to see a well reasoned and well-supported ROV).

I can't believe the fellow you were dealing with didn't do the same thing with the data you provided. You know which doctors have the fewest malpractice complaints? The ones with a good "bedside manner" - to mix professional metaphors if I may.

Beyond all this - congratulations on your home purchase. I have old military acquaintances who have lived in Hawaii for a couple of decades and some of the stories I've heard about the costs of home ownership out on the islands are truly scary!

Thank you for the congrats!

And the lack of transparency is what might be most frustrating to me. I feel that I've put together a well supported ROV with full transparency into the data used (down to the MLS numbers for my paired sales) and have been told "the number is not changing" and "we've reviewed it and it's good".

The costs of homeownership out here are no joke. As I mentioned previously, that's a big part of why I'm even considering filing a complaint: I don't want this to happen to anyone else as the stakes are really high.

 

[throwaway12345]

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.

I can't pretend to know what analysis the appraiser did outside of the report. The comps included were sales from 8-10 months ago and a pending sale that was assigned no weight. There are no more current sales for the specific product in the neighborhood.

I asked for a ROV and provided detail on the pending sale with a SC higher than listing, which are both higher than closed sales prices 8-10 months ago. I included the selling agent's info if the appraiser would like to verify. I was told to pound sand.

 

[throwaway12345]

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.

As I mentioned in the OP, I got the loan and made up the difference in cash. The complaint (if I go through with it) would occur outside of the transaction. If that wasn't clear in the OP, I apologize.

You may be right about your expectations for interest rates. But is it the appraiser's scope to determine a FMV as of a specific date, not into the future?

You may also be right in that maybe the market isn't increasing and stable is a reasonable observation. My question, knowing full well that I'm not the appraiser's client, is if all of the market data seems to indicate an increasing market (based on paired sales, neighborhood sales, market area sales, and county sales) then what support do you have for calling it stable and warranting a 0% market conditions adjustment?

I am not attempting to attack the appraiser, the reviewer, the profession, or any of that. It's not an easy job and is very important to a well functioning real estate market. I just want to know whether I'm dealing with someone in the 95% or the 5%. If it's the 5%, I don't want this to happen to anyone else.

 

[throwaway12345]

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.

That's unfortunate considering the financial stakes for all parties involved (the people not the institutions), especially since I ultimately paid for the appraisal. I ordered an unbiased FMV and seem to have received a half-baked analysis not inclusive of all of the publicly available data.

There aren't really any damages or losses to speak of (unless you count the time value of money for the cash I had to put up), my only motivation for the complaint is to prevent someone else from dealing with the same issue.