fraud or not on GLA adjustment

[Marcia Langley]

spry,

Now that you have some other appraiser-selected comps you have some amunition to challenge the bank's appraisal.

If the comps in your appraisal are more proximate, recent, and similar to your condo, you will have a good case.

Also, you didn't say whether the bank's appraisal or your appraisal considered the impact of active listings on the opinions of value. If any active listings are lower in price (yet still recent, proximate, and similar), it is possible for them to have a limiting effect to the high end of the range of value.

 

[Lobo Fan]

Appraisers are tasked to find market value. The opinion of market value might vary from one appraiser to the next. Undervaluing is as much an ethics violation as overvaluing. If you think that you have a problem, try comparing credentials of the two appraisers. Which one is closer, been doing it longer, etc.

The low number could still be the more correct number. Plus an appraisal that is cranked out in under 24 hours may not have been properly researched. It seems that the last appraiser had a target number provided. The best appraisal would come from an appraiser with no information regarding your needed number.

If your buyer wants to proceed with the deal they can provide the additional cash to meet your asking price, or you can lower your price to make the deal work, or the buyer can find a new lender. It is doubtful that any lender would proceed with a $300,000 loan when there is a $260,000 appraisal in the file.

We still don't have enough information to conclude that there is a problem with the first appraisal. It seems the only real problem is that you don't like the number. Where did the second appraiser go for comps?

 

[Wayne Tomlinson]

Way back in 1962 when I returned to my home town, I was doing a few apprailals along with my other business.

I was talking to the (only) local bank president one day. He told me that it was ok with them if the appraisals were a little bit low, they would not object.

At that time all lending was local. Every bank that made a loan also expected to collect that loan. What he was really telling me was that they would rather make 75% loans that looked like 80% loans.

Also, back then, of course no one ever thought of such a thing as licensing. There was not an appraiser on every corner.

If an appraisal did not support the sales agreement, the buyer went back to the seller,and they renegotiated. Simple as that. Now the idea is to renegotiate by getting another appraiser so the house becomes worth more.

Changed world.

Wayne Tomlinson

 

[sprydle6]

full disclosure... I am the owner of the building / condo project. No agent involved in the sale of the unit, FSBO.

I evaluated the market, looked at what else was for sale and then offered the unit below what I thought it might sell for, hence the bidding war.

The 2nd appraiser came back and told me he had comps in the area which were in the 400,000 range but excluded them because they were so high.

The buyer agrees with me on the value. They have been in the market looking for places for the past 4 months and haven't found anything nicer for the price.

I refuse to allow scared banks to dictate how much money I can make just so they can make up for all the liar loans they looked the other way on for the past 5 years.

Both buyers are full doc and employed as tenured school teachers. Husband and wife looking to start a family. Putting 20% down... come on. The banks need to do what they do, evaluate risk and provide loans.

 

[Marcia Langley]

Spry,

I understand your agitation.

If your new comps don't move the lender or his appraiser to reconsider, and you and the buyer are adament about the price, then the buyer should move to another lender (or come up with the extra cash).

You didn't comment on whether the comps your appraiser found were more recent, proximate, and similar or whether listings impacted the outcome.

Respectfully, the lender will follow his own guidelines regardless of what you "allow". He has the right to decide how much he is willing to loan on any given property. Unless you can convince them you have provided better comps as described, he is not likely to change his mind.

The simple fact of there being "some" sales in the range you have in mind is not the whole story. In an appraisal they have to be the "best" or most comparable sales.

 

[Webbed Feet]

full disclosure... I am the owner of the building / condo project. No agent involved in the sale of the unit, FSBO.

Now I feel psychic!

I evaluated the market, looked at what else was for sale and then offered the unit below what I thought it might sell for, hence the bidding war.

The 2nd appraiser came back and told me he had comps in the area which were in the 400,000 range but excluded them because they were so high.

Correction in wording. You meant to say the appraiser told you he had sales in the area that sold as high as $400,000 but excluded them because they were not comparable. Or this is what the message should have been. No decent appraiser worth a hoot excludes comparable because they sold too high.



Webbed.

 

[sprydle6]

excluding certain places because they are significantly higher priced should be a valid reason to exclude them. Perhaps I am influenced by the NYC metro area I live in, but you can have identical sized condos with the same rooms and they could be priced as far apart as 100k. Concrete and steel construction units carry a big premium to frame construction. Soundproofing, number of windows, quality of fixtures / appliances. Wolf 6 burner stove or midlevel Kenmore? Custom kitchen or home depot special? Steam shower with marble or single diverter and ceramic? Parking? covered parking? garage parking? I don't think appraisers account for all these things when coming up with a value. Buyers know what that is worth and what they are willing to pay for it.

The units I am selling have 9' solid wood doors, 10' ceilings, oak and mahogany parquet floors, custom kitchens, restored victorian home built in late 1800s with original plaster mouldings, tin ceilings. I actually imported the new entry door for the building directly from Argentina. The door was salvaged from a building built in Argentina's heyday in the 1920s.

These are things which sell units in any market. Buyers are pround to own and for 6 months after the sale I get buyers friends calling me up asking if I have other units for sale.

It frustrates me when someone comes in and tries to tell me that a place down the road where you will hear your neighbor **** through the walls, using inferior products and craftsmanship is the same as mine.

I will be sure to let everyone know how this goes. I think Bank of America will accept the new appraisal (seeing that the company is an approved BOA appraiser). With any luck the closing will happen on tues or weds next week.

One other question for all. I have heard through the grapevine that 4 large banks (i won't mention names) have given their appraisers marching orders to find most conservative comps they can then take 10% off the final value. True? You guys being pushed to defend the banks position?

 

[Marcia Langley]

spry,

All anyone meant was that the higher prices in and of themselves were no reason to exclude the sales. As you said, the higher levels of quality, location, and amenities (absense of similarities) are the reason for excluding them, not their prices.

If they had been the most similar sales, the high price would not have been a good reason to exclude them.

To you, this may sound like a chicken/egg semantics like distinction but those sorts of distinctions are the fundamentals of appraising.

I hope you are successful in getting more appropriate comps considered by the bank.

If thheir original appraiser did not use the most similar, recent, and proximate comp sales and listings, you deserve to have a reconsideration.

=========

Regarding appraiser coercion, yes, in many cases appraisers are bombarded with coercion. Appraisers who are competent and ethical know how to fend that off. Financial institutions may change their policies with the ups and downs of the economy but appraisers, by law, are not allowed to. Not allowed to no matter if the coercion is "up" or "down". Both are equally illegal.

Appraisers who violate their obligation to be an unbiased third party aren't worth a patoot. Many are currently facing jail for their misdeeds along with the lenders, realtors, mortgage brokers, builders, developers, buyers, and sellers that coerced them. the FBI is currently making a huge push going after them.

If you have proof that lenders are giving appraisers marching orders to violate their obligation to be unbiased, independent, third parties, you should report it to the FBI.

 

[Marcia Langley]

spry,

I will add that, no, I have not been under any pressure to be unethically bias toward a lower value. So far, if pressured at all, I am still being pressured to be unethically biased toward a higher value.

Given all the posts in this forum, I'd say the bulk of the pressure is still toward the high side, but there have been some reports of the other way.

You know, the bank can't raise or lower the appraiser's reported opinion of value. If the bank has some sort of policy to "cut" value, that just means they are loaning at a lower LTV but they don't want to call it that. But such a policy as that has nothing to do with the appraiser.

 

[sprydle6]

Webbed... you are correct in altering what I said. The appraiser told me that the sales in the 400k range were the same in room count but couldn't verify the sq ft from MLS. The 2 sales he referred to specifically were in the same building a few blocks away. But here we go, if those are so out there in terms of price and don't have a "comp" how do these deals get funded?

In my area land doesn't play a big role in the value of property. Having a "yard" will add about 10-15k onto the sale price, having a parking spot will add 5-20k depending on the quality and size. The condos that sell really do sell based on price per sq ft. I've read what you guys say, but that is how it works. You start from the rough per sq ft price then add on amounts for extras other places don't have. Every sq ft in a small condo counts. If a condo feels larger because of a superior floorplan then great, people will feel they are getting a deal. But buyers bring tape measures with them and see if you are inflating the sq ft of a unit. If they measure and come up with 100sf difference to the short side they will adjust the offer down based on that. I know to you guys that may not make sense, but that is the market.