Help! Appraisal came in $100,000 too low!

[TheXman]

Unadjusted sales prices were:
#1 $495,000
#2 $515,000
#3 $510,000
#4 $576,000
#5 listed at $500,000
#6 listed at $489,900

 

[AnonApprsr]

Based on those #s, what do you expect the value to be? 600k?

 

[Webbed Feet]

Josh,


You were hoping for at least $600,000. If we say that hypothetically the appraiser had actually done as he said, and used a method of weighing based solely on those sales dates similar to what I may have done, then the “weighed” outcome indicated by the four closed sales may have been something like $530,000. This is only $20,000 more, but still $80,000 less than what you wanted at least. If the entire appraisal is not bogus, clearly you are not in the ball park at all regarding your desired value outcome.

There are many reasons I can think of that could make the appraisal entirely bogus. But without knowing that specific area and seeing 100% of the report, I don't care to comment. Which is why you need to hire local talent and move past causing all of us to guess at this. I don't mind guessing at a few things here.

A) You don't really have 100% of that report, only a few pages of it.

B) The appraiser has made a novice mistake of failing to change boilerplate statements he had already in a template (or cloned appraisal report) to match what he said somewhere else in the report. Thereby causing the page two reconciliation comments to not match his comments he made elsewhere that you don't have.

C) A strong guess that this is typical Appraiser Management Company (AMC) rushed work, done for cut rate fee to the appraiser, donkey crap work. You get charged $550, the appraiser gets paid $225, and the AMC that could be owned by the lender rakes in $325 of your money for pretty much nothing. The idea of a “quality” appraiser by many of these AMCs is how cheap will the appraiser work and how fast can the appraiser provide a report, crap or not. This guess would go far to explaining why those reconciliation comments versus the actual apparent consideration (weighing) are in conflict with each other. Rushed, uncorrected incorrect boilerplate comments instead of what was actually done. If so, this could be really the tip of the iceberg of what is wrong with the appraisal analysis and reporting.

Again, you need to have someone local and good review that work. I could sit here all day trying to tell you what to look for. But there is only so much free milk before one has to buy the cow.

 

[DTB]

OK, here is what the report says about weighing comps:
"All sales are competing homes from the same market. They are confirmed as closed sales as noted above. All of the comps are given weight in
the approach to value, with the most recent comps most heavily weighted. All adjustments are typical and based upon buyer behavior in this
market. Adjustments also based on MLS comments.
Based on a complete visual inspection of the interior and exterior areas of the subject property, defined scope of work, statement of assumptions and limiting
conditions, and appraiser’s certification, my (our) opinion of the market value, as defined, of the real property that is the subject of this report is
$510,000 as of 10/04/2010, which is the date of inspection and the effective date of this appraisal."

It appears that he settled on Compa

Just so you have the facts about values and sale dates, here are the sale dates and adjusted comp values for all six comps:
#1 sold on 7-28-10, adj. value: $524,575
#2 sold on 7-22-10, adj. value: $544,075
#3 sold on 6-25-10, adj. value: $510,000
#4 sold on 5-14-10, adj. value: $563,845
#5 active listing, adj. value: $512,260
#6 active listing, adj. value: $510,400.
There you go, he says he gives the most recent comps more weight and yet somehow, our house is still valued at exactly at the same price as the lowest valued (and second oldest comp). Now, will somebody please believe me when I say that this guy screwed up and did not weigh the comps in the manner stated in the report? I don't think it's asking too much for someone to admit that there is an error and say that it should be corrected.

It appears the appraiser settled on Comp 3 as the best indicator due to the zero net adjustment. Can't tell from here if that was proper or not. I would have likely reconciled somewhere around 520-525 but that still would not have made you happy.

Knock out the high and low comp and you have adjusted values of 510,400-524,575 with the actives (currently competing properties) at the lower end.

 

[TheXman]

Please don't get me wrong, I see the math as clearly as anyone, the value of my house will not approach what I was hoping for as long as these are the comps used, no doubt. I have focused on this aspect of the appraisal in this forum because I wanted to understand the process of how comps are weighted and how a final appraisal value is reached, and I knew that this guy could not mathematically stand behind a value of $510,000 if anything other than comp #3 was used. My loan officer had already challenged the appraisal to the AMC which then supposedly asked the appraiser to review the appraisal. Word then came back to me a week later that the appraiser and AMC were standing behind the work 100%, saying everything was done correctly and verified by the AMC. Since they were unwilling to even correct the obvious error on their own, I needed some information about the process to be able to prove the mistake and to properly respond to any of the typical "Circle the Wagons" answers I was sure to get when raising my issues just to get them to agree to revisit and possibly amend the appraisal.
Today I called the AMC and challenged the appraisal. It took some persistance and direct questioning, but eventually I did get the AMC to admit that the final appraised value should be higher than the very lowest adjusted comp. He asked me to email all of my concerns to him and he would ask the appraiser to re-evaluate the appraisal based on our conversation. Now that I have my foot in the door, I challenged the four comps that were not in my immediate neighborhood in addition to challenging how the value was calculated (or not calculated in this case). I gave point by point specific reasons why these houses were not comparable, but the short answer is that they are all crappier houses in crappier neighborhoods to varying extents. I know that it's the comps that are killing me, but now that they have somewhat admitted an error elsewhere I can at least get past the gatekeeper to challenge them. Thank you all for your responses, I have learned a lot, even from those of you who thought I was just a sore loser who didn't like the appraised value of my home. I'll keep all of you posted on what happens next.
Josh

 

[Peacemaker]

In order to get the AMC to seriously consider your complaint, it would be best if you can provide the addresses of the comps you think are more appropriate than the ones used in the report.

If these are larger, sold more than a couple months ago, have better views, are from a better 'hood, are 10 years newer than yours, etc, you are likely going to be dismissed as just another person unhappy with value. If they are truly very similar, recent sales, from your immediate development then you have a shot.

I hope that if you got a lousy appraisal, you can get some satisfaction there. If it turns out to not be the case, then I hope you will at least understand how/why the appraiser came up with his/her value. And those here who contributed to your education in that regard would appreciate knowing how this turns out. Thanks and good luck.

 

[Mr Rex]

Looks like he is weighing the active listings heavily from here. Thus the lowest sold comp isn't the key factor, its what is actively offered in the market that is driving the value down toward those numbers. This is typically indicative of a declining market. If you think there are better sold comps, you need to find some more comparable listings that support a higher value as well.

 

[TheXman]

Looks like he is weighing the active listings heavily from here. Thus the lowest sold comp isn't the key factor, its what is actively offered in the market that is driving the value down toward those numbers. This is typically indicative of a declining market. If you think there are better sold comps, you need to find some more comparable listings that support a higher value as well.

Our market is no longer declining. It reached its low point about 18 months ago and has been slowly climbing back up since. The appraiser listed the market as "stable" and the home inventory on the market is declining. Here's the kicker though, the two active listings are the two worst comps of the whole group. One is an REO bank-owned property, the condition of which is listed as "Average" while my home was completely remodeled 9 years ago to the tune of over $100,000 and the appraiser listed its condition as being "Good". To me, these two homes would appeal to two completely different sets of buyers. Someone looking for a nice, modernized home that needs no improvements would be interested in our home while bargain hunters looking to get a fixer-upper on the cheap would be interested in the comp. The other comp is a smaller house than ours built on a cheaper foundation, in a much cheaper neighborhood where the average home value is about $125,000 cheaper than the average home value in our neighborhood. There isn't even any overlap in home values between the two neighborhoods. The cheapest home on our street is valued at $20,000 more than the most expensive home within two blocks on their street. I don't know why these two listings were chosen over others but I do know that neither one of them compares favorably with mine or even any of the other sold comps. There is a house around the corner from ours which has a sale pending for between $670,000 and $680,000 (listed at $689,900) according to the real estate agent, but it has an extra bedroom and bathroom and it is 650 sq ft larger. The agent said it was in good condition but the interior was dated and the house had no recent updates or remodels. Unfortunately, I think this house is too big for the appraiser to use as a comp, but if one were to use it as a comp and adjust for size, extra rooms, and our remodeled kitchen, it would value our home somewhere between: $634,250 and $644,250. I'm not saying that my house is worth quite that much, but I do think that most of the discrepancy is due to the neighborhood and quality of the comp that is used. Location and quality command premiums on the market, but don't appear to be very high on this appraiser's list.

 

[TheXman]

I got this email today from the AMC and was wondering why Fannie Mae requirements apply to this loan. My current loan is not a Fannie Mae loan and the loan I am currently applying for isn't either. My understanding is that my loan would be too large to qualify as a Fannie Mae loan, or am I wrong about that?

Email from AMC:

Mr. Anderson,

I will review your information with the appraiser to see if he is willing to adjust/correct. If he is unwilling to make changes to the report, we will have a field review completed by an appraiser in your immediate area. Per Fannie Mae’s Appraiser Independence Requirements, the lender is not allowed to order a second appraisal for a refinance transaction unless the initial appraisal is found to be flawed by a reviewer or underwriter. I will be in touch with the results ASAP.

 

[hastalavista]

I got this email today from the AMC and was wondering why Fannie Mae requirements apply to this loan. My current loan is not a Fannie Mae loan and the loan I am currently applying for isn't either. My understanding is that my loan would be too large to qualify as a Fannie Mae loan, or am I wrong about that?

Email from AMC:

Mr. Anderson,

I will review your information with the appraiser to see if he is willing to adjust/correct. If he is unwilling to make changes to the report, we will have a field review completed by an appraiser in your immediate area. Per Fannie Mae’s Appraiser Independence Requirements, the lender is not allowed to order a second appraisal for a refinance transaction unless the initial appraisal is found to be flawed by a reviewer or underwriter. I will be in touch with the results ASAP.

Whatever AMC you are dealing with, they have a correct understanding of Fannie's requirements.

Although your loan may not be slated for GSE purchase, almost all lenders require that the GSE (GSE= Fannie Mae / Freddie Mac) guidelines be followed. They have become the de facto standard for the typical residential mortgage loan.
As I said, there are exceptions, but they are rare.
A particular lender can have appraisal requirements that exceed the GSE guidelines.

What the AMC did not include (and I see nothing nefarious about this because we start to get too inside baseball) is that if a review is ordered and the review concludes a different value, then the lender must rely on the review value and not consider the original appraisal's value. You should fully understand this:
If the review comes in higher, then the lender must rely on that higher value in its lending decision. Be advised that the lender may determine the review is not credible and decline the loan (a long-shot, but possible).
If the review comes in lower, then the lender must rely on that lower value in its lending decision. It cannot go back and use the original appraisal.

This process is designed to eliminate the potential of "shopping for a high value"; in other words, ordering a number of appraisals and then using the one that best fits what the lender wants to occur. The latest appraised value is the one the lender must rely upon- the others effectively disappear from the lending decision.