Help with a Complex Appraisal

[Elliott]

Mich CG makes a good point about the current collection of appraisers. There are turn and churn appraisers who don't mind if some of their reports fall through the grates. And there are appraiser's who have standard professional pride, aren't fee chasers, and know how much work is required to produce a supportable report for a unique property.

The current appraiser selection process by lenders and AMCs have a difficult time connecting the right appraiser for all situations.

 

[Terrel L. Shields]

All it takes to get such a home financed under conventional terms with a conventional lender is an appraisal report that makes sense, generally performed by an appraiser who knows what they're doing. I.E, an appraiser who is smarter than the form is.

That may be true in the land of eclectic construction (California). It doesn't apply in rural areas where unique properties are scarce as hen's teeth. And those that sell are far rarer. When a banker sees only an appraisal that has taken one of two courses, they don't like what they see.

A - They see a unique property where the recent and proximate comps are more traditional construction.

B - They see a unique property where the similar construction is over one year since sold and/or tens of miles away, or located in unique places like lakeside, mountain top, etc. And even then, the "unique" nature of the place is being compared to another unique but quite dissimilar property.

That isn't an issue of the appraiser's choices nor competence but a mere recognition that "comps" as we understand them are not going to be readily available. That's why these loans get turned down.

For the appraiser, it means tons of work, worse, tons of "stips". I recall learning that lesson years ago helping another appraiser value a geodesic dome house. We found two such homes had sold in the entire database of some 10 years in the MLS. 2. One was five years old and the other was a two year old sale. Yet, she chased all over a 4 county region in search of these "comps" acceptable to the lender....and one comp was over twice the SF of the subject. I've not touched one since - along with other odd-ball properties. Let someone else fall on that sword.

 

[Restrain]

Here is a prime example. Bob Borrower has a 'hanger home', that is, a hanger on a private airport with part finished out as a Q3 residence. Not atypical for that airport, and was originally financed through Big Bank.

Rates fell, and Bob tried to refi through the same bank. Did the appraisal, used best available comps, and that meant surrounding similar airports (yes there is a bunch of them in DFW). Bank wouldn't refi because there weren't sufficient sales of the same unit in the same Airpark.

Problem is that Big Banks because of the regs now are just not willing to take any chance on a 'square peg-round hole' property. They are setting more money than they can effectively use and making money safely on the spread. Why go to the effort to deal with unique properties when they can churn tract homes all day.

This type of a loan requires a local bank that will take the time to deal with a local customer. Just the way it is in today's real estate lending.