The Sheriff
Member
- Joined
- Mar 21, 2007
- Professional Status
- Certified Residential Appraiser
- State
- Arizona
A good friend from college sent me his FHA appraisal and asked me to review it prior to his closing next week. I responded that I can't do a quantative review (for obvious reasons), however, I would do him a favor and do a quick check to make sure the appraiser had a clue (I only told him he had to buy me a beer when we go and see USF beat down UF in the swamp on 9/11). Well... it's an SRA with over 20 years in the industry and he has a college degree per his resume. Should be a no brainer for a tract property. Here's the email I just sent back to my buddy. So sad to be honest with ya...
Here's a very brief overview Bunti (I feel bad for you bro...),
I'll work my way down the report.
1. In the contract section, the appraiser does not list the $ amount of the financial concessions. It says specifically to list the $ amount.
2. The appraiser stated that the market has declined 0.4% per month over the previous six months, and bases his conclusions on the 1004 MC. However, the 1004 MC is utilized to only look at truly comparable properties to the subject property (a very micro aspect), not the defined neighborhood in general (which is a macro aspect). This is not the proper way to determine One-Unit Housing Trends for a defined market area. I would recommend that the appraiser takes his Defined Neighborhood Boundaries from the Neighborhood section in page 1 and pull quarterly data for all single family detached residential housing sales to truly determine if your defined market area is declining. It would be as simple as this below and doesn't leave the underwriting wondering how he derived his results (and something that can be quickly replicated on every appraisal - this is from a report I completed the other day in Phoenix):
Per MLS statistics and upon review of the subject's overall market area in the previous six months as of the effective date of this report, there were a total of 151 sales recorded. Currently, there are 173 active listings with 68 of those listings presently under contract or contingency for sale. This represents a 6.9 months supply of properties in the subject's defined market area.
A review of MLS data quarterly demonstrated the average sales price of a 1,579 sq ft property within the subject's defined neighborhood boundaries was $191,001 ($122.44/Sq Ft) in the fourth quarter of 2008. The 2009 average first quarter sales price of a 1,557 sq ft property within the subject's defined neighborhood boundaries was $153,494 ($97.71/Sq Ft) per MLS statistics. The 2009 average second quarter sales price of a 1,550 sq ft property within the subject's defined neighborhood boundaries was $146,861 ($94.72/Sq Ft) per MLS statistics. The 2009 average third quarter sales price of a 1,547 sq ft property within the subject's defined neighborhood boundaries was $146,114 ($95.01/Sq Ft) per MLS statistics. The 2009 average fourth quarter sales price of a 1,565 sq ft property within the subject's defined neighborhood boundaries was $146,141 ($93.37/Sq Ft) per MLS statistics. The 2010 average first quarter sales price of a 1,607 sq ft property within the subject's defined neighborhood boundaries was $152,680 ($94.93/Sq Ft) per MLS statistics. The 2010 average second quarter sales price of a 1,561 sq ft property within the subject's defined neighborhood boundaries was $143,303 ($89.93/Sq Ft) per MLS statistics. The current snapshot of the subject's defined market area based on statistical data demonstrates very moderate DECLINE in housing pricing. The minimal oversupply of properties readily available for sale in the subject's defined market area will further contribute to a minimal reduction in housing prices in the near future.
Either way, the appraiser's logic is incorrect regardless based on the results of the 1004 MC. The market conditions conclusions on page 1 contradict ALL the data in the 1004 MC section. The Median Comparable Sale Price per the 1004 MC for the prior 4-6 months was $263,500. In the most recent 3 months, the Median Comparable Sale Price is $281,200. That does not reflect a declining trend in the market. Furthermore, the most recent Median Comparable Sales Price is greater than the 7-12 months period. That is NOT a declining market based on the 1004 MC results!
The appraiser states that marketing times are greater than 6 months. Once again, he refers to the 1004 MC as to how he derived his results. However, six months in my math is at least 180 days (give or take a couple of days depending upon the calendar cycle). The Median Comparable Listing Days on Market are 114, 114, and 79 days respectively. The Median Comparable Sales Days on Market are 20, 100, and 40 days respectively. Properties are not on the market for six months or more! It does not take a rocket scientist to figure this out!
And since we're already going here... the 1004 MC directly states: "Sales and listings must be properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the subject property."
You're essentially purchasing a property that is selling $100,000 LESS than the MEDIAN COMPARABLE SALES PRICE of similar property resales in the previous six months per his 1004 MC data. Either you're getting one hell've a deal, or this appraiser has no clue as to what is truly comparable. His three sales he utilized in the grid of this report... they ranged from $220,000 to $222,500. That's not even close to the reported MEDIAN COMPARABLE SALES PRICE of $278,493, $263,500, and the most recent $281,200. The same can be said about the MEDIAN COMPARABLE LIST PRICE with respect to the two listing utilized in this report. The results are not credible, nor do they reflect anything similar to the price point you are looking at. I would ask the appraiser what his search parameters were for determining truly comparable properties. My 1004 MC would have this on it for your property (because this would appear to be what a prospective buyer would be considering when looking at apples to apples with the property you are presently under contract for):
Comparable search parameters identified in the subject's defined neighborhood boundaries included:
Properties that are two story in design (you never want to compare a ranch/single story home to a two story home - they typically sell at two vastly different prices per sq ft favoring the single story property)
Properties with GLA ranging within 15% of the subject's GLA: 2,134 sq to 2,887 sq ft
Properties WITHOUT the swimming pool amenity (because there is huge difference based on his $20,000 adjustment on the grid)
Properties WITH an HOA (conformity of housing matters!)
Properties built between 1996 and 2006 (a small range allowing for properties of fairly similar construction)
Properties NOT located on the golf course (because they obviously command a larger premium for their location)
3. In the General Description section, the # of stories states: One. Your house is a TWO STORY!!!
The exterior walls state C. Block. Sure looks like Stucco to me from the photos (but hard to tell from a simple desk aspect).
4. The worst part about the report is the fact the appraiser DID NOT UTILIZE ONE RESALE with similar views. Essentially, he compared your property to resale properties with SUPERIOR VIEWS and had to make across the GRID adjustments. He has no narrative supporting why he had to make across the GRID ADJUSTMENTS in this report! HOW DO YOU REALLY KNOW YOUR HOUSE IS WORTH $180,000 WHEN WE HAVE NO DIRECT TWO STORY POND SALES WITHOUT A POOL TO VERIFY THE ACCURACY OF HIS RESULTS! I'D BET MY LIFE THERE IS AT LEAST ONE SALE OUT THERE IN THE LAST 12 MONTHS ESPECIALLY WHEN HE STATES IT'S AN REO MARKET.
Second... Comparable #2 is a single story resale. How is it that comparable #2 is 336 sq ft smaller than comparable #1, is not located on the golf course like comp #1 (which is clearly a superior view), does not have a swimming pool like comparable #1, and has a marketing time of only 11 days (meaning it sold in a NY minute), yet it essentially sold for the same sales price? WHY? IT'S A SINGLE LEVEL PROPERTY!!!! THERE IS A CONSIDERABLE DIFFERENCE BETWEEN A SINGLE LEVEL PROPERTY AND A TWO STORY PROPERTY IN YOUR MARKET (AND THIS ONLY BEATS THE POINT HOME). YET, NO DESIGN ADJUSTMENT! HE MADE A $10,000 UPGRADES ADJUSTMENT TO COMPARABLE #2, BUT THAT IS OBVIOUSLY NOT THE ONLY ADJUSTMENT THAT NEEDS TO BE MADE. COMPARABLE #2 SHOULD NOT BE IN THIS REPORT AT ALL! LISTING #2 IS ALSO A SINGLE STORY HOME. IT SHOULD NOT BE UTILIZED EITHER UNLESS A DESIGN ADJUSTMENT IS MADE.
Finally, you stated that both A/C units needed to be replaced. Well, there's a place on the grid that allows for an adjustment if the A/C are not operational/functional. I bet the typical buyer would be willing to pay at least a couple thousand more for a property that had a functional A/C unit in Florida of all places than a 2,510 sq ft property that doesn't! You stated HSBC is even making a concession for the non-functional A/C units as well. Well, an adjustment on the grid should have been made unless all the properties sold with similar A/C issues.
5. When researching the prior sales history of the comparable sales, the appraiser CHECKED that the comparable sales had NO prior sales or transfers in the previous year prior to the date of the comparable sale. Well, comparable #3 and listing #2 did have a transfer in October of 2009 and February of 2010 respectively. So this is obviously incorrect!
6. The reconciliation of value has the date entered into the opinion of value area.
7. Obviously he didn't run a spell check on the report based on his "subject to narrative" in the reconciliation of value section.
8. Where are the exterior photos of the comparable sales? This is an FHA insured report (that is a requirement). Also, appears that Listing #1 has an MLS photo utilized for the exterior photo. FHA requires an actual photo of the property.
Bunti... This is why our industry is in such disarray. This guy has an SRA certification (one of the top designations in the industry) and he has been in the industry for over 20 years, yet his report appears to have been written by a trainee without a license (and no proper oversight - happens all the time - it's how many appraisers operate to churn out a lot of work to meet profit margins). I would request that a new appraisal is completed by a COMPETENT certified appraiser so you really know what the market value of your property is (especially knowing you have A/C issues). There SHOULD BE NO REASON for me to be able to rip this report apart from a desk in ARIZONA (and I don't even care about the value aspect - this is just a quick quality control check on the data reported). One or two errors is common place. However, this report is riddled with errors and demonstrates a lack of general appraisal methodology/ability. Once again, an appraiser is taking serious short cuts... disregarding the well being of the lender (Sun Trust) and the prospective borrower (yourself). This is why the housing market has tanked... You have serious issues here and really need to talk with someone in Sun Trust that cares! I would forward this quick review to Sun Trust and would also contact the local FHA Direct Endorsement Underwriter. This type of work is not good for the industry as a whole!
Respectfully,
Michael T. Lucas
Owner, USF Appraisals, LLC
Here's a very brief overview Bunti (I feel bad for you bro...),
I'll work my way down the report.
1. In the contract section, the appraiser does not list the $ amount of the financial concessions. It says specifically to list the $ amount.
2. The appraiser stated that the market has declined 0.4% per month over the previous six months, and bases his conclusions on the 1004 MC. However, the 1004 MC is utilized to only look at truly comparable properties to the subject property (a very micro aspect), not the defined neighborhood in general (which is a macro aspect). This is not the proper way to determine One-Unit Housing Trends for a defined market area. I would recommend that the appraiser takes his Defined Neighborhood Boundaries from the Neighborhood section in page 1 and pull quarterly data for all single family detached residential housing sales to truly determine if your defined market area is declining. It would be as simple as this below and doesn't leave the underwriting wondering how he derived his results (and something that can be quickly replicated on every appraisal - this is from a report I completed the other day in Phoenix):
Per MLS statistics and upon review of the subject's overall market area in the previous six months as of the effective date of this report, there were a total of 151 sales recorded. Currently, there are 173 active listings with 68 of those listings presently under contract or contingency for sale. This represents a 6.9 months supply of properties in the subject's defined market area.
A review of MLS data quarterly demonstrated the average sales price of a 1,579 sq ft property within the subject's defined neighborhood boundaries was $191,001 ($122.44/Sq Ft) in the fourth quarter of 2008. The 2009 average first quarter sales price of a 1,557 sq ft property within the subject's defined neighborhood boundaries was $153,494 ($97.71/Sq Ft) per MLS statistics. The 2009 average second quarter sales price of a 1,550 sq ft property within the subject's defined neighborhood boundaries was $146,861 ($94.72/Sq Ft) per MLS statistics. The 2009 average third quarter sales price of a 1,547 sq ft property within the subject's defined neighborhood boundaries was $146,114 ($95.01/Sq Ft) per MLS statistics. The 2009 average fourth quarter sales price of a 1,565 sq ft property within the subject's defined neighborhood boundaries was $146,141 ($93.37/Sq Ft) per MLS statistics. The 2010 average first quarter sales price of a 1,607 sq ft property within the subject's defined neighborhood boundaries was $152,680 ($94.93/Sq Ft) per MLS statistics. The 2010 average second quarter sales price of a 1,561 sq ft property within the subject's defined neighborhood boundaries was $143,303 ($89.93/Sq Ft) per MLS statistics. The current snapshot of the subject's defined market area based on statistical data demonstrates very moderate DECLINE in housing pricing. The minimal oversupply of properties readily available for sale in the subject's defined market area will further contribute to a minimal reduction in housing prices in the near future.
Either way, the appraiser's logic is incorrect regardless based on the results of the 1004 MC. The market conditions conclusions on page 1 contradict ALL the data in the 1004 MC section. The Median Comparable Sale Price per the 1004 MC for the prior 4-6 months was $263,500. In the most recent 3 months, the Median Comparable Sale Price is $281,200. That does not reflect a declining trend in the market. Furthermore, the most recent Median Comparable Sales Price is greater than the 7-12 months period. That is NOT a declining market based on the 1004 MC results!
The appraiser states that marketing times are greater than 6 months. Once again, he refers to the 1004 MC as to how he derived his results. However, six months in my math is at least 180 days (give or take a couple of days depending upon the calendar cycle). The Median Comparable Listing Days on Market are 114, 114, and 79 days respectively. The Median Comparable Sales Days on Market are 20, 100, and 40 days respectively. Properties are not on the market for six months or more! It does not take a rocket scientist to figure this out!
And since we're already going here... the 1004 MC directly states: "Sales and listings must be properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the subject property."
You're essentially purchasing a property that is selling $100,000 LESS than the MEDIAN COMPARABLE SALES PRICE of similar property resales in the previous six months per his 1004 MC data. Either you're getting one hell've a deal, or this appraiser has no clue as to what is truly comparable. His three sales he utilized in the grid of this report... they ranged from $220,000 to $222,500. That's not even close to the reported MEDIAN COMPARABLE SALES PRICE of $278,493, $263,500, and the most recent $281,200. The same can be said about the MEDIAN COMPARABLE LIST PRICE with respect to the two listing utilized in this report. The results are not credible, nor do they reflect anything similar to the price point you are looking at. I would ask the appraiser what his search parameters were for determining truly comparable properties. My 1004 MC would have this on it for your property (because this would appear to be what a prospective buyer would be considering when looking at apples to apples with the property you are presently under contract for):
Comparable search parameters identified in the subject's defined neighborhood boundaries included:
Properties that are two story in design (you never want to compare a ranch/single story home to a two story home - they typically sell at two vastly different prices per sq ft favoring the single story property)
Properties with GLA ranging within 15% of the subject's GLA: 2,134 sq to 2,887 sq ft
Properties WITHOUT the swimming pool amenity (because there is huge difference based on his $20,000 adjustment on the grid)
Properties WITH an HOA (conformity of housing matters!)
Properties built between 1996 and 2006 (a small range allowing for properties of fairly similar construction)
Properties NOT located on the golf course (because they obviously command a larger premium for their location)
3. In the General Description section, the # of stories states: One. Your house is a TWO STORY!!!
The exterior walls state C. Block. Sure looks like Stucco to me from the photos (but hard to tell from a simple desk aspect).
4. The worst part about the report is the fact the appraiser DID NOT UTILIZE ONE RESALE with similar views. Essentially, he compared your property to resale properties with SUPERIOR VIEWS and had to make across the GRID adjustments. He has no narrative supporting why he had to make across the GRID ADJUSTMENTS in this report! HOW DO YOU REALLY KNOW YOUR HOUSE IS WORTH $180,000 WHEN WE HAVE NO DIRECT TWO STORY POND SALES WITHOUT A POOL TO VERIFY THE ACCURACY OF HIS RESULTS! I'D BET MY LIFE THERE IS AT LEAST ONE SALE OUT THERE IN THE LAST 12 MONTHS ESPECIALLY WHEN HE STATES IT'S AN REO MARKET.
Second... Comparable #2 is a single story resale. How is it that comparable #2 is 336 sq ft smaller than comparable #1, is not located on the golf course like comp #1 (which is clearly a superior view), does not have a swimming pool like comparable #1, and has a marketing time of only 11 days (meaning it sold in a NY minute), yet it essentially sold for the same sales price? WHY? IT'S A SINGLE LEVEL PROPERTY!!!! THERE IS A CONSIDERABLE DIFFERENCE BETWEEN A SINGLE LEVEL PROPERTY AND A TWO STORY PROPERTY IN YOUR MARKET (AND THIS ONLY BEATS THE POINT HOME). YET, NO DESIGN ADJUSTMENT! HE MADE A $10,000 UPGRADES ADJUSTMENT TO COMPARABLE #2, BUT THAT IS OBVIOUSLY NOT THE ONLY ADJUSTMENT THAT NEEDS TO BE MADE. COMPARABLE #2 SHOULD NOT BE IN THIS REPORT AT ALL! LISTING #2 IS ALSO A SINGLE STORY HOME. IT SHOULD NOT BE UTILIZED EITHER UNLESS A DESIGN ADJUSTMENT IS MADE.
Finally, you stated that both A/C units needed to be replaced. Well, there's a place on the grid that allows for an adjustment if the A/C are not operational/functional. I bet the typical buyer would be willing to pay at least a couple thousand more for a property that had a functional A/C unit in Florida of all places than a 2,510 sq ft property that doesn't! You stated HSBC is even making a concession for the non-functional A/C units as well. Well, an adjustment on the grid should have been made unless all the properties sold with similar A/C issues.
5. When researching the prior sales history of the comparable sales, the appraiser CHECKED that the comparable sales had NO prior sales or transfers in the previous year prior to the date of the comparable sale. Well, comparable #3 and listing #2 did have a transfer in October of 2009 and February of 2010 respectively. So this is obviously incorrect!
6. The reconciliation of value has the date entered into the opinion of value area.
7. Obviously he didn't run a spell check on the report based on his "subject to narrative" in the reconciliation of value section.
8. Where are the exterior photos of the comparable sales? This is an FHA insured report (that is a requirement). Also, appears that Listing #1 has an MLS photo utilized for the exterior photo. FHA requires an actual photo of the property.
Bunti... This is why our industry is in such disarray. This guy has an SRA certification (one of the top designations in the industry) and he has been in the industry for over 20 years, yet his report appears to have been written by a trainee without a license (and no proper oversight - happens all the time - it's how many appraisers operate to churn out a lot of work to meet profit margins). I would request that a new appraisal is completed by a COMPETENT certified appraiser so you really know what the market value of your property is (especially knowing you have A/C issues). There SHOULD BE NO REASON for me to be able to rip this report apart from a desk in ARIZONA (and I don't even care about the value aspect - this is just a quick quality control check on the data reported). One or two errors is common place. However, this report is riddled with errors and demonstrates a lack of general appraisal methodology/ability. Once again, an appraiser is taking serious short cuts... disregarding the well being of the lender (Sun Trust) and the prospective borrower (yourself). This is why the housing market has tanked... You have serious issues here and really need to talk with someone in Sun Trust that cares! I would forward this quick review to Sun Trust and would also contact the local FHA Direct Endorsement Underwriter. This type of work is not good for the industry as a whole!
Respectfully,
Michael T. Lucas
Owner, USF Appraisals, LLC
