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Incorrect appraisal.

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bucsfan007

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Florida
About a year ago I started construction on a new home through a builder and using a construction loan. Originally, the appraisal (bank) for this home came in at 735K and the bank was able to give me a loan based on a % of that amount. Recently though, I found out that the 725K appraisal was based on saltwater waterfront property and not interior land where my house is being built. The community is half waterfront so I guess it could have been a mistake but looking at other appraisals at that time (provided to me by the builder), this home should not have appraised for more than 525K (If that). I won’t get into the details of sales price, etc.

My question is, once the home is completed and when I go to modify my loan and they redo an appraisal, what will happen when the home appraisal price comes back at roughly 300K (400K+ less than incorrect original and less than purchase price) due to the foreclosure, short sale and market conditions in the area?

Also, am I liable for signing a loan based on a clearly incorrect appraisal?

Some of these questions are probably better answered by a bank, but I wanted to give as much details as possible.

Thank you in advance for your help.
 

Tim The Enchanter

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Certified Residential Appraiser
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California
Also, am I liable for signing a loan based on a clearly incorrect appraisal?

I think you're just liable for what you borrowed. What to do and what happens if you're upside down in the loan is another question. :sad:
 

The Warrior Monk

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Also, am I liable for signing a loan based on a clearly incorrect appraisal?

You would have to speak to an attorney familiar with the laws in your state regarding the matter.

Generally:
  • The appraisal was prepared for the lender, not you, thus there are privity issues. It would be an entirely different matter legally if the you hired the appraiser to do a report for you to determine what you should pay for the property.
  • You borrowed the money, you are responsible for paying it back. You could attempt to sue for damages if you believe fraud is involved, but that won't come cheap.
 

Mike Siegfried

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I can't help wondering if you were as unhappy with the appraisal when the bank was handing out the money as you are now that the market has turned against you. Being a builder in the area and no doubt familiar with values, I would think that you would have been alarmed by an appraised value that was $ 200,000 too high when it first occurred. Just curious, since people tend to look for cover when properties go upside down.

Mike
 

Carnivore

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Jan 15, 2002
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North Carolina
BucsFan,

I understand. It is rather sickening to think you(and thousands of others) were probably deliberately misled.

Contact an attorney. I can give you the name of one who litigates this kind of Corporate Misconduct. If he can not help you then he will refer you to someone who can.

Good luck. We all are here to help you.
 

bucsfan007

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Florida
I can't help wondering if you were as unhappy with the appraisal when the bank was handing out the money as you are now that the market has turned against you. Being a builder in the area and no doubt familiar with values, I would think that you would have been alarmed by an appraised value that was $ 200,000 too high when it first occurred. Just curious, since people tend to look for cover when properties go upside down.

Mike

At the time, I was a bit surprised by the high appraisal but the community had some rather high sales off and on the water so I personally did not think much of it. The builder provided appraisals where with banks they constantly used (recently given to me, not at the time). I did not use their suggested banks.

The sales price/loan is nowhere near that 735K amount so yes it was great to think that my house appraised at such a high value. This also though affected the amount of upgrades, pool, etc. that I built. But that’s really not the issue. I signed; I’m not looking for a way out or a scapegoat. I have full intentions of moving in.

My only concern is that once the bank reappraises the house at modification and sees that for example that between the loan amount and what the house is actually worth is a 100K difference, are they going to try to ask me for more $$ or will they honor the original appraisal, and if they look at it and see the original appraisal was way off is there a chance they will not let me move in etc.? I’m sure somebody here has seen this type of scenario. Basically are they going to force my hand and tell me I was a moron for not doing more research or will they own up to the incorrect appraisal?

I don’t like the fact that home prices have dropped but it is what it is unfortunately, but to give more $$ (even if I had it) would not be fun. And I certainly don’t want to lose this house.
 

AnonApprsr

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Massachusetts
An appraisal is only an estimate of value as of an effective date. Meaning that appraisal has nothing to do with what your house is worth now. However, if you're insinuating that the appraisal was wrong as of that effective date well..... that's different.
 

Carnivore

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North Carolina
bucsfan,

Do you think you were substantially injured as a result of the transaction?
 

bucsfan007

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General Public
State
Florida
bucsfan,

Do you think you were substantially injured as a result of the transaction?

Tough question. Yes and No. Yes because the housing market stinks and I would not have been approved for the loan if that appraisal did not come in that high so right now I would not have a mortgage on a house that is worth 200K less than the loan (based on recent sales in the neighborhood) I would consider that to be substantial.

But no at the same time because it was a good deal for the house and I do want it.

I just have this gut feeling that all hell is going to break loose when I go to modify.
 

PropertyEconomics

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Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
Tough question. Yes and No. Yes because the housing market stinks and I would not have been approved for the loan if that appraisal did not come in that high so right now I would not have a mortgage on a house that is worth 200K less than the loan (based on recent sales in the neighborhood) I would consider that to be substantial.

But no at the same time because it was a good deal for the house and I do want it.

I just have this gut feeling that all hell is going to break loose when I go to modify.


These statements are in direct conflict with oneanother.
 
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