Latest Appraiser Bias Lawsuit

[NC Appraising]

Guild mortgage.....

Allegedly.

From Google AI

Guild Mortgage is widely recognized as a "go-to" lender for borrowers with lower credit scores or "thin" credit files. They are frequently ranked as one of the best lenders for "bad credit" due to their flexible underwriting and specialized assistance programs.

Nontraditional Credit (The "Complete Rate" Program)
One of Guild's standout features for "less qualified" borrowers is the Complete Rate program. This allows you to qualify for a mortgage even if you have no traditional credit score. Instead of a FICO score, Guild reviews alternative data:
Guild Mortgage +1

• Consistent rent payments.
• Utility bill and car insurance payment history.
• Direct bank statement analysis to prove income and financial stability

 

[John Hassler]

I pulled up Zillow just to get a feel for the neighborhood. This looks to be one of those areas where the components of values are not predominantly some simple metric like GLA, age, or lot size. It looked like homes of the subject size/age could have up to a 75%, or so, price differential. This looks to be an easy area for a sub par appraiser, or one not familiar with the area, to run into difficulty.

 

[Joe Flacco]

Looks like 2-3 years ago developers were buying 10,000 SF lots for around $170k and subdividing into two 5,000 SF lots. In 2026, a developer paid $200k for a 10,000 SF lot subdivided into two lots. Based on that, what prices are at the low end, and 2500 SF new construction at $600,000, the value of a 5,000 SF lot is probably around $125k.

I don't want to throw out a number but the adjustment for 2,500 SF lot vs 5,000+ SF lots is not zero.

 

[George Hatch]

That's true but that lot size adjustment in a market segment consisting of 100yr old homes usually also isn't $20k in a $200k market. S#4 in the 2nd appraisal has an even smaller parcel and it matches up reasonably well with the sales with larger parcels.

 

[Joe Flacco]

That's true but that lot size adjustment in a market segment consisting of 100yr old homes usually also isn't $20k in a $200k market. S#4 in the 2nd appraisal has an even smaller parcel and it matches up reasonably well with the sales with larger parcels.

But that house is renovated and it is in a different place.

Most of the value for those old $200k or less houses is the land. About $125k for the land and about $75k contributory value of the improvements. New construction on those lots are at around $600k.

 

[George Hatch]

All RE is local.

I routinely add a supplemental land sale analysis when appraising improved properties with big differences in lot utility. It's extremely common with the improved properties - especially with older improvements- for the contributory of additional lot area (measured by comparison with other improved properties) to be different than the contributory of the different lot areas if vacant. Maybe that's the case in this situation and maybe not, but I've seen plenty of datasets that showed the most convergence when using a $0 adjustment factor and I'm guessing most appraisers have seen the same.

Also, the majority of the value of a small subdivision lot occurs with the minimum acceptable lot size for that location, all additional lot area having a different contributory when analyzed on a price/sf. That's why we almost always use different adjustment factors on a price/sf than the sale price/lot area. Similar to when we adjust for GLA.

Also common for existing SFRs to not depreciate to zero if their REL for that condition in that location is indefinite. Those SFRs are usually being purchased and financed with long term financing unless/until the underlying land values exceed.

Whatever the adjustment factor actually is for the smaller lot, it's not going to be enough to significantly affect the outcome. The higher appraisal only hits the onsite driveway+garage @ S#5 for $10k and that includes the structure. The sales won't support a higher adjustment factor for that feature.

------------
Full disclosure, I looked at all the sales in that neighborhood going back a couple years (as shown in Zillow) before looking directly at the sales in these reports. The macro contributes to why I think the 2nd appraisal might be high but (IMO) has more support in the market.

 

[Joe Flacco]

I get what you are saying. You are saying there is non-phyical depreciation to the older homes on normal size lots that may not exist for the homes on undersized lots.

That might be the case, but like you say, real estate is local. You don't just assume that to be the case. In my opinion, the impact of the subject's 2,500 SF lot compared to the typical 5,000 SF- 10,000 SF lots is the main problem to solve. Then it's the condition of the house and it's size.

 

[George Hatch]

I'm saying what I've always said about the CA: REL is primarily an economic construct, not strictly physical. And sure, the difference in the *contributory* of the larger lot in this market segment will be the thing. In a $200k market that difference may or may not be be more than $0. I've seen examples of both.

 

[Joe Flacco]

I'm sure the defense is on it, but they will need to get the details of the off market sale next door during discovery.

 

[Non Sequitur]

Full disclosure, I looked at all the sales in that neighborhood going back a couple years (as shown in Zillow) before looking directly at the sales in these reports. The macro contributes to why I think the 2nd appraisal might be high but (IMO) has more support in the market.

Eh, the subject is flat out C4, the second report's comps 1,2, and 3 are solid C3. And neither report did a decent job with location. Both missed the sale next door, whether it was in the MLS or not there's no way I'm not looking hard at it. It's a tough assignment no doubt, but the first thing I would have done is research the adjacent properties and hope to find something even if the data is dated. IMO that's the first step given the location.