Opinion on Appraisal

[client123]

In an effort of full discloser, I am not an appraiser. We recently had an appraisal done in conjunction with a refinance on our current home. When we received the appraisal, we extremely surprised by our appraised value. Our home has been appraised several times in the past 3 years, and this particular appraisal was at least $200,000 lower than any of the other appraisals. This has put our refinance in jeopardy.

While I am sure that customers being upset with an appraised value is nothing new, we have serious concerns about the validity of the underlying data. Here are just a few examples of errors contained in the appraisal:
1) Appraiser incorrectly listed the number of bedrooms and bathrooms in subject property. All bedrooms and bathrooms were photographed by appraiser and are above grade.
2) Subject property has approximately 100 square feet of finished basement. Although the appraiser measured this area and photographed it, it is not included in the valuation of subject property. All other properties are given a credit for their finished basement square footage.
3) The appraiser overstated the square footage of one of the comparable homes in the original appraisal by 1,800 square feet. He adjusted the square footage and the value of that comparable by $72,000. However, no adjustment was made to the value of the subject home to reflect this material error. Is it normal to adjust one comparable property due to a factual error and not adjust the subject property as well?
4) Appraiser makes comments such as, "There are no suitable comps within the past 6 months within subject's neighborhood so I was forced to consider sales outside of this time frame." There were at least 10 homes that sold within this time period in the neighborhood (as defined by the appraiser), but the appraiser has refused to consider those and won't give a reason. He still has that language included in the appraisal despite being provided with the numerous examples to the contrary.
5) As in #4, he states that he was unable to find any comparable homes within 25% GLA of subject property so he was forced to consider homes outside of that. One home was 60% GLA of the subject property. Once again, there are homes that meet that criteria in the neighborhood as defined by the appraiser. Appraiser will not comment on why he won't consider those.
6) As with #4/5, the appraiser states that there are no homes within a 1 mile radius so he must expand the search area. There are plenty of comparable sales within the 1 mile radius. Appraiser will not comment on why he will not consider those.
7) Appraiser states that the highest sales value in the "neighborhood" is $849,000, but there have been recent sales of comparable homes as high as $1,600,000. Once again these sales occurred in the neighborhood as defined by the appraiser.

We are not asking the appraiser to pick new comps (we would obviously prefer that he pick comps that are within 25% GLA, less than 1 mile from our home, and the most recent sales... I just think that these are better comps, but in some ways that is neither here nor there), but he refuses to fix the factual errors. We obviously cannot ask for a certain value (I firmly believe that the appraised value is a 20%-30% error... aside from the market conditions in the area, all of our other appraisals have come in our expected range). Any advice from the other side? These material errors will cost us our refinancing, and our damages are not insignificant.

ETA - These series of errors in aggregate seem to violate Standards Rule 1-1 (c), which states "a series of errors, in the aggregate, affects the credibility of those results." I really don't want to pursue this route, but our hands are tied right now.

 

[glenn walker]

Go to another lender and get another appraisal !!!

 

[client123]

Go to another lender and get another appraisal !!!

We will lose our rate lock, and it will cost us tens of thousands of dollars over the course of our loan. I wish that it were that easy.

Are we being unreasonable to expect that these factual errors are fixed? We are hoping to talk to the title company this week, but at this point, I am almost resolved to losing our rate lock.

 

[Michigan CG]

It sounds like you have a higher end home and with the limited information it is hard to make any judgment. How was the appraiser hired? Through an AMC? Was he/she local?

I would suggest you hire a local appraiser to review the report for you. www.appraisalinstitute.com.

 

[client123]

He was hired by the title company, who has a relationship with the mortgage company. Yes, he was local.

If we get a local appraiser to review the report for us, what does that do? Based on our conversation with the mortgage company, a second appraisal prevents them from selling our mortgage. If they cannot sell our mortgage, they don't want to lend to us. I am happy to hire someone to review the appraisal if it helps us close the loan for which we applied. Is there any way to get him to reconsider the appraisal? It's just crazy that this appraisal came it at 80% of all of the other appraisals (and our macro market has gone up nearly 20% since the last appraisal was done) ..... of course, it is because his report is filled with factual errors.

 

[Michigan CG]

He was hired by the title company, who has a relationship with the mortgage company. Yes, he was local.

If we get a local appraiser to review the report for us, what does that do? Based on our conversation with the mortgage company, a second appraisal prevents them from selling our mortgage. If they cannot sell our mortgage, they don't want to lend to us. I am happy to hire someone to review the appraisal if it helps us close the loan for which we applied. Is there any way to get him to reconsider the appraisal? It's just crazy that this appraisal came it at 80% of all of the other appraisals (and our macro market has gone up nearly 20% since the last appraisal was done) ..... of course, it is because his report is filled with factual errors.

You have a ~$1,500,000 home and give us a few details. If you have someone review the appraisal you can force the lender to get a new appraisal should the one you have be a POS.

You said you are talking about tens of thousands. In every business there are people not good at their job, this might or might not be the case. Sometimes it costs money to right wrongs.

Of you can try to post the appraisal here.......

 

[Elliott]

client123 said, We will lose our rate lock, and it will cost us tens of thousands of dollars over the course of our loan.

How could that be, rates have been very low and not trending upward, significantly.

http://www.bankrate.com/funnel/graph/default.aspx?cat=2&ids=1,-1&state=GA&d=180&t=MSLine&eco=-1

Of course, appraisers here are from throughout the country, and your particular situation is unique to your community and your property. What is a common observation over the last 6 years is that frequently the low fee appraiser gets selected, frequently from out of the area, to make the title company an extra $50 to $150. It could be he doesn't know the area or isn't a decent appraiser.

Its pretty hard to get the 'first' appraiser to move significantly from their original opinion of value. I'd think it would be easier to go find a new lender to refi.

 

[client123]

You have a ~$1,500,000 home and give us a few details. If you have someone review the appraisal you can force the lender to get a new appraisal should the one you have be a POS.

You said you are talking about tens of thousands. In every business there are people not good at their job, this might or might not be the case. Sometimes it costs money to right wrongs.

Of you can try to post the appraisal here.......

What kind of details would you need about our appraisal/home?

Hopefully, we will be talking to the person who handles appraisals at the mortgage company tomorrow, and I will mention the idea of getting an appraisal review. If we could spend the money out of pocket to get a new appraisal, I would do it in a heartbeat. I have no doubt that this appraisal is fundamentally flawed.... valuation aside.

Are the items that I mention in my OP the kinds of things that an appraiser would normally address? I can handle it if our expectations are unreasonable.

 

[client123]

client123 said, We will lose our rate lock, and it will cost us tens of thousands of dollars over the course of our loan.

How could that be, rates have been very low and not trending upward, significantly.

Of course, appraisers here are from throughout the country, and your particular situation is unique to your community and your property. What is a common observation over the last 6 years is that frequently the low fee appraiser gets selected, frequently from out of the area, to make the title company an extra $50 to $150. It could be he doesn't know the area or isn't a decent appraiser.

Its pretty hard to get the 'first' appraiser to move significantly from their original opinion of value. I'd think it would be easier to go find a new lender to refi.

We locked in our rate on a one day dip. The 10 year bond rate is up 5 basis points since we locked in our rate. As I said, it will costs of us lots of money to go to another lender.... plus the lender we originally chose had the lowest rate. I would love to find a way to "fix" our current appraisal. Our mortgage company is going back to the appraiser one more time.

 

[Rick Stillman]

You have written a very detailed summary of your situation, which I understand and believe you have valid points to be very unsatisfied. I myself, even though I am an appraiser, have experienced some of the same items which you describe. You do have options which are very powerful.

It is obvious that you have evidence of factual errors, which are being ignored by the appraiser. My first suggestion would be to completely clarify in as much detail as possible what happened in each error of the appraisal, and explain why that was wrong and what it should have been. That may be beyond your scope of expertise to fully implement, however you don't have to pin point things to an exact degree, at this point.

Armed with specific information like that, I would have that submitted to the appraiser, along with a very direct statement that his response, or lack thereof, will be turned into the State Board as a formal complaint, which he WILL have to answer to. Trust me, that will be a wake up call and get his attention.

If you still have no progress, or unsatisfactory progress, go to the final step, and file a formal complaint against the State Board that governs appraisers in your area.

I would also inform the lender that they too will be mentioned in the complaint, and may (or may not) be joined as a party to the complaint.

What you are hoping for is a fast and efficient resolution to this matter, which you should have following this course of action. Speaking for myself, I would never let things progress to the state that they are now in - but there may be reasons for that. Perhaps there was a death in the family, or the appraiser himself has suffered something has has prevented him from answering. I try to give people the benefit of the doubt. That has actually happened to me in the past, although not being able to reach me did not result in a problem of any sort - but it certainly could have.

Good luck. I completely understand that this is a serious issue for you, and I hope that my suggestions may help fill in the blanks as to what options you have. You are far from helpless and powerless in this situation. On the contrary, having the state to investigate this on your behalf should be enough, in and of itself, to warrant immediate attention on the part of any appraiser. Their power over appraisers is absolute, and usually somewhat severe.

I do not think you are being unreasonable at all in your requests for explanations, and certainly deserve a professional response to your concerns.

Please keep us posted as to the developments in this situation.