Opinion on Appraisal

[client123]

GEORGIA

539-3-.02 Standards for Developing and Reporting an Appraisal
(1) In developing and reporting an appraisal of real property, an appraiser shall not:
(a) perform any appraisal assignment beyond the scope of authority granted in the appraiser classification held;
(b) fail to disclose clearly and accurately the appraiser classification and number granted to the appraiser by the state;
(c) fail to employ correctly methods and techniques that are necessary to produce a credible appraisal. Unless the appraiser expressly provides a credible real estate appraisal justification in the appraisal report, the appraiser may not vary from the following guidelines:
1. appraisers reaching a conclusion of value for a real property must:
a. Obtain all data used in every appraisal from a reliable source and verify that data from at least one additional reliable source. For purposes of this Chapter a reliable source shall be one typically utilized by appraisers in the area and includes, but is not limited to, a personal inspection by the appraiser; publicly filed records; property tax records; an
appropriate local multiple listing service; and commercially available data based and publications reasonably relied upon by appraisers in the ordinary course of their business.
An appraiser may also rely upon information obtained from real estate appraisers, brokers, closing attorneys, sellers, and buyers provided that the appraiser maintains (1) documentation of any information obtained from appraisers, brokers, closing attorneys, sellers, and buyers and (2) the name and telephone number and/or address of each source in the appraiser’s file for at least five years;
b. Obtain for the appraiser’s file the Tax Assessor’s 100% market value;
c. identify and state in the appraisal report any list prices of the property if listed within the preceding year reported by reliable sources; and
d. comment on the impact on the market value of the subject of foreclosure activity in the market area of the subject property.
2. appraisers utilizing the market approach for reaching a conclusion of value for a real property must:
a. identify and describe the market area as a geographic location;
b. select comparable properties that are the most recent sales and that reflect current market conditions for valuation of the subject property. Absent a credible real estate appraisal explanation for a different definition of most recent sales, most recent sales shall be within one year and in the market area. The most recent sales shall be presumed to be properties that have sold within the preceding year of the effective date of the
appraisal;
c. select comparable properties for valuation of a residential property that require the net total of any adjustments to the sales price of a comparable sale not to exceed 15% and the gross total of all adjustments (whether positive or negative) not to exceed 25%, absent a
credible real estate appraisal explanation for differing adjustments;

d. select comparable properties for valuation of a property that are located within the market area of the subject. Absent a credible real estate appraisal explanation for a different market area, the market area for residential properties shall be presumed to be comparable properties located first within the same subdivision as the subject and second located within one mile of the subject;

e. list in the appraisal report any sale of the subject property held within the preceding three (3) years of the appraisal’s effective date including the date of sale and sales price. In addition, comment on or explain if any sale occurred within six (6) months of a previous sale within said three (3) year period when the sales price increased more than 25% of the previous sales price; f. list in the appraisal report any sales of comparable properties used in said report held within the preceding one (1) year of the comparable properties last date of sale including the previous date of sale and sales prices. In addition, comment on or explain if any sale occurred within six (6) months of a previous sale within said one (1) year period when the sales price increased more than 25% of the previous sales price. g. state the exposure time indicated by the market.
3. appraisers utilizing the cost approach for reaching a conclusion of value for a real property must include in the appraisal report the relevant replacement cost data from a source reasonably relied upon by appraisers in the ordinary course of their business. Said source must be identified by title on the appraisal report;
4. appraisers utilizing the income approach for reaching a conclusion of value for a real property shall identify in the appraisal report the source of any income data used in the appraisal report; identify any ownership or other interest which such source has in the subject property; and maintain in the appraiser’s file for a period of five years written verification of such income data.
(d) commit a substantial error of omission or commission that significantly affects the appraisal;
(e) render appraisal services in a careless or negligent manner;
(f) communicate the appraiser’s analyses, opinions, or advice in a manner that is misleading to the client;
(g) fail to include in a report of an appraisal sufficient information to enable the person(s) who are expected to receive or rely on the report to understand it properly;
(h) perform an independent appraisal assignment with partiality or an accommodation of personal interest;
(i) accept an independent appraisal assignment when the employment itself is contingent upon the appraiser’s reporting a predetermined estimate, analysis, valuation, or opinion or where the fee to be paid is contingent upon the opinion, conclusions, analysis, or valuation reached or upon the consequences resulting from the appraisal assignment;
(j) perform any appraisal assignment without (1) disclosing any lack of knowledge and/or experience to the client before accepting the assignment; (2) taking all steps necessary to complete the assignment competently; (3) describing the lack of knowledge and/or experience and the steps taken to complete the assignment competently in the appraisal
report; and (4) having the client expressly identify any other persons or entities that the client expects to rely on the appraisal report;
(k) report the results of a real property appraisal without disclosing the nature, extent, and detail of the appraisal processes undertaken;
(l) fail to disclose clearly and accurately in the appraisal report any assumption or any limiting condition that directly affects the appraisal and to indicate its impact on value;
(m) fail to include in an appraisal report a certification that includes the following items in language substantially similar to the following:

I certify that, to the best of my knowledge and belief:
- the statements of fact contained in this report are true and correct.

etc >>>>>

My husband and I were just reviewing this exact "document" last night. :blush: We highlighted the exact same items that you did.... literally verbatim.

I do want to comment on the 25% GLA adjustment. We have two comps with GLA adjustments that exceed 25%. He states [Since I do not have the appraisal in front of me at the moment, the wording could be ever so slightly different than this] , "No other comparable sales could be found so I was forced to consider sales outside of 25% GLA." I am assuming that is what he presumes to be a credible explanation. However, that explanation is not accurate IMO. We sent him comps with GLA variances of less than 25%, but he refused to comment on them. I have no idea why he would not consider them, but I would love to know. If he had a valid reason, why could he just not communicate that to us?

In light of the above, I really have my doubts about whether or not his "I certify that, to the best of my knowledge and belief:
- the statements of fact contained in this report are true and correct." We specifically asked the lender in writing how the appraiser's statements about "being forced to consider sales outside of 25% GLA" and "I certify" reconcile with the comps that were presented to him for consideration. Truly, I do not understand it. If you read the appraiser's report, you would think that our property is overdeveloped. However, we are far from the nicest house in our neighborhood. Trust me, there are plenty of houses that are much larger, nicer, and grander than ours.

Shortly after Christmas, we plan to turn this case over to the state board. I really want to give people the benefit of the doubt, but his stubborn behavior did him no favors. He will now have to explain his decisions and opinions to the state board. He will need to give a credible explanation as to why the other appraisal came in nearly 25% higher than his. He can let a professional board evaluate his judgments. He can let the board decide whether or not the multiple properties we sent over satisfied the conditions of a comp. He can explain why he chose to exclude them. After all, that is the purpose of the board. They are there to decide whether or not in their professional opinion he followed all of the appropriate standards. Whatever the outcome, I hope that justice prevails.

I just want to thank all of you again for your time and input. It really has been invaluable. I plan to continue to update this thread as long as there is new information. It sounds like we will not find out the outcome of our case for several months (I am thinking next summer), but I will be sure to report when we have the outcome communicated to us. Thank you again.

 

[Carl Pylant]

At the risk of sounding like a jackdonkey just to play devil's advocate.....Would you have been upset at the errors and omissions in the report if the value opinion had been where you wanted it to be? Would you have scrutinized the appraiser's work as closely as you have now? Good luck with your refinance efforts.

 

[client123]

At the risk of sounding like a jackdonkey just to play devil's advocate.....Would you have been upset at the errors and omissions in the report if the value opinion had been where you wanted it to be? Would you have scrutinized the appraiser's work as closely as you have now? Good luck with your refinance efforts.

If the appraiser's work had come back in our expected range, no we would not have scrutinized his report the way we have. However, when we saw his opinion of the market value of the subject property, we were flabbergasted at the value. We did not need an appraisal anywhere near the market value for us to refinance without issue. In light of that, my husband and I were wondering how this happened. We then began to look at the comps he selected, and we noticed never several errors.... some of which I consider extremely material (most notably a square footage error of 1,800 GLA on one of the comps). Also our initial read of the report revealed that he got the bed and bath count wrong on the subject property. Quite frankly, the lack of attention to detail on some very big things cast doubt on the integrity of the entire report. Did he use the same sloppiness in choosing comps? Why were his comps all significantly smaller in terms of GLA? His refusal to address his questions did not help the matter. You have to remember that the variance in opinion of market values is around 25%, which amounts to over $200K. We are not talking about a few dollars which can be explained away by just a few adjustments. The entire report is in question. Like I said, we believe his work to lack integrity and do not believe that the appraisal reflects the market value of our home. The appraiser clearly thinks that this work his sound. The state can now arbitrate the matter. That's one of their roles.

If the appraisal had come in at an amount significantly higher than what we expected, we would have looked at the report in the same way. I would have been equally as shocked, but no we would not have gone back to the lender. However, if the lender reviewed the report, they would have had the same types of questions. I would like to point out that we would have gone back to the lender to let them know if the appraiser had overstated the bed/bath count in our home. I could not in my right mind let a bank underwrite a loan with known errors. In the end, his appraisal cost us our refinance. That's why I am upset. I don't think that is unreasonable at all.

Do you think that we are out-of-line for scrutinizing a report when the we believe that the opinion of the market is fundamentally flawed? It's not as if our belief in the market value of our home has not been substantiated numerous times by other arms length appraisals.

 

[client123]

At the risk of sounding like a jackdonkey just to play devil's advocate.....Would you have been upset at the errors and omissions in the report if the value opinion had been where you wanted it to be? Would you have scrutinized the appraiser's work as closely as you have now? Good luck with your refinance efforts.

Upon further thought, I would like to clarify my answer.

Would I have been as upset with the errors and omissions? No.

Would I have his found his report to have been more credible? Also no.

A credible report would represent the market value of our home, and I don't believe that his report does that.

 

[Carl Pylant]

I agree that you probably received a sub-par appraisal if the particulars of the market and the comparables, used and un-used, that you present are accurate. My point is that you could have likely received an equally sub-par appraisal with the value you were expecting. Had you received an appraisal that was very close to the value you expected, you would probably not be seeking out other appraiser's opinions and certainly would not be upset. A value does not necessarily make an appraisal good or bad. There is a saying in our business that the low appraisal is always the bad appraisal. I hope you are able get the situation corrected and are able to do what you need to do.

 

[George Hatch]

A "sloppy report" is just that - sloppy. That the management company reviewed the appraisal, chastised the appraiser for the series of minor errors but stood by the value conclusion waves a huge red flag for me. It means that - in their opinion - the errors being pointed out weren't of significant effect on the valuation, the overall results of which they apparently found to be otherwise reasonable.

It means they likely agreed with the comp selection and most of the really significant adjustments to those comps.

Had the management company disagreed with the appraiser's selection or analyses of these sales they'd have leaned on him/her to specifically consider the alternate sales you submitted. Really, in most cases they require the reconsideration even when they agree with the original appraisal's value conclusions.

I'll be interested to learn what happens with the 2nd appraisal.

 

[client123]

I agree that you probably received a sub-par appraisal if the particulars of the market and the comparables, used and un-used, that you present are accurate. My point is that you could have likely received an equally sub-par appraisal with the value you were expecting. Had you received an appraisal that was very close to the value you expected, you would probably not be seeking out other appraiser's opinions and certainly would not be upset. A value does not necessarily make an appraisal good or bad. There is a saying in our business that the low appraisal is always the bad appraisal. I hope you are able get the situation corrected and are able to do what you need to do.

I certainly understand the point that you are making. In our particular case, I think that the low value is a symptom, and not the cause, of me referring to the results as "not credible." If sound/good comps were chosen and the data itself was accurate from the beginning, I would feel very differently about the low value. I would also more than likely feel very differently if the appraiser was able to articulate why he dismissed the comps that were provided to him. I am still not sure how one of the comps given the "most weight" increases by $66K and the appraiser's opinion of the market value of the subject property does not change by a single dollar. I am a numbers person and respond well to logical answers. I don't, however, think that ignoring questions is a logical or quite frankly a professional response.

In the end, I think that we would both agree that there are some good and some sub-par appraisals. I happen to think that our particular appraisal is sub-par, and we plan on asking the state to look into the matter. I am guessing that the appraiser thinks his work is solid.

 

[client123]

A "sloppy report" is just that - sloppy. That the management company reviewed the appraisal, chastised the appraiser for the series of minor errors but stood by the value conclusion waves a huge red flag for me. It means that - in their opinion - the errors being pointed out weren't of significant effect on the valuation, the overall results of which they apparently found to be otherwise reasonable.

It means they likely agreed with the comp selection and most of the really significant adjustments to those comps.

Had the management company disagreed with the appraiser's selection or analyses of these sales they'd have leaned on him/her to specifically consider the alternate sales you submitted. Really, in most cases they require the reconsideration even when they agree with the original appraisal's value conclusions.

I'll be interested to learn what happens with the 2nd appraisal.

I have already given an update with respect to the second appraisal. It came in over $200,000 higher (about 25%) than the first one.

 

[ucbruin]

We are in the process of getting a second independent appraisal and are paying for this one completely out-of-pocket.

I just wanted to give a quick update. We just got back the second appraisal which came in $225,000 higher than the first appraisal. This number is inline with every other appraisal that we have seen. In my mind it just highlights the errors with the first appraisal.

The $ difference between the 2 appraisals is quite substantial.

I'm curious as to the/any conversation you may have had with the 2nd appraiser. Was there any discussion as to the 1st appraisal; did you provide the 2nd appraiser with a copy of the 1st report; did you provide sales you found to the 2nd appraiser; did the 2nd appraiser employ the same sales as the 1st but adjustments were different; was there in any way unintended hint of "value" based upon any information you provided to the 2nd appraiser?

 

[client123]

The $ difference between the 2 appraisals is quite substantial.

I'm curious as to the/any conversation you may have had with the 2nd appraiser. Was there any discussion as to the 1st appraisal; did you provide the 2nd appraiser with a copy of the 1st report; did you provide sales you found to the 2nd appraiser; did the 2nd appraiser employ the same sales as the 1st but adjustments were different; was there in any way unintended hint of "value" based upon any information you provided to the 2nd appraiser?

We did not really have any conversation with the second appraiser. We told him that we were considering a refinance on our house and would like a market value report. We did not mention the first appraisal, and we did not provide or suggest any comps. With basically the exact same data available to him (the effective dates were 29 days apart) we wanted to see what comps he would pull.

As an aside we had the second appraisal done for two reasons. First we were wondering if we were just that far off base in our assumptions. It was a sanity check for us as much as anything. Also if we planned to move forward with a different refinance we wanted to know if we may have a similar valuation problem. Second, we had pretty much decided that if the second appraisal came back in the range that we were expecting that we would be filing a complaint with the state board. The board in Georgia can require the person requesting an investigation (us) to have a second appraisal done. We figured we would kill two birds with one stone.

For those reasons, we in no way wanted to hint at value or give suggestions for comps. We were very curious how a new appraiser with a completely clean slate would value our house. We wanted to see the location of his comps as well as the key attributes of those properties. Since the first appraiser was unable to find "comparable homes" and was "forced to consider" other properties outside of the normal parameters, we wanted to know if the second appraiser would have the same problem. All that I will say is that the second appraiser's comps required far fewer adjustments and were closer in location to the subject property.