Opinion, Please - Request For Value Reduction

[Greg Parker]

It's a $5,000 decrease and is within the adjusted range of sales. Opinion of value $170,000, the home was listed at $220,000 and reduced a single time to $165,000 the day after my inspection (in other words, I had only seen the $220,000 listing). 101 total DOM, within the market average of 3-5 months marketing periods. I have not been provided a contract, was not aware of a previous appraisal, and have significant explanation as to the reasoning behind my value and the larger than preferred unadjusted value range. This is a rural area, the fact that I found the older sale next door was unusual. It was necessary to go a full three miles for comparable sales in all other cases, and the home is on 2.7 acres. The client does not appear to have any issue with comparable selection or the methods use to determine the value opinion. There were zero stipulations, corrections or changes requested beyond what I have listed below.

Adjusted sales are 168,500, 172,500, 183,000 (this one is an almost exact match), and $152,500 (a sale directly next door, used in position four, settling slightly over one year previous, added to explain/support commentary regarding slight market upticks -- REO sale). I have three listings with the report on an addendum, they adjusted to $171,600, $169,800 and $173,400.

Here is the request:

The reviewer looked at the appraisal dated 9/21/2016 for $170,000 and a previous appraisal for $165,000.


(redacted client) employs the appraiser for a purpose they normally don’t perform. We are asking the appraiser to give us an “as is” value for the purpose of setting the list price for our properties per HUD guidelines for our product. “As is” is very true for our product because once the list price is set, (client redacted) can’t sell the property for less than the list price, we don’t make repairs, we can’t offer seller concessions of any kind, and our properties must be marketed and closed with 180 days. The appraiser’s value sets the list price. (client redacted) is not looking for a liquidation value for the subject, but we need an accurate value in order to prevent delays in marketing.


There is a contract for purchase in the amount of the previously appraised value of $165,000. As noted above, according to client guidelines, the list price must increase to $170,000, and therefore the contract price must also increase. The current buyer does have the opportunity to buy the property for $170,000, but most buyers feel this isn’t fair to them when they have negotiated in good faith to buy the property for $165,000. Most buyers terminate the contract in these situations. But as explained above, if this buyer declines to pay $5,000 more than the current contracted price, the subject will have to be placed back on the market for $170,000.


In a forward loan, an appraised value above the contract price is beneficial but as discussed in a reverse mortgage situation the list price will have to be change and likely the buyer will refuse to pay the higher amount. In order to preserve the contract, would the appraiser please consider lowering the appraised value to $165,000 as the adjusted sales value range is $152,500 to $183,000?



I have already formulated my response and sent it to the client. This loan is on a defaulted FHA reverse mortgage property. The appraisal was done/completed as a servicing (not a sale) report. I am just curious as to how others would respond in a similar situation.

 

[JTip]

>3% price difference. Drop it $5k. They are not asking anything unethical. Fits within YOUR range. Close the deal, get paid, move on to the next one.

Feel good that you came in that close without seeing the contract.

Now if they wanted it raised 5k, that would be a different story.....

 

[Artemis Fowl]

So I am reading that value have trended increasing over the past year. Price is based on a year old appraisal? What is the contract date? Maybe they need to re-read their regs if the contract is closer to the dated appraisal vs. yours. There appears to be a logical progression to explain what is happening.

Unless there is a significant consideration to reconcile to 170 instead of 165. Comes down to credibility of your opinion.

 

[Greg Parker]

So I am reading that value have trended increasing over the past year. Price is based on a year old appraisal? What is the contract date? Maybe they need to re-read their regs if the contract is closer to the dated appraisal vs. yours. There appears to be a logical progression to explain what is happening.

I don't know. I did not see the old appraisal nor any contract. No indication was made when setting the appointment that there was a contract, and the home is not listed as pending (even now, with a reduced price of $165 from the original $220)

Jtip- -- I respect your opinions, and like your posts. If I'm being difficult, it's not intentional, but this is a servicing appraisal asking for an as-is value., There was no indication of any contract or purchase price.

FWIW, my response to the client (AMC) was that I have provided an as-is value, and do not like to revisit an appraisal after the fact simply because a contract was made on a date after my inspection.

 

[Artemis Fowl]

So hold on...
Contract price was determined by the prior value opinion. THEN they order a new opinion to set price and expect it to come out the same? Am I the only one who thinks this is really stupid?

If we assume that the prior appraisal "expired" for its intended use...somebody allowed a contract to proceed and is...stupid.

I'm starting to think they need you to bail them out for being stupid. Not sure I would be amenable to that.

 

[J Grant]

The reviewer is out of line reviewers are not supposed to ask appraisers to reduce or raise value.

If a reviewer disagrees with a value, they are supposed to provide their own value opinion and do an appraisal as part of the review.

Sounds like the actions of reviewer/client are a violation of the ethics portion of USPAP.

 

[Mike Kennedy]

 

[The Bob]

Is this on a defaulted HECM? If so there are special rules that must be followed...

https://www.gpo.gov/fdsys/pkg/CFR-2011-title24-vol2/pdf/CFR-2011-title24-vol2-sec206-125.pdf

Fannie Mae HECM Reverse Mortgage Offer Guidelines
Please read this website in its entirety to fully understand the sale of the subject property. This is a Fannie Mae HECM (Home Equity Conversion Mortgage) reverse mortgage foreclosure, which must be sold subject to 24 CFR 206.125. (This means there are very specific guidelines outlined for the sale of this property, which are outlined below. You can read further HERE and HERE.) Even though this is a Fannie Mae product, it has its own set of unique guidelines that are NOT the same as typical Fannie Mae guidelines.

The seller has special rules to follow in selling this property in order to qualify for their mortgage insurance reimbursement for their foreclosure loss.
· The subject property CANNOT be sold for less than the current appraised value as established by an FHA Roster Appraiser (list price), without HUD’s express authorization. Offers submitted below list price cannot be accepted and at the seller's discretion may not be formally countered regardless of any terms, conditions or circumstances.
· Property is sold "AS-IS AT TIME OF SALE". In many of these properties, they will not be completely cleaned out and they will not be maintained during the escrow process. Buyer accepts condition at the time of closing.
· There can be no repairs and no termite completed on property. This includes repairs or termite completed by the buyer. If buyer is found to have completed any repairs or termite during contract period without written authorization from seller, contract will be terminated immediately and buyer will not receive any reimbursement. If repairs will be required for buyer's financing, do not offer as they will not be completed.
· Per HUD guidelines, utilities will NOT be turned on at any time at seller's expense. Buyers AGENT may turn on utilities and Buyer will be responsible for any and all costs incurred turning on the utilities. Utilities can ONLY be turned on during 10 day inspection period and utilities MUST be turned off upon completion of inspections or 10 day period.
· Homepath Financing is not available. This property does not qualify for any special financing from the REO seller.
· Seller does not provide HOA documents. Buyer will be responsible for incurring the cost of all governing documents.
· Seller does not allow buyer to pay a transaction coordinator fee, additional selling agent commission or any other transaction related expenses to the selling (buyer's) agent. If fees are on the HUD, the HUD will be rejected by HUD and property cannot close escrow. The published CBB in the MLS is the only compensation allowed to the selling agent.
· Other costs not allowed by HUD at closing include, repair reimbursements or allowances, county and or city transfer taxes, home warranty fees, discount points or closing cost credits, wire fees, "miscellaneous" fees, courier fees.
· Fannie Mae does not allow for a 1031 exchange.
· If a corporation/LLC/LP is purchasing the property, the Articles of Incorporation/Organization will be required as well as Specific Signing Authority.
· Mediation and Arbitration will be removed from the contract.
· Seller requires 30 days for a cash transaction and 60 for a financed transaction. This gives time to ensure a clear title at closing. Property may be able to close sooner and extensions to this timeframe may be required.
· Electronic signatures ARE accepted.
· Under no circumstances is the buyer allowed to move into the property (including personal property) prior to the close of escrow. There can be NO exceptions to this and prior possession is grounds for termination and forfeit of deposit.

 

[JTip]

but this is a servicing appraisal asking for an as-is value., There was no indication of any contract or purchase price.

My fault. I am familiar with servicing work, and enjoy those assignments too. While I'm positive your work is solid and credible, these assignments are not scrutinized as hard as other lending work.

simply because a contract was made on a date after my inspection.

I know we are 'independent' pros, salty and stubborn, but in this particular situation/circumstance I would accommodate my client (assuming they are a 'good' client) and make the change.

Your report easily supports this number and, if it gets this off the books for them, make it happen. No laws/rules or brick on the path to heck is being set. 5k, everybody wins and nobody gets hurt.

 

[Greg Parker]

Follow up.

Mr. Kennedy -- Yes. you are 100% correct. This was for a defaulted HECM. I'm still a little aggravated over the contract being completed after the date of appraisal however. I do understand the guidelines in these cases, as I have done more than I really want to (these are a type of inspection I don't like to do that often. Frankly, it's sad.).

The chief appraiser for the client got back to me however, and brought up another issue. If the value I come in at is within 5% of the sales price, the loan can still go through. It causes one additional form for the lender to complete, but is apparently not an issue. She told me that if the lender does not supply additional sales to dispute my value that the dispute is essentially void. I was under the mistaken assumption that all of these files went through the entire collateral underwriter, and I am very particular about consistency in all of my reports (triple checking for every sale if I have used it before, verifying everything possible with agents, etc), only to find out it is not the case for these properties.

Based on feedback, I have offered to make the $5k change, but she does not really feel it's necessary on review of the appraisal from their end.

Jtip hit one nail on the head though... I am stubborn. Sometimes obstinately so, and I might need to rethink that attitude.