Overvalued Appraisal

[snowchild]

To let the lender decide if the risk is worth the loan. $1M in sales a year, you obviously made good money, probably had good credit, and have a nice house. The appraisal is only one portion of the deciding factor. Obviously income and credit are the major factors. Without a house, if you have such a thriving business, one could get an unsecured business loan at a low rate.

It is not the appraisers fault or the banks fault as to what happened in your personal/business life. One day you are making tons of cash, next day you are broke and can't afford the mortgage that YOU agreed to. That's life, and luckily in America you can get a second chance.

I am 66 years old. At the time I had no idea what was coming in terms of my common law husband's intent. We had been together for 10 years, he was a key man in the manufacturing process. As far as I was concerned we were good for life which is why we built the house, albeit he didn't want to. Unbeknownst to me, he had been having an affair with someone since 2012 and hoping for a big payoff when the house was finished. He went to an attorney and tried to get me for 50% of everything but I found proof through his facebook of his infidelity and their collusion to take me for a large sum of money. In the end he walked with no responsibility and about 80K in cash and equipment. I am still trying to recover.

 

[Elliott]

Snow,
Residential lending is based on two things, your capacity to re-pay the loan, and the residential value of the home. Your conflating the two. I will try to treat you more as a snowflake. If you read forum responses, they are not as mean as you think, and we do give as good as we get.

 

[snowchild]

Snow,
Residential lending is based on two things, your capacity to re-pay the loan, and the residential value of the home. Your conflating the two. I will try to treat you more as a snowflake. If you read forum responses, they are not as mean as you think, and we do give as good as we get.

The fact remains that I am now sitting on a property I cannot sell for what is owed and is at least 1/4 million less than the appraised value.

 

[hastalavista]

So... what now? Can I sue someone for getting me in over my head or am I just on my own? I appreciate any advice I can get. Thanks for your time.

I'll take your question for what it is: A request for information from a consumer.

Although Elliot gave good advice (find a local, knowledgeable expert to guide you through your options), I'll expand a bit.
1. As a consumer, if you believe there has been a problem with a prior appraisal that was related to a transaction you were involved with, you have the right to file a complaint with the state's appraisal regulatory board. I never recommend that action lightly as even if an appraiser is found to be in compliance, the process of that investigation is onerous on the appraiser. And, filing a complaint with the state will not assist you in recovering any alleged loss related to that appraisal. But, it is an option all consumers have and one you should be aware of.

2. It is the responsibility of the lender to "vet" the appraiser for competence and the appraisal for its reliability. The lender is the appraiser's client and it is the lender with whom the appraiser has the contractual agreement with. While you no doubt paid for the appraisal (either in a direct fee or contained by virtue of a no-cost rate), the appraiser has no direct-liability obligation to you. S/he was hired by the lender and it is the lender with whom the appraiser has privity.

3. The lender does have a responsibility with the borrower. That is where (in my opinion) the focus of your recourse should be directed...

They ordered an appraisal and could not find an appraiser to do it. They asked me if I knew anyone and after asking around was given the name of an appraisal service in Plentywood MT, some 100 miles to the east of us. I passed the name on to quicken and they hired them.

While the situation you describe does happen (the borrower finds the appraiser for the lender) it does not relieve the lender from its obligation of ensuring that the appraiser and appraisal meet the minimum requirements; which can be boiled down to accurate reporting of the factual condition/legal characteristics of the property and producing a reliable result (the value) based on appropriate and acceptable appraisal methodology. Indeed, a lender should go to a higher level of qualifying the appraiser and reviewing the work since they are (apparently) engaging an appraiser with whom they have no prior knowledge or engagement-experience with.

4. My recommendation is to contact an attorney that specializes in mortgage fraud. Quicken loans is a high-visibility target and they were recently sanctioned for unsavory lending practices. Although those practices occurred in the past, and many such lenders have since mended their ways, your situation was in the past and your advocate could make an argument that your situation was part of that unsavory, past behavior.

5. You should appreciate that when someone from the public comes on to an appraiser forum and asks, "can I sue someone...." where the discussion focuses on the an appraisal, appraisers will get defensive. Most of the suits appraisers are threatened with are frivolous. After the housing bust, certain law firms made it their business to buy bad loans with the specific purpose of suing the appraisers simply because the loans were bad and while the broker or lender was long-gone, the appraiser was still in business. I'm not excusing the defensiveness, I'm simply explaining it.

Based on what you posted, there may be significant appraisal issues. However, your recourse in my opinion is not with the appraiser; it is with the lender who was responsible for vetting the appraiser and the appraisal used to make your loan.
That row isn't necessarily easy to hoe. The question is, where/how were you harmed? You were able to pay off your construction loan and other debt based on the credit that the lender extended you. You lived in the house and therefore received some benefit during that occupancy:

The appraised value came in at $650K which was very surprising to me but I said terrific! I would use the opportunity to pay off the existing construction loan and some other outstanding debts so I took on 400K with the thought that I still had 250K of equity.

You've substituted lower cost debt (a residential mortgage; about as low as one can get) for higher-cost debt (construction loan and other financing).

I decided to sell the property and had trouble finding a local realtor to take it on at the appraised value. I then found a sympathetic realtor who marketed it for a year locally and over the internet, starting out at $500K and eventually down as low as $350k which was below what I owed. In all this time he had only 2 inquiries and 1 showing. None of those were financially qualified.

The market may have changed, or the property was not as worth as much at the time of the $650k value date, or the appraisal was materially in error.
Again, one has to show where the loss was? You didn't purchase the house, you refinanced it (as I understand) and used that debt to pay off existing loans.

In Oct 2016, I walked away and moved to Florida. I continued to pay the Mortgage till January of 2017 but then had to stop due to financial hardship. Quicken offered me a deed in lieu with a 1099 hit for the difference which could have been substantial. I looked at bankruptcy but since my business was still bringing in the majority of my income I would have had to lose that in bankruptcy. So, in June 2017 I made a deal to do a mortgage modification and move back to the property.

My bold. "Quicken". The potentially original offender.

Last week I paid for a reappraisal from the same appraiser that did the appraisal for the bank in 2011 and she said to me that based on the location, she does not understand where his number came in at $650K. She didn't think it will come in at 450K. Still waiting for the result. The Tax assessed value is $385K.

The assessed value is $385k, so you were not reassessed on the $650k value. No loss in excess tax.

My point is this:
I (and I think most on this forum) are not unsympathetic to your plight. It gives the mortgage industry a black-eye and potentially the appraisal profession a black-eye. Most of us are all in favor of getting the bad players out of the industry; especially and including fellow appraisers because they can damage us the most. However, many times, appraisers are an unwarranted target in the search for satisfaction; on the surface, that may not be the situation in your case, but no one here can say that with certainty.

The culprit and responsible party here is the lender. That should be your focus. This isn't brushing away a potentially bad appraisal or an incompetent appraiser. This is answering your question:

Can I sue someone for getting me in over my head or am I just on my own? I appreciate any advice I can get.

Yes, I think you can sue someone with the possibility of getting satisfaction.
That "someone" is the lender. They had the responsibility to ensure the appraiser and appraisal they relied on was credible and done correctly. You trusted them to ensure that the process was followed through. You have more than expectation on your side with the lender: you have their regulatory requirements which demand that they take responsibility and ensure the appraisal meets a minimum threshold of being "credible and reliable".
The good news for you is that they (Quicken) are still in business.

Good luck. I think you should pursue this to the next step (get an attorney who is experienced in real estate mortgage fraud and lending regulatory requirements). Ask him/her, given your situation, what the likelihood of success is in pursuing the matter. An attorney may recommend all parties including the appraiser be included in the lawsuit (a common occurrence). Just don't be surprised if the appraiser's attorney is able to get his/her involvement thrown-out due to the privity.

Again, good luck!

(BTW, the appraiser, if not responsible to you, is not "off the hook". The lender will likely go back to the appraiser and purse an action against him/her. They have standing in that matter if they do. So it isn't like a potential bad player gets off the hook. Your question is what is the best course for you to pursue; that answer is clear- it is against the lender).

 

[Meandering]

That,
and those lawyers that will sue a lender are not cheap.

But the district attorney is free if you've been victimized.


.

 

[Elliott]

Its Quicken's fault? How? Why?

 

[Mike Kennedy]

Quicken used my PERSONAL income from the business(an S-Corp). They did not use the business income itself but they did know that we were running a business from here and that it was my sole form of income. There are no zoning or permits required out here, in fact we built the house ourselves with oversight from a licensed contractor, but essentially there are no rules to comply with like in towns and cities. The loan is Fannie Mae.

Did you request a copy of both appraisals? If not DO SO A.S.A.P. Hearsay holds no weight. Which County is the property located in?

 

[Meandering]

Its Quicken's fault? How? Why?

A residential loan on a property that was not 1-4 residential use.

.

 

[hastalavista]

Its Quicken's fault? How? Why?

If the borrower can prove s/he is harmed by the appraisal, and can prove that the lender did not meet the standard of minimum due diligence in obtaining the appraisal, then the borrower's line of recourse is with the lender, no?

Note I emphasized (above and in my longer post) if harmed and if the lender did not meet its requirements.
Note I also asked (in detail) how the poster was harmed, given all the dynamics of the scenario.

Neither of which may be easy to prove (although easy to allege).

 

[snowchild]

If the borrower can prove s/he is harmed by the appraisal, and can prove that the lender did not meet the standard of minimum due diligence in obtaining the appraisal, then the borrower's line of recourse is with the lender, no?

Note I emphasized (above and in my longer post) if harmed and if the lender did not meet its requirements.
Note I also asked (in detail) how the poster was harmed, given all the dynamics of the scenario.

Neither of which may be easy to prove (although easy to allege).

Harm would only be in the overall value of the loan I took based on the appraised value. I did loan more because the appraisal value was 650K and loaning 400K would leave me at least 200K in equity. The extra money went to pay off loans of higher interest on the business which was paying down a 200K SBA loan which in turn, the local bank held a UCC filing on the business property. Quicken knew that and initially told me they would only loan if they could loan against the entire property and in order to do that it was necessary to pay off the SBA loan so the local bank would release its lien. That is why I took the 400K instead of just what was owed on the construction loan.

It is this equity that is now missing from the overall equation so that is the "harm" I suffered.