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Problem W/ Pre-construction Appraisal, Advice?

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melaniegalliano

Freshman Member
Joined
May 30, 2003
My husband and I are building a house. We own the land.

Here's our situation:

We paid "Mr X" $350 upfront for an appraisal of our land and house plans. Mr. X was working with our mortgage broker. He used other houses in the area as a comparison to what we will build. The appraisal came up $10,000 UNDER the cost to build the house. (Our contractor is actually $30,000 cheaper than all other bids we got! ) Contractor talked to Mr. X and Mr X explained why (first larger house in area etc... ), and agreed to meet us half way, he'd add $5000.

Long story short, the mortgage company we were working with took 6 weeks to tell us they were much too busy for our business. We are now getting our loan through a bank. We call Mr X for an updated copy of the appraisal with the $5000, and he says he never spoke with anyone about our house or changing the amount. :eek: (??) The bank will not use his appraisal because the numbers are off, so we are having to pay for yet another appraisal through the bank.

Here's the kicker.... I had never looked over Mr X's appraisal closely. My Fiance had the only copy, and had read the numbers to me over the phone. (we got married, moved, etc etc) FINALLY I looked at the hard copy recently (3 months after we got it)..... And he appraised the WRONG LOT!!! There are pictures of "our" land with "145 Gabriel Street" next to them (which is our lot address) , but the pictures are of land 3 lots down... 151 Gabriel St!!!

The lots are the same size, same cost, so it won't affect the dollar amount of the appraisal. It's the principal... we paid $350 for an appraisal of OUR land and OUR future house, and we didn't get it. We are not happy.

So, after all that confusion.... my question is..... Since the land is miss-represented in the appraisal, the photos do not show what the appraisal is actually for, is it still valid? Or does that make the appraisal worthless?? Or does it not matter much since it's a piece of land in the same area??

If anyone has any advice on how to handle this, or if there is anything we can do, we would appreciate it!!
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
You're doing a vacant lot with proposed construction. In a subdivision with numerous vacant lots, unless you were there to show him the lot, it's very easy to say it's X lot instead of Y lot. You admit that there is no difference in the lots. Technically, it's a USPAP violation. However, given the real problems that exist with true incompetent and fraudulent appraisers, this will not get anyone's attention at the licensing board. Besides, he did look at the lot (he drove down the street), he just didn't photograph the right one.

Your problem is two-fold. First, Appraiser X didn't make value. "Making Value" is not what an appraiser is about. It is about estimating market value. You say he came in below Cost. Cost is not Value. Just because a home cost $XXXX doesn't mean that it is worth $XXXX. Your home may be worth more or less than the cost depending on the market. Appreciation is also not a given - homes can lose value.I can show you numerous subdivisions where a home loses 10% as soon as it is bought because of concessions, etc being offered by the builder in the subdivision.

Your second problem is that your mortgage company took longer than it should have to do anything and you had to go to another lender. The fact that the bank (2nd mortgage company) won't accept Appraiser X's appraisal because it didn't make value is a real problem that appraisers have throughout the U.S. The bank doesn't want an appraisal by an independent appraiser, it wants an appraisal by an appraiser that they consider a "number hitter". They know that their appraiser will make value, they can make the loan, then sell the loan and they have no liability if the loan goes bad. And that's a real problem with lenders today. I know you don't intend to lose the home, but things happen and some secondary lender (not the bank) may end up with the home and the liability of trying to resell it. That's why honest appraisals are needed on loans.

I cannot address the fact that your original appraiser came in $5000 low. However, an appraisal range is 3-5% of value, so on a $100,000 property, $5000 is 5%.

The bottom line is that unless the appraiser committed an seriously FRAUDULENT appraisal, there is no recourse against the appraiser. An appraisal is an ESTIMATE of value, not a guarantee of a value.

Hope this helps you understand the process.

Roger Strahan, SRA, IFA
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Adding to Mr. Strahan's excellent answer, your original lender is the appraiser's client. You are not and you cannot rely on or use it for anything other than wallpaper.

Please believe me, appraiser's do not enjoy coming in below the value wanted by everybody else and don't do that lightly. We get threatened and bribed by the loan officers, builders and real estate agents for doing that. Is it possible that you are building the biggest and best house in that project? If so, it probably will cost more than it actually is worth. I have measured the wrong house in a project full of houses under construction, caught my mistake and went back to do the right one. When vacant lots are all similar it can be difficult to locate the exact right one and it sounds like that particular mistake won't make any difference in the value. It is not a significant error.

I know you're disappointed, but take another good look at the facts of that appraisal and the comparables used. Maybe.... just maybe.... it really is correct.
 
W

walt kirk

Guest
I think that the appraiser did you a great service by telling you the truth. You are entitled to a copy of that appraisal but( due to regulations rules)the appraiser can't give it to you, you must obtain it from the mortgage company. If the mortgage company failed or refused to complete your application you should get a refund of all of your prepaid expences from them.
 

melaniegalliano

Freshman Member
Joined
May 30, 2003
Thanks for the replies and info. Greatly appreciate it!! The whole house thing has been really stressful, and we haven't even begun building yet!!

In a subdivision with numerous vacant lots, unless you were there to show him the lot, it's very easy to say it's X lot instead of Y lot.

Actually there are only 2 empty lots on the street... ours, and the one he photgraphed. He is suposedly very familar with the area, he also had a drawing of the subdivision with the lots clearly marked. Ours is on a corner, the one he photographed is not.

However, an appraisal range is 3-5% of value, so on a $100,000 property, $5000 is 5%

That's one thing that no one told us. Now I don't feel so bad. It was actually $10,000 off.... which is about 6%, so it's pretty close to that.

I know you're disappointed, but take another good look at the facts of that appraisal and the comparables used. Maybe.... just maybe.... it really is correct.

I totally understand that it may be correct. It's irrelevent since the bank is having it appraised again anyway. We're not disputing the value he gave us, just the fact that it was the wrong piece of property! I just feel like we paid to have our land apraised, and we didn't get that. We got someone else's. If my house were appraised, I wouldn't want the neighbor's house appraised in it's place, even if the value was the same.

You are entitled to a copy of that appraisal but( due to regulations rules)the appraiser can't give it to you, you must obtain it from the mortgage company.

Well, we did get a copy from the apraiser. My husband picked it up!



Again, thanks to everyone for the replies. Neither my husband nor I know much about any of this, so it's all brand new and we are still learning as we go!
Melanie
 

Ghost Rider

Senior Member
Joined
Apr 27, 2003
Professional Status
Banking/Mortgage Industry
State
Connecticut
Melanie

He did appraise your property, take a look at the report - does the lot size match up with what your actual lot is?? There is a check box on the first page of the form where you mark if it is a corner lot or not, which did he mark??

Could he have taken the picture of the wrong lot?? Absolutely, It's happened to me doing appraisals of vacant land and new construction where things aren't marked clearly - He might have taken a picture of the wrong lot, then while he was looking at everything, realized it, and taken the right picture, and just dropped the wrong one into the report. The Photgraphs really dont do anything more than support the data in the appraisal. For Example, if I call a home "GOOD" and the photographs show a house with gutters hanging off, chipping paint, and broken windows, then I need to explain that. If all the appraisal contained was pictures, then we would all be a lot less stressed, and a lot richer!!!!!! I'm willing to bet he just put the wrong picture into the report, which might upset you, but in the long run, really doesn't affect the estimate of value
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Originally posted by melaniegalliano@May 30 2003, 09:18 PM
  I just feel like we paid to have our land apraised, and we didn't get that.
I think this is the crux of the matter. Hard to explain but the appraisal is NOT yours nor is it to be used for your purposes or anyone elses, except the original lender that called for the report,, they just got you to pay for it. Now you feel as if it is your property or are somehow entitled, but it is not and you are not. You paid for the appraisal on behalf of the original lender, that is all.
This is a good example as to why I feel that there should be a required high school course in Residential Real Estate, just like Home Economics (what a missed named course) or Gym.
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Melan,

I wouldn't be to upset on a vacant land for taking the wrong picture. You did state that the vacant land is similar in size. Unless there is a significant site size or view difference between the parcels then not to worry. Yes it is an infraction of USPAP, however, for vacant land to me it would be minor. Vacant land is tough when no one is out there to meet you at the property to insure that you have the right one. Even in subdivisions without clear markings and no one there to meet you as an appraiser I always worry on vacant land if I got the right one. Unless I am meet at the property which is not always possible. You may be frustrated at not getting the loan but I would use the appraisal that you have in hand and compare to the next appraisal provided by the new lender. See what the differences are in the appraisals. Perhaps you may be building to unique of a house for the subdivision. In which case you may overpay for the construction costs vs market value of the house.

Ryan
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
Melanie,

You state in the appraisal that the lot drawing shows the corner lot. It sounds to me like he appraised the correct lot, took the wrong picture.

I understand you are upset. Have you asked him to fix this? It really should not be a problem. We are all human and we have all taken the wrong photo at one time or another. Be it a vacant lot, a comparable house, whatever, we have all done it. However, most of us want the most accurate appraisal possible in our client's hands. If it was brought to my attention, I would fix it immediately.
 
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