AndrewBiz
Freshman Member
- Joined
- Jun 22, 2009
- Professional Status
- General Public
- State
- Massachusetts
I had an issue with...you guessed it a low appraisal value for a re-finance which will now result in paying mortgage insurance (81% loan to value to add salt to the wound). At any rate I reviewed the appraisal in detail and noticed what appears to be a major error in calculating the time value adjustment on the report. This discovery resulted in me sending the below letter to the appraisal company and lender (I hope to attached the refernced exhibits to this post). Long story short the appraiser is sticking to their valuation. My next step is to report them to the state license board but would like any feedback on the merits of my positions before proceeding. If anyone has other thoughts on my best course of action that would be appreciated as well.
To Whom It May Concern:
I am writing in concern to an appraisal (File No. XYZ) prepared by your firm in connection with the refinance of my residence at 123 Main Street in Anytown, USA. The nature of my inquiry is in regards to the property data used to develop the Market Conditions Addendum (MCA) to the Appraisal Report (Fannie Mae Form 1004MC).
On June 10, 2009 at approximately 3:00 pm I placed a phone call to your office and spoke with the woman that answered the phone. During this call I requested that the property data used to complete form 1004MC be provided to me so I can validate the information contained on the form; this request was denied. Upon being denied the information I then questioned if I was supposed to simply “assume the data is correct”. The answer I received was that I should assume the data is accurate because it was compiled by a professional appraiser.
Subsequent to my request being denied I was able to ascertain the dataset used to complete form 1004MC. Upon review of said dataset I was able to confirm my suspicion that the dataset used to complete form 1004MC contained flawed data. The instructions for form 1004MC states, “Sales and listings must be properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the subject property.” It is clear by reviewing the sales data that at least three (3) of the properties contained in the prior 7-12 Months time frame do not compete with the subject property and should not have been included in the dataset. Refer to Exhibit A for information on these properties and a narrative explaining why the properties do not compete with the subject property. The inclusion of the Exhibit A properties in the MCA dataset created “outlier” sales (sales which are far above or below the neighborhood norms). The use of medians (as recommended on form 1004MC) rather than average sales data would have minimized the impact of the outliers (refer to Exhibit B, column B). The decision of the Appraiser to use average sale prices rather than median prices made it extremely important to filter the dataset to include only properties that compete with the subject property; this important step was not done. The inclusion of the these “outlier” properties artificially inflated the average sale prices during the 7-12 month time frame thus creating a perceived 24% decline in average sale prices over the past year (a classic example of “garbage in, garbage out”). This erroneous 24% decline was then applied to Comparable Sale No. 2 and 3 respectively on the URAR. This error devalued the comparable sales.
When the aforementioned “outlier” properties are not included in the dataset the resulting declining sale price over the past year based on average sale prices is 17% (refer to Exhibit B, column C) rather that the 24% decline applied to the comparable properties in the Sales Comparison Approach section of the URAR. To complete Form 1004MC per the explicit instructions (removing non-competing properties and using the median sale prices) the decline over the past year is 12% (refer to Exhibit B, column D) versus the 24% decline applied to comparable properties in the URAR. The net result of using an erroneous 24% declining market adjustment in the URAR is illustrated in Exhibit C.
As I highlighted in the opening of this correspondence I was unable to have a meaningful dialog with anyone to express my concerns with the appraisal. Therefore, I am providing this information in confidence that the information I bring forth will warrant a correction and modification of the appraisal. I am requesting that the Date of Sale/Time adjustment line item be corrected based on the corrected market decline rate and the subject property appraisal be revised based on the corrected information.
In closing please be advised that this is not a request to change a subjective opinion but merely to correct an error in the data collected which in turn was used to develop an erroneous appraisal. It should be noted that failure to address the issues contained in this correspondence may constitute an intentional, negligent misrepresentation in the appraisal report which can result in civil liability and/or criminal penalties under the provisions of Title 18, United States Code, Section 1001 or similar state laws.
As you are aware real estate transactions are a time sensitive matter and your prompt response is greatly appreciated. Should you have any questions concerning the data contained in this correspondence please contact me at your earliest convenience.
Sincerely,
Joe Homeowner
To Whom It May Concern:
I am writing in concern to an appraisal (File No. XYZ) prepared by your firm in connection with the refinance of my residence at 123 Main Street in Anytown, USA. The nature of my inquiry is in regards to the property data used to develop the Market Conditions Addendum (MCA) to the Appraisal Report (Fannie Mae Form 1004MC).
On June 10, 2009 at approximately 3:00 pm I placed a phone call to your office and spoke with the woman that answered the phone. During this call I requested that the property data used to complete form 1004MC be provided to me so I can validate the information contained on the form; this request was denied. Upon being denied the information I then questioned if I was supposed to simply “assume the data is correct”. The answer I received was that I should assume the data is accurate because it was compiled by a professional appraiser.
Subsequent to my request being denied I was able to ascertain the dataset used to complete form 1004MC. Upon review of said dataset I was able to confirm my suspicion that the dataset used to complete form 1004MC contained flawed data. The instructions for form 1004MC states, “Sales and listings must be properties that compete with the subject property, determined by applying the criteria that would be used by a prospective buyer of the subject property.” It is clear by reviewing the sales data that at least three (3) of the properties contained in the prior 7-12 Months time frame do not compete with the subject property and should not have been included in the dataset. Refer to Exhibit A for information on these properties and a narrative explaining why the properties do not compete with the subject property. The inclusion of the Exhibit A properties in the MCA dataset created “outlier” sales (sales which are far above or below the neighborhood norms). The use of medians (as recommended on form 1004MC) rather than average sales data would have minimized the impact of the outliers (refer to Exhibit B, column B). The decision of the Appraiser to use average sale prices rather than median prices made it extremely important to filter the dataset to include only properties that compete with the subject property; this important step was not done. The inclusion of the these “outlier” properties artificially inflated the average sale prices during the 7-12 month time frame thus creating a perceived 24% decline in average sale prices over the past year (a classic example of “garbage in, garbage out”). This erroneous 24% decline was then applied to Comparable Sale No. 2 and 3 respectively on the URAR. This error devalued the comparable sales.
When the aforementioned “outlier” properties are not included in the dataset the resulting declining sale price over the past year based on average sale prices is 17% (refer to Exhibit B, column C) rather that the 24% decline applied to the comparable properties in the Sales Comparison Approach section of the URAR. To complete Form 1004MC per the explicit instructions (removing non-competing properties and using the median sale prices) the decline over the past year is 12% (refer to Exhibit B, column D) versus the 24% decline applied to comparable properties in the URAR. The net result of using an erroneous 24% declining market adjustment in the URAR is illustrated in Exhibit C.
As I highlighted in the opening of this correspondence I was unable to have a meaningful dialog with anyone to express my concerns with the appraisal. Therefore, I am providing this information in confidence that the information I bring forth will warrant a correction and modification of the appraisal. I am requesting that the Date of Sale/Time adjustment line item be corrected based on the corrected market decline rate and the subject property appraisal be revised based on the corrected information.
In closing please be advised that this is not a request to change a subjective opinion but merely to correct an error in the data collected which in turn was used to develop an erroneous appraisal. It should be noted that failure to address the issues contained in this correspondence may constitute an intentional, negligent misrepresentation in the appraisal report which can result in civil liability and/or criminal penalties under the provisions of Title 18, United States Code, Section 1001 or similar state laws.
As you are aware real estate transactions are a time sensitive matter and your prompt response is greatly appreciated. Should you have any questions concerning the data contained in this correspondence please contact me at your earliest convenience.
Sincerely,
Joe Homeowner
