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Questions About Recent Appraisal

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Fishhooker

Freshman Member
Joined
Feb 24, 2017
Professional Status
General Public
State
Texas
We recently had an FHA appraisal for the home we put an offer on. Our appraisal came in $22,000 under our offer amount. Our offer was $122,000 the appraisal was $100,000.

I noticed some items of serious concern when going through the appraisal report. The home is 9 1/2 years old, and in excellent condition according to our home inspector. ( the only issues he found were a gutter downspout in a less than ideal location, and lack of a cleaning port on the A/C evaporate line. The sellers had the downspout fixed prior to appraisal.)

  • The address is incorrect- they listed E instead of W on our street name. The photos of the home are correct, but the eastern end of the street is a very run down neighborhood.

  • They took an across the board $5,000 deduction for commercial facing property. The house faces the operations office for the local school district, so it is not subject to the same traffic, noise, and increased crime typically associated with commercial

  • The first comp used appears to be a mobile or manufactured home on a foundation. It was built in 1985, despite the appraisal report stating the comp search parameters were properties +- 20 years. It also appears to be a "flip house." It was purchased for an undisclosed amount 3 months prior to the sale used in the report. Can a mobile/manu even be used as a comp for standard construction?

  • The second comp used was built in 1950. It spent 82 days on market. Average for this zip code is 34, our prospective home was on market for only 2 days with 9 offers. This house is well outside of the 20 year window.
The list of unused additional comps further down in the report were much more similar to the home being appraised. Why would an appraiser use the two comps that were the furthest outliers in both age and sale price? The additional listed comps were all within 1 mile of the address and were much closer in condition, age, and quality than the ones used.

According to this appraisal, the seller's are upside in this house. They purchased it 2 years ago for $109,000. This area has risen an average of 16% in the last two years, so I find it extremely hard to believe that this home depreciated while everyone else's was appreciating.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
I can't speak to the specific appraisal or issues without seeing the appraisal and all the other data. You can submit your concerns to your lender.

Keep in mind appraisers don't' tell buyers what to pay, they tell lender opinion the lender uses for lender purposes. If you want the house at 122k, you are free to put down 22k in our own funds to make up the difference. .
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
The address is incorrect- they listed E instead of W on our street name
No impact on value

deduction for commercial facing property
Judgment call but did he/she support the adjustment with any statement or was it simply an adjustment pulled from air?
The first comp used appears to be a mobile or manufactured home on a foundation. It was built in 1985, despite the appraisal report stating the comp search parameters were properties +- 20 years. It also appears to be a "flip house." It was purchased for an undisclosed amount 3 months prior to the sale used in the report. Can a mobile/manu even be used as a comp for standard construction?
MH makes a Pee Poor comp to stick built. Bring this to the attention of the lender and ask for a review appraisal.
The second comp used was built in 1950. It spent 82 days on market. Average for this zip code is 34, our prospective home was on market for only 2 days with 9 offers. This house is well outside of the 20 year window.
Old housing makes poor comps to newer homes. Bring this to the attention of the lender and ask for a review appraisal.
This area has risen an average of 16% in the last two years, so I find it extremely hard to believe that this home depreciated while everyone else's was appreciating.
Perhaps. Does he/she discuss why they felt the value was below the contract price...ie.- did they discuss the contract that they are required to "analyze"? Bring this to the attention of the lender and ask for a review appraisal.

If the lender refuses, sent the report to the state licensing board.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I can appreciate when there is a difference of opinion of value, every item comes into question. This is natural.

The address may be a typo. It doesn't sound like that is material or significant to the valuation but should be corrected if it is in error. Bear in mind that the appraiser may be going off a datasheet that lists the address as "E". But, if an error or typo, it should be corrected.

A street scene photo is a street scene photo. If you are on the edge of the good/bad neighborhood boundary, and that is captured in the street scene, it is what it is. And, if that is the case, many times such proximity can impact value. This should make intuitive sense: given the choice to live on the same street where the good neighborhood transitions to a "very run down" neighborhood, most would prefer to live further from that boundary than closer. "How close" is obviously a factor, but if most would prefer to live further than closer, then most will pay more to live further than closer. How much more i cannot say.

Similar to the above, most in a residential neighborhood prefer to live among residential properties. Having a commercial property as a neighbor is usually (but not always) less desirable than having a similar residence. That proximity may impact the value or it may not. The fact that it is adjusted is not necessarily an issue; the question is, is the adjustment supported?

A mobile/manufactured home can be used as a comparable if necessary. It is not ideal. If there are other sales that are more similar to your potential purchase, logic would argue that they be used rather than the mobile/manufactured home (all other things being the same). From what you describe, this is a very legitimate question.
Likewise the second comp built circa 1950. Especially if the report has described the comparable search parameters as being 20+/- years of age (which, on the surface, sounds reasonable). The expectation is that if the report is using sales that doesn't fit within the description it provided as to what are the comparable parameters, then some explanation would be provided why a sale outside of those parameters is being used as a comparable. You should see if the report has a reason why it used what it did counter to what it described as its search parameters. I don't see a significant issue with 82 days for a specific house vs. an average of 34 days for a zip code.

The list of unused additional comps further down in the report were much more similar to the home being appraised. Why would an appraiser use the two comps that were the furthest outliers in both age and sale price? The additional listed comps were all within 1 mile of the address and were much closer in condition, age, and quality than the ones used.

This is a valid question.

They purchased it 2 years ago for $109,000. This area has risen an average of 16% in the last two years, so I find it extremely hard to believe that this home depreciated while everyone else's was appreciating.
This is a valid question to have on the surface. However and again, average appreciation may not be what any specific house appreciates at for a number of reasons. Regardless, your question is reasonable.

There is a process to address these issues/questions you have. It is called the Reconsideration Process. You should contact your lender (not the appraiser directly because s/he is prohibited by regulation and contract of discussion value issues with anyone but the lender or an FHA authorized person) and tell the lender you have questions. You can repeat exactly what you've written here because they appear reasonable (to me). The lender will then take a look at the questions/concerns and determine if they are reasonable; if they are, they will forward them to the appraiser to address.
The appraiser will receive the request and then look at the questions and determine what, if any, action or changes are warranted to the report. Keep in mind that new data may or may not result in a change of the analysis. Factual discrepancies (such as the address) should be changed but wouldn't, by itself, necessarily impact the value.

Good luck!
 

Fishhooker

Freshman Member
Joined
Feb 24, 2017
Professional Status
General Public
State
Texas
Thank you for the help and info. I believe our lender is asking for a review.

The inaccuracy on the address doesn't have any monetary bearing, but it seems to indicate an overall inattentiveness to detail and accuracy- traits that do not seem to be beneficial to an appraiser, and which call the accuracy of the entire report into question.

There was no explanation given for the use of comps outside the search parameters, nor any breakdown of how the $5,000 commercial facing deduction was figured.

After digging a bit deeper into the report and talking to the listing agent, I have a few other concerns that hopefully the review process with address.
  • The appraiser is based 71 miles away from the home being appraised. The appraised home is in a rural area in a town of about 3500 people. I don't believe (nor reasonably expect, for that matter!) an appraiser based 70 miles away to be familiar with the area and it's market.

  • The signing, licensed appraiser on the report is female, but the person who talked to the listing agent and arrived at the house was male. There was a statement in the appraisal report stating that a trainee helped with inspecting, gathering and analyzing comps, and determining value.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
The signing, licensed appraiser on the report is female, but the person who talked to the listing agent and arrived at the house was male. There was a statement in the appraisal report stating that a trainee helped with inspecting, gathering and analyzing comps, and determining value.

This is potentially a very serious item.
If this is an FHA appraisal, then the FHA approved-appraiser must be the appraiser who completes the inspection and signs the report.
When I say serious, I mean monetary fine and license-losing serious.
If you are certain of this, I would consider filing a complaint (a recommendation I do not make lightly). I emphasize being certain because such a complaint, if unfounded, is a nightmare to go through as an appraiser. If it is founded, doom on the appraiser. You would be doing the public and the rest of us who do follow the rules a service.

Good luck!
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
After digging a bit deeper into the report and talking to the listing agent, I have a few other concerns that hopefully the review process with address.
  • The appraiser is based 71 miles away from the home being appraised. The appraised home is in a rural area in a town of about 3500 people. I don't believe (nor reasonably expect, for that matter!) an appraiser based 70 miles away to be familiar with the area and it's market.
Notwithstanding the significant issue of the signing appraiser not being the inspecting appraiser, while I can understand your concern about the distance (many call it "geographic competency") for what it is worth, I just drew a 70-mile radius from my office to see if I regularly appraise in markets at the edge of the boundary. I do and I am competent to do so. So distance by itself is not necessarily an indication of competency (at least according to me! :rof:). However, when I do travel that far, I expect someone to ask me, "Your office seems a long way away; do you know this neighborhood?". My reports are written in a similar fashion for similar properties no matter where I appraise. The 60+ mile distant market is analyzed to the same level of detail as the one 10 miles away.

Having said all of this, the concern of a distant appraiser having local market knowledge, given the questions you have, is reasonable.
 

Fishhooker

Freshman Member
Joined
Feb 24, 2017
Professional Status
General Public
State
Texas
This is potentially a very serious item.
If this is an FHA appraisal, then the FHA approved-appraiser must be the appraiser who completes the inspection and signs the report.
When I say serious, I mean monetary fine and license-losing serious.
If you are certain of this, I would consider filing a complaint (a recommendation I do not make lightly). I emphasize being certain because such a complaint, if unfounded, is a nightmare to go through as an appraiser. If it is founded, doom on the appraiser. You would be doing the public and the rest of us who do follow the rules a service.

Good luck!

Thank you.

I know about the horrors of state board complaints. I am a licensed insurance adjuster for property damage. I have not had to deal with Texas Department of Isurance complaints against myself, but I have had to help with complaints against coworkers.

I'm inclined to give the appraiser a chance to correct their work before going to the state.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
The signing, licensed appraiser on the report is female, but the person who talked to the listing agent and arrived at the house was male. There was a statement in the appraisal report stating that a trainee helped with inspecting, gathering and analyzing comps, and determining value.
I'm inclined to give the appraiser a chance to correct their work before going to the state.
I understand that angst. I even appreciate it as I would feel the same way. And you are a victim undoubtedly of the AMC model of Dutch Auction appraiser selection, and I defer to your effort to get it corrected. It would be selfish of me to suggest you pursue turning it into the state, but the fact is honest appraisers should support anyone turning into the state those who are liars or incompetent in name of the betterment of the industry. Everyone who is caught doing this kind of work who is sanctioned by the board has a chance to reform (it isn't like they don't know they are bending the rules) or to get out of the business. We need fewer "run and gun" appraisers and more thoughtful and diligent ones. And the only way to get the trash removed is one piece of garbage at a time.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Thank you.

I know about the horrors of state board complaints. I am a licensed insurance adjuster for property damage. I have not had to deal with Texas Department of Isurance complaints against myself, but I have had to help with complaints against coworkers.

I'm inclined to give the appraiser a chance to correct their work before going to the state.

The lender, if they are concerned that the signing appraiser did not actually inspect the property, not only "should" but by regulation "must" report that to the state and to FHA. You are being most reasonable in allowing the appraiser to address the issues and I admire that.
The lender should report the appraiser on its level if it believes the appraiser did not inspect the property because that is an ethical issue in regards to the appraiser's responsibilities and her signed certification included in the report you are reviewing. They have no choice if they come to that conclusion.
There are two types of violations appraisers can be guilty of:
Competency: I don't know what I'm doing and therefore did something incorrectly or inadequately
Ethics: I lied
Of the two, ethics is the more serious.
 
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