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Review appraiser used BAD comps

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imchrisporter

Freshman Member
Joined
Sep 30, 2008
Professional Status
Appraiser Trainee
State
Utah
I recently did an appraisal of a custom home with incredible views that I valued at $450,000. I had an underwriter condition to "explain the discrepancy between the public records which report 4,500 SF with 5 bed/2 ba, and the appraisal report of 2,500 SF and 2 bed/2 ba." After reviewing the public records, I realized the UW was comparing TOTAL square feet (main level and basement combined) with my GLA. I sent a reply e-mail that there really was no discrepancy, and did they really want me to address that in the report. They did, so I politely explained the difference between total SF and GLA, and pointed out how they could figure total SF from the report. Next, the report was sent for review. The review appraiser came back with a value $70,000 less than my report. The comparables they used were all within one mile of the subject and are as follows: (Comp #1) a sale that occured more than a month after the effective date and signed date of the appraisal. The comment was, "Sale 1 closed after the date of the appraisal but was probably listed or under contract of that date." In reality, at the time of the appraisal it was an active listing for $449,000 (Comp #2) sold for more than the list price at $370,000. It was a very distressed pre-foreclosure. There were multiple offers on the property. I did not use this sale in my original report because it was a distressed sale, and there were other sales that were comparable that were arms-length transactions, although some of them were further than one mile away. (Comp #3) is an active listing in a far inferior neighborhood and is inferior in both quality and condition. It is reported in the review to be .5 miles from the subject, but in reality it is 2.0 miles from the subject. (Comp #4) is an active listing on the same street as the subject. It is a two-story, while the subject is a rambler. It is also an REO. The value in the review is $380,000 which is the current listing, while the listing at the time of the appraisal was $525,000. Although it is on the same street, it is on the other side of the street and does not have views.

How do I effectively refute the review without getting into trouble or alienting my client?
 
Didn't you just perform a rebuttal of the reveiw in your post. Be professional and don't refer to the reveiwer as the reveiwer this the reviewer that, but provide a rebuttal that addresses the actual review.

Defend your appraisal in a professional manner. If the value opinion is well supported with an accurate analysis of the current market conditions in the subject's neighborhood and sub-market then it should stand alone.

One thing I am a little concerned with, the sale that you claim was a super distressed pre-foreclosure also had multiple offers indicating that buyers actual competed directly for the property indicating true market value almost like an auction. I would look into that sale some more just to make sure it isn't more reflective of current market value than you think. What does your supervisor recommend that you do?
 
My supervisor is camping with his family for spring break and has no cell phone reception. He'll be back next Tuesday.

I appreciate your feedback on the distressed sale. The listing price was lowered by $100,000, generating multiple offers within a couple of days, one of which was accepted. I know the same thing happend to a house across the street from me. The price was lowered significantly, they had 20 showings in 24 hours, with 5 offers. They accepted the highest offer. I personally talked to three potential buyers after that date that said they had been willing to pay $150,000 more than the sale price, but the offer was accepted so soon they didn't have a chance. Maybe a second call to the listing agent wouldn't be a bad idea.

Does anyone charge more for situations like this? I'll likely spend three extra hours on this before I'm done, plus my supervisors time.
 
To quote Al Pacino in Glengarry Glen Ross, "Just tell them the truth--it's the easiest thing in the world to remember."
 
Sounds like maybe you've gotten one of those "out of the area" desk reviews.

What I usually do with these, is find the achilies heel of each of this un-comps, the one or 2 points that really ruins it as an indicator of value, and I'll drill in there in a fairly exhaustive fashion. When that un-comp seems to be a direct result of a lack of geographic competence, I point it out, but I do it indirectly. I'll say "my knowledge of the area and the local market strongly suggest that the neighborhood where Reviewer's Comp X is located is much inferior to the subject's for the following reasons.... This conclusion is supported by the attached analysis." or "geographic competence and my experience appraising in this market led me to the conclusion that no adjustment for design was necessary or appropriate." See, I'm not calling the reviewer out on geographic competence, but I'm pointing out that I'm familar with the local market, I live here, I work here, my supervisor lives and works here and our knowledge of the local market led us to a different conclusion than the reviewer. If the reviewer is sitting in an office 900 miles away, you'll have made your point to whomever is reconciling the rebuttal.

I've also found that it pays to be exhaustive and long winded in your rebuttals. I try to write a rebuttal that will require more effort from them to digest than they put into the initial review. I figure they're probably working off the clock at this point too. So I take on each and every point they made and deal with it in agnozing detial. Shock and awe, overwhelming fireppower, and all that. I want them to just say "screw it, let it go, I cant stand, nor can I afford to play this game any more with this appraiser that obviously has too much time on their hands."

I realize it a pain doing these without pay, but hey, they count towards your hours, and its a rare insight into the bigger picture of the process. Once you're past the basics of appraising, you'll find you learn more from the rebuttals than any other part of the process.
 
don't refer to the reveiwer as the reveiwer this the reviewer that
no, simply refer to him as Idiot...much shorter word. Then turn the report into the state.
 
I to trust Terrel is talking tongue in cheek .... refering to the REVIEW and not the reviewer is prudent in your efforts.
One of the things I always do on properties like this is include a photo of the view. It helps the reader understand why you selected the comparables you did and why they are more relevant.
I think you simply make the comments you stated above, address in detail the property that sold under the bidding process (I would tend to agree this sale may in fact show market value even though it was a short sale) and support the reasoning you did what you did.

One of the first things I may do is give this report to a friend of mine and ask them to review it honestly for me, showing me weaknesses, comparables they may have selected, etc.. Its not a violation of confidentiality to ask for peer to peer consultation, its merely a point then the peer is under the same confidentiality conditions with regard to this assignment you are.

From there, it is totally up to the lender to make their own decisisions as you will have done all you can and will be removed from the loop.
 
Then turn the report into the state.

We had a review that our office did report to the state once. Let me tell you what NOT to do.
1. Don't get personal. Stay with the facts. The review that was done must meet Standard 3. Go through standard 3 line by line, find what is wrong, and cite the big issues with it. DON't take this to far though. Don’t nitpick the report to death, that’s the board’s job if they want to do that. You can give them the rope they need to hang the reviewer, but let them hang him.

2. Provide them with evidence; they might not have access to the MLS you used. Provide them with what you cite. Don't make them go on a goose chase.

3. Don't get personal (again). Show them you area a professional, and you know your job.

4. be prepared to define your report, you just might get a complaint filed against yourself. (We did).

FYI. The review we did was the start of a process that caused someone to lose their license. In the process He filed a complaint against us but did it in such a way that the board was able to look at his complaint, and used it against him. Please be careful, and maintain your professionalism.
 
Its not a violation of confidentiality to ask for peer to peer consultation, its merely a point then the peer is under the same confidentiality conditions with regard to this assignment you are.

Do you have a citation for that?

Last USPAP I did I asked the instructor what constitutes a "designate peer review committee" as described in the confidentiality exemptions in USPAP. I specifically wanted to know if I could "designate" the guy sitting next to me in class as my peer review committee? The instructor didnt have an answer for me.
 
Do you have a citation for that?

Last USPAP I did I asked the instructor what constitutes a "designate peer review committee" as described in the confidentiality exemptions in USPAP. I specifically wanted to know if I could "designate" the guy sitting next to me in class as my peer review committee? The instructor didnt have an answer for me.


Meta .. I dont. But I did speak to the chair of my state board and he stated the board would consider peer to peer consultation ok under the understanding the peer would be bound by the same confidentiality as the original appraiser.
It makes perfect sense to me that one should be able to consult with peers.

As far as selecting your peers ... Id say if the board selected a peer review committee .. you could also come in with your own as a counter to the argument. Frankly, the whole PEER thing in USPAP is a big bucket of worms in my opinion.
 
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