Home Buying in Old Tappan>Question Details

Drdrowsy, Home Buyer in New York

What can I do about a seriously flawed appraisal? Came in 50k less than proposed purchase price, but there are many factual errors in it.

Asked by Drdrowsy, New York Mon Jul 18, 2011

Most egregious error- a comp. that he has listed as a colonial with 3,600 sqft is a split level with 2,600 sqft (I even have a floor plan of the house proving the error!) I've appealed to the appraiser and he said he used MLS data to get the numbers so even though i have proof of this error (and several other large ones) they are my "opinion" and he is unwilling to make any changes. Trying to work with the lender, but they haven't been exactly helpful, sounds like a second appraisal my be an option but they will not discount the old one- that will go to underwriting as well

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Drdrowsy - regarding your comment:

"claiming he did the best he could. I would think that a desire to have pride in ones work would compel someone to make corrections, but that doesn't appear to be the case. "

I suspect that often appraisers do want to do their jobs correctly, and most of them have a lot of pride in their work. However, the issue is, is that for the most part lenders are stuck using Appraisal Management Company's (AMC's), these are the company's that Scott Hulen referred to as taking a slice of the appraiser's pie/profit. Well you see when one of these requests to change an appraisal is made, it goes through the AMC's first, then to the appraiser. So there is a bit of a political mess here. The AMC doesn't want to look incompetent for not doing a thorough Quality Control (QC) review or they may not be used by the lender, the appraiser doesn't want to look incompetent for not doing a quality appraisal or they may not be used by the AMC. So admit the mistake by making the correction? Or stick to your guns and justify that the appraisal was done "the right way"? Most pick the latter.
1 vote Thank Flag Link Tue Jul 19, 2011
It occurrs to me that you need a crash course in how they do an Appraisal:
(I would prefer to send you a mock up, but you'll have to rely on my communication skills.)

Visualize a series of COLUMNS, probably 4 or 5;
The First Column is the SUBJECT HOUSE and the others are COMP's.
Down the page we list FEATURES or FACTORS; such as # Bedrooms, # Baths, House Sqft, Lot Sqft, Fireplace, Pool, Roof, Garage, Fencing. Got it?
Now, in each box created, there will be a VALUE: Lets say the subject house is 915 sqft it would get --- or 0. And the first Comp house has 2500 sqft, it might get -100,000; which means that the house is WORTH $100,000 more because of the square-footage. (It is a negative number because the Selling price of that Comp house was approximately $100,000 more BECAUSE of the square footage and we have to deduct that $100,000 to bring them to equity.) Got it?

Now, lets say that the Subject house has $5,000 worth of new fencing and the Comp house has 25 year old OK fencing.: Then the SUBJECT house would get +5,000 and the Comp. house would get --- or 0.

When you go down the page, and enter everything, you get total Comparative Values on the two houses, which allows for the DIFFERENCES.

The two houses DO NOT have to be literally COMPARABLE, we MAKE then comparable with the VALUES.

So the house next door is larger, so what? We made up for that with the values.

Now, if you understand what I just did, then you will understand why;
1.) The two Comp's came so far apart, and,
2.) Why the Lender will not listen to you about the results.
and in fact I will give you a third;
3.) If you hire your own Appraiser, he will end up with about the same numbers!

Also, please do not compare/equate the ASSESSMENT with the APPRAISAL: The ASSESSMENT is based on the LAST SELLING PRICE OF THE PROPERTY which might be last year. five years ago, or thirty years ago.

I hope I've helped.

Good luck and may God bless
1 vote Thank Flag Link Mon Jul 18, 2011
What a strange profession to be an appraiser!

You form an opinion based on a series of data, some of which is fact (measurements that the appraiser himself has done), some of which may or may not be fact but is treated as fact (data in MLS listings-- we've all seen agents list square footage of homes as total including the basement, but failing to mention that in the description, or not fairly representing the condition of the home). When actual factual errors are brought to light (like the one that i listed above: in real life a comp has 1000 less sqft than the appraiser stated on the appraisal) the appraiser can shrug it off, claiming he did the best he could. I would think that a desire to have pride in ones work would compel someone to make corrections, but that doesn't appear to be the case.

Sorry, do i sound a little bitter? We vetted everything in the process- the town, the home, the agent, the inspector, the lender. Now someone who i have no control over picking, someone who i have no knowledge of the quality of their work comes along, takes my money, does what i think is a substandard job and torpedoes everything. We're trying out some other lenders now. I hate the idea of having to pay for a new appraisal (not sure that i mentioned above that I'm the purchaser) but it's at least better than letting the whole deal fall though.
0 votes Thank Flag Link Tue Jul 19, 2011
What does your agent say? Are there good comps to refute the choices used in the first appraisal and establish the value in the purchase price? Are the mistakes blatant and in your face? if so, get a second appraisal. If the lender will not discount the old one go for another lender. Use a mortgage banker (mortgages are their only business) rather than a national bank (Chase, Wells Fargo, BofA, etc.) as the national banks are often very inflexible and seem to be riddled with bureaucrats and ignorant underwriters. Good Luck.
0 votes Thank Flag Link Tue Jul 19, 2011
New Appraiser! - New Appraisal! We are dealing with these flaws in this area on a contstant basis. Have one now that had listed 200 Amp electrical service and house has a Fuse Box!
0 votes Thank Flag Link Tue Jul 19, 2011
Perfect example of our current “broke system” dispute the appraisal and get a second appraisal. In our state “Missouri” is a non-discloser state and in some areas, mainly upper end MLS data is severely flawed. My example a new subdivision with 100 estate style homes, 40 of which are sold mostly without agents and are custom build jobs in excess of 500,000 to 1,000,000 none of these custom jobs are entered into the MLS system even though a realtor was involved in some of the transactions. The spec inventory consisted of homes in the 300,000-400,000 dollar range, about 60 homes of this type were sold, now 5 years later someone who bought a 750,000 home wants to sell with the reduction in prices in the market place and the fact that the MLS data is not complete the appraisal comes back at 375,000. A good appraisal requires a lot of work and the “pool system” emphasizes randomness and price over quality. Appraisers used to get 600.00 for an appraisal and the management companies still do, but the actual money now going to an appraiser can be as little as 150.00. The guy getting 150.00 is not going to redo their work or even consider it! The days of having a relationship with the appraiser are gone, hopefully not for good but for now the big banks and the feds are not always doing what’s in the best interest of Joe American.
Web Reference: http://www.randshomes.com
0 votes Thank Flag Link Tue Jul 19, 2011
Agree, dispute it. I had success with this once, an appraisal was done by an "out of area" of appraiser and the selected comps distorted the value. With everyone, including the buyer agreeing that it was off, we managed to convince the bank to reorder. But it wasn't easy, was a few years ago, and the buyer may have had to pay for the 2nd appraisal. Nonetheless, well worth it, second one came back just fine, and the deal stayed on track.

Good luck to you!
Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Tue Jul 19, 2011
The appraiser isn't required to go to any extraordinary measures to obtain information about comparables, which would include obtaining a floor plan to confirm the information on the MLS is accurate. I've had this same exact issue, there was a comparable that if the accurate figures were used then the value would have been more accurate, so a 2nd appraisal was done which had the accurate figures (the 2nd appraiser went to the assessor's office as we informed them ahead of time the MLS data was inaccurate), and then we had an appraisal field review done on the 2nd one to determine if it was indeed accurate. The first appraisal company we no longer use.

Any information that can be verified via public records or MLS should be able to dispute, any information that you had to inside of a comparable home, obtain floor plans of, speak to individual homeowners, etc. would be out of the appraiser's normal scope of responsibility... however from the get go, if that information is provided to the appraiser and you make it easy for them to confirm the validity, then they could potentially incorporate that information into the appraisal.
0 votes Thank Flag Link Mon Jul 18, 2011
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