Oopsie on the Appraisal

[Chris Seveney]

This one is a first for m today i received a scratch-and-dent loan for sale. a scratch-and-dent loan is a loan that a lender originates and cannot sell it to an end buyer or get it securitized due to an issue or an error. the error that occurred in this case was related to the valuation. it was a very strong borrower who was refinancing a property but the property was a decent-sized parcel with a main residence and a second residence on the property similar to an add (but larger) the appraiser could not find any comps so what they did is find a property similar to the main house and doubled the value because of the add. needless to say adding another structure on a property does not double the value of the property. this lender refinanced a loan and gave the borrower a significant amount of cash well above what the actual appraisal value of the property is worth. i share this because whether you are a lender, a borrower, or whatever the situation is. it's always important to review, understand, and make sure everything is in line. in this instance unfortunately this lender is going to take a very big haircut because of lack of due diligence.