Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
I recently had an appraisal come back way under what I believe is the current market value. I am very familiar with this neighborhood and know that this home would sell for more if it was listed for sale tomorrow.
I proceeded to appeal the appraisal and back it up with lots of documentation, but did not have success in getting anything changed. I still want to pursue this, but I have a few questions.
My questions:
1. Isn't the appraiser supposed to drive by comps and take recent photos? Isn't this part of evaluating the comparable sales? Can they get in trouble for not doing so, and pulling photos off the MLS? He did not appear to have driven by the comps because the photos used in the appraisal were the same photos that were on the MLS (same flowers on the bushes, same sky, same exact brown spots on the grass).
2. When there is a different bedroom and bathroom count on the MLS vs. public records, which are they permitted to use for appraisal purposes? (I've always thought that they couldn't give value to unpermitted additions.)
3. I've seen other appraisals where a short sale was used as a comp, and it was indicated that it was a short sale, not an arms length transaction. This appraiser called a short sale an arms length transaction. He did not address this in his response to my appeal. What is correct?
I would appreciate any input as well as advice for how to proceed to get this appraisal corrected.
Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
9y
@Wayne Brooks As far as the permitted space goes, let me give you an example and hopefully you can elaborate a little more. I'm looking at other sold comps that have 2 beds / 1 bath on the property profile on my title website. Let's say the house has 1000 square feet. On the MLS, this property has been sold twice recently. Once as a short sale with 2 beds/1 bath, square footage of 1000 feet. Then it gets purchased, renovated, and resold as a 3 bedroom/2 bath, also with 1000 square feet.
I have seen plently of these flips where there are unpermitted additions that still look like additions after the renovation, but when they are listed on the MLS they add the additional bedroom or bathroom without changing the square footage.
So as I am looking up additional comps to use, some of the 2 bed/1 bath properties came up because on title that's what they are. However when I go to the MLS, the listings say they have a larger bed/bath count. The appraiser wouldn't use these comps because they have a higher bed and bath count, even though I doubt those additions were permitted.
Obviously it's better to find comps with the same bed and bath count, which I did. They were more recent and closer to the subject property. I also added some additional comps that had the issue I described above.
WOW! I know from experience how you feel. Recently had the same problem and asked BP for help. While my questions were not the same you can review the post for additional information.
Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
9y
@Account Closed I am finding that out. I prepared a lot of documentation and from reading the appraiser's response it does not appear he looked at much of it. (i.e. disputing that comments were written in MLS listings after I sent the listing in with the comments highlighted; saying that a sale hadn't yet closed when I submitted both the listing and the transaction history from the title company showing it closed 2 weeks before appraisal date)
I am following all the rules and going through the appraisal management company. I'm definitely not trying to steer the appraiser, since of course that's not allowed. It's not getting me very far...
Ah yes, our favorite game. I'll share my experiences.
1. Yes, appraiser could get in trouble for this.
2. MLS data is garbage. Appraisers go off of what is present when they do the appraisal. If someone did something to turn a bedroom into not-a-bedroom, and didn't tell the county, the appraiser is supposed to go off of what is physically present at the time of the appraisal. They have their own USPAP rules to follow that, for them, trump city/county rules and records. I had one where the listing agent, county records, etc, all indicated that the subject was a triplex, but appraiser said it was a duplex. I google'd around for the USPAP standards after reading why he said it was a duplex, and sure enough it was a duplex according to USPAP standards, sorry agent, sorry seller, and sorry county of Alameda (he was super liberal with market rents on the 2 units that he had to call 1 unit, because it was one GIANT unit, so the rental income was actually fine).
3. I'm confused. I've never heard of a short sale that was NOT an arms length transaction. Joe's brother-in-law buying Joe's house at a short sale would be a huge red flag for fraud.
I think the biggest arrow in your quiver is #1, and your most probable path to success is to order a fresh appraisal with a fresh opinion of value, and once it comes back go to your (or the end-lender's) appraisal department (not the AMC, the lender's internal folks) and argue that the new appraisal is more credible than the previous one because of #1 ("if the appraiser didn't even go to the comps for a quick drive-by photo, who knows what else he didn't even actually do?") and any other things you could demonstrate beyond any shadow of a doubt that appraiser #1 did wrong.
This obviously doesn't work with government loans, but for conventional loans I have had way more luck with the 'get a new appraisal & point out flaws in the old one' approach than I have with trying to get an appraiser to admit that they made an error. So I'll put two appraisals in front of our appraisal department head honcho dude, a normal one and a low quality one, and let him decide which is more credible (obviously this also doesn't work if the first appraisal was credible, done well, and the value just isn't there) and which opinion of value we will use.
Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
9y
Thanks @Chris Mason I appreciate your input. I guess based on your answer for #2 that they will go off what the agent says is physically in the comparable property in the MLS, since they can't actually get in there to inspect it. The issue wasn't with the subject property (a 2/1), only the comps I wanted to use.
Yeah, you're right, a short sale is technically an arms length transaction, but I also consider it a distressed sale and for some reason I thought they would categorize it differently. I looked back at old appraisals where they note whether the sale was arms length / REO and the type of financing used, and I did find an appraisal where it said "Short" instead of "ArmLth." Maybe that appraisal wasn't correct.
My biggest issue with this appraisal is that he used a fixer upper that had recently been foreclosed on and a short sale as comps for a nicely remodeled home, when there are numerous remodeled sales in the neighborhood selling for $60,000 - $70,000 more. And the appraiser even commented "Bank owned and auction sales don't represent current trends. REO sales would represent distressed conditions therefore not being relevant in the current market." He didn't use any REO comps but they're just as bad.
Oh, and the short sale comp which sold for $300,000 has since been remodeled, relisted for $99,000 more, and was pending at time of appraisal.
That's frustrating, and if you tell the agent "hey why don't we wait two weeks for that to close, so we can close two weeks late but be more certain of no appraisal issues" they will start getting prickley about their paycheck being delayed a few weeks.
