Apologies for the long post but I think it's warranted to see the magnitude of the factually inaccurate appraisal I received recently. I recently dealt with a bank who had approved my loan request through 2 bank committees and then ordered my appraisal. The appraisal company valued my building's ARV at about half of what we needed for the loan so the bank denied the loan. However, upon further investigation of the appraisal report it seems the appraiser was way off base. I'll summarize as best as I can the factual issues we had with the appraisal. We presented these issues to the bank who stated we had made valid points and then, without asking us, gave the comments to the appraiser company. The appraisers' response was they weren't going to make any amendments. As a result the loan officer stated he had a discussion with the chief lending officer, the CEO and the chief credit officer and they all decided another appraisal wasn't warranted. I was floored. I thought if an appraisal this bad didn't warrant another appraisal then what would?

Here are the issues. Some of these stemmed from obvious copy and paste issues from another appraisal while others just seem to point to being a horrible appraiser:

1. Appraisal objective was incorrect stating that we were taking the first floor office space and converting it into a 2 bedroom apartment. The building is a 3 story mixed-used apt building that we're keeping mixed-used with 6 apartments on 2nd and 3rd floors and retail/office on first floor.

2. There is both on and off street parking but the report says only on street is available. I offered the easement doc to show there actually is off-street parking available but the appraisers didn't care.

3. Location map used Delorme Street map data from 2009 (since then a new overpass/exit was constructed from the interstate that passes 1 block from our building to provide quick access to the highway which dramatically affects its location considerations.

4. Flood map also is outdated by not reflecting this new interstate accessibility.

5. Cable company is incorrect; referenced company hasn't been in the area for over 5 years. This obviously is minor but it shows the appraisers didn't pay attention to using accurate, valid and current information.

6. This is a complete reconstruction after a fire and the only components remaining is the roof and exterior walls. All infrastructure components had to be ripped out due to needing to comply with code. But the appraisers mentioned in the improvements section that only new plumbing was going to be installed and only on the first floor. They disregarded an entirely new HVAC system, fire suppression throughout, as well as new plumbing and electrical throughout.

7. In the as-is sales approach the appraisers only adjusted 15% for 'interior finishings', which I'm sure was in reference to the fact the building is currently completely gutted and uninhabitable. As a result of this small 15% adjustment their as-is value calculation deemed the building's market value at only 15k below the sale price from 6 months earlier, for a completely uninhabitable building with no infrastructure. Go figure! I would have thought at least 30% was necessary as an adjustment.

8. The building was used as its own comp in the as-is sales approach and was in that section is referenced as being built pre-1900s but it was built in 1925.

9. An as-is sales comp for an office building was found to have been sold by the bank we were using for a sale price that was discounted 35% and the MLS listing is listed as "priced below appraisal". We believed this qualified as a non-arm's-length transaction and therefore shouldn't have been used as a sales comp. An office space that used to be rented by US Cellular was used as a leased retail space comp however I know that US Cellular had already left that location so I don't think that this could have been fairly used as a comp for leased commercial space.

10. The appraisers used a RealtyRates survey for national cap rates from 4th quarter 2014 even though the appraisal was conducted in Feb 2017.

11. Appraisers chose a 9% cap rate and didn't justify why that was chosen. They specified that the cap rate range in the area is 7.5% to 10.5% but otherwise no justification for why 9 was selected.

12. The rental analysis section stated that commercial and apt rents were examined for similar design and condition but never specified the design and condition that was being considered. Upon performing our own homework, by calling the people whose apartments were used as comps, we found that 1 apt building's property mgr (a community development company) purposely set below market rates to assist local residents. Their units though had not been renovated in at least 5 years and didn't provide any air conditioning nor had any in-unit laundry facilities. Another building that was referenced as a comp was completely vacant and was no longer on the rental market. And the 3rd apartment rental listed in the appraisal didn't even have a rental value listed for it (the appraisers were sloppy) so we had to call the owners and found out it was actually on par with the design and condition of our units and was being rented for exactly what our projected rent was (and the bank had agreed with) for a 3BR unit. However, for no reason whatsoever the appraisers stated our rents would be 2/3 of this rent for the same BR/BA configuration even though our units would have in-unit laundry while the comp only had hookups. This last comp is a block from our building so it was essentially the same location and the apt was located above a commercial business just like ours will be.

13. The appraisers stated our apts would garner lower rent than what we were getting before the casualty loss and below what HUD's FMRs are for the area. They did not know what our rents were prior to the fire but the rents they specified in the report were effectively lower than what we were getting before. Our bldg prior to the fire did not have any fire suppression, nor any forced air heating or cooling, and only a few units had in-unit laundry. With the rents as low as they were that they said we could get it was almost as if they were comparing what we could rent apartments for if we were to rent out the building in its currently uninhabitable state rather than 10 months from now when everything is brand spanking new with security cameras, laundry, central HVAC, etc.

14. Two appraisers certified they inspected the property however we know only one was present because I was the one to meet them at the building. The bldg has a lockbox and they didn't ask for the code so the other appraiser wouldn't have been able to inspect it.

Hopefully as you read this you will be able to get an idea of just how blatantly wrong the appraisal report is compared to what it should be. My wife and I admit that even with all these changes that maybe the valuation could have still been below what we needed however, we prove based on the above info that their facts were completely wrong, invalid, inaccurate, etc. but yet they were unwilling to make any changes.

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