Legal Question: Mortgage lender changed valuation of appraisal

3 Replies

So I've purchased 8 houses (both as a primary and investments) over the last 10 years or so and have never come across this issue when buying or selling my properties...

I recently had a deal fall through for a single family house that I was purchasing for my new primary residence in MA. I was the RE agent on deal and decided to pick the best rate of for mortgage off bankrate. The bank I picked kept jumbo, 20% down loans in house and you could bring down the APR by depositing money into their savings account which made perfect financial sense to me.

Long story short, a week before financing commitment I get call that the appraisal they ordered, and I paid for, came back with a number of $650,000 (my offer price) but after "internal review" the appraised number was $600,000 and they would only lend on that number. I asked for an appeal and found 8 more properties that supported the price of the house I was trying to buy and after a week the bank basically said they are holding firm. I have no idea what happened during the appeal.

So my question is, the bank is not local to MA and the appraiser that did the review for the bank is only licensed in CA as far as I can find, is this even legal? If I had known that they would just make up a number and reply to the appraisal with random comps from the other side of the country I would have never went with this bank. I even went back and checked the documents I signed and the only mention I can find is from the preliminary commitment that says something to the affect of "the appraisal must meet our standards".

I at the very least want my money back for the appraisal they didn't use but I really feel like I'm entitled to everything I spent up to this point because THEY are the ones that killed the deal. Any help is appreciated. 

@Matt Mach

The golden rule strikes again. The banks, after the bailout, think they are the government and can make their own rules. And they can! -look for another bank. 

Why would you feel that a lender is required to lend a specific amount based on an appraisal? Lenders have percentages above which they will not lend, but there is no law requiring that they go higher than their comfort level. Especially when appraisals are easily manipulated. (if you think this isn't the case, refer back to the last downturn.)

The more local the lender, the greater the comfort level for properties within their market area.  National lenders have no knowledge of local values or market conditions.  You are frequently best going with local lenders if you want your deal to close on time.

And a lender doesn't kill a deal.  You do.  A lender simply decides whether and how much to lend on a specific situation.  You can lose a deal if you don't get financing in time, but that's on you, and you might consider having more than one source.  I know two loan originators who have a track record of rigorous pre screening and on-time closings.   I can send you their contact info. 

Perhaps you can still save the purchase if you speak to the seller and try again with another lender.  

Hi Ann, 

Thanks for the reply. While I agree with you that banks can decide what their risk factor is and lend based on whatever percentage of value they want, in this case the bank CHANGED the value of the home and gave a mortgage amount as a percentage of their own value. 

The issue I have with this is that they had me pay for an appraisal by a licensed person in my state but then returned with an "appraisal review" that changed the comp values the appraiser gave and gave alternate comps to lower the valuation of the home. If they could have done their own appraisal without taking money from me, why wasn't this done from the beginning? How can a person at the bank, that isn't a licensed appraiser in MA, give me an appraisal that counters the legitimate one?

I unfortunately couldn't justify coming up with the additional money out of pocket and the sellers weren't willing to wait for another lender so the deal fell apart. 

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