Stop Everything...Halt!! Appraisal Issues Ahead!!

Appraisers are always conservative when markets are slow to average and very liberal with their appraisals when the markets are overheated...we need a better system.

Karen:  I did appraisals for well over 20 years, so know a thing or two about putting an appraisal together and the mindset that should accompany it.  Some of the appraisals I see coming in on my files are totally void of common sense and contain narratives that are sloppy and un-supportive.  Comps are overlooked ... adjustments made that lack basis.  Because of my appraising background, I take a real hard look at the property, contract, and supporting info for the property prior to actual mortgage application and order of an appraisal.  If I feel there may be issues with an appraisal of the property, I confront them head on at that point.  It helps immensely, but every once in a while ... appraising issues can still crop up.  I feel your pain on this issue.  It's so frustrating and as Rob Spinosa in #19 points out ... it's a hindrance issue too often.  And one that our industry needs to face and get under control.  Soon!

Gene

Ouch Karen, you're right, that's not a call that we want to get.  I hope that everything works out for you and your buyer. I hope I don't see any low appraisals this year. Wishful thinking right?

I can see the problem Karen. Appraisals are the weakest link in the industry right now and not an easy solution to resolve. That's why I make it a point for all my buyers and sellers to meet with the appraiser to discuss the comps.

Two miles away sounds like a lot unless it's normal in your area. Mine is 1/2 mile to 1 mile.

Karen, my biggest issue lately has been late appraisals- but I, like you don't understand why an appraiser would not use the comps closer to the property. I hope today there can be some resolution for your buyers. Seems like there should be a review.

I hate appraisal issues. It kills so many deals. I had a similar circumstance where the appraiser pulled 8 comps, and proceeded to use the 3 lowest which were also the farthest away from the property, in poor condition, and sold right at 6 months ago. The appraiser ignored the fact that both of the neighbors houses had sold within the last 30 days for a higher price. The appraiser ignored the fact that the home we were under contract on was fully updated and move in ready. 

Ug. 

I would certainly wonder why they would use comps 2 miles away if there are comparable properties in the neighborhood. Heck, BPO companies want their comps within 1/2 mile in urban areas and 1 mile in suburban areas.

I have noticed that mortgage companies refuse to question the appraiser and simply take what the appraiser says as gospel.

Karen, 

I find appraisals very challenging, as five appraisers will come up with five different numbers.  It's just tough.  Having said that, of course, they are needed for the banks, there is just not magic about them, although you would think so because of the way mortgage bankers/lenders have to use them.

All the best, Michelel

Is your market so shy of inventory that you need to do this for your buyer client?  I've had appraisals not come to value and we re-negotiated.  Wonder if that will be the sellers' bane this year. 

Love how you wrote this post...tonight!  Please do a follow up.  Kristine :)

Karen  So far I can't remember losing any deals but I know I have renegotiated after the appraisal.  MY horror story is my own property, a bed and breakfast.  The appraiser used a homeless shelter in another town 30 miles away but did not use the motel in the next block that sold 3 months earlier.  I will stop there as I can feel my blood pressure exploding!!!  Thanks for all you do!

Greetings Karen,

I also work in the Southern California market and understand your predicament.  It seems our Seller's market is heating up faster than the appraisers can account for.  I empathize with your buyers who have found a home they want but because of a bad appraisal can not get.  It is hard enough to find a suitable home for a client, then to have to do it all over again!  Please do not give up!

I recently had an appraisal issue on a newer home in a master planned community.  Although the disparity was similar, the appraisal was $25,000 less than the sales price, although the price was less, in the high $300's.  I could not believe it.  I did my homework and knew the sales price we negotiated was supported by the recently SOLD comparable homes.  My clients were heartsick.  They are very particular and this home fit all their needs.  I disputed the appraisal to the lender.  The home my clients were purchasing was a standard sale.  The appraiser used a short sale that went into escrow over a year prior and an REO that was snapped up in two days and needed work, yet other standard sales were left out!  The home my clients wanted was immaculate.  In disputing, I provided a list of homes from the builder in the master planned community across the street.  The newly built homes that recently SOLD had similar plans, but were builder basic homes, selling for many tens of thousands more.  None of those builder homes, although lovely, had the upgrades of the home my clients had in escrow.  Unfortunately, because of the newness of the community, the sales did not appear yet in the county records and were not being reported in the MLS.  However, all the appraiser had to do was walk across the street to get information on these SOLDS.  I provided the title and escrow for the appraiser to investigate these closed sales that were not included in the original appraisal report.

Well, after the appraiser went back and verified the recent SOLDS in the community across the street, a supplement was issued increasing the amount of the appraisal!  I was still upset because the appraiser did not remove the short sale and REO that I did not think should have been added in the first place, since it did not reflect "like for like."  Before I could go back and dispute it again, the seller and buyer quickly agreed to adjust for the much smaller shortfall in price. (Price negotiated down additional $5K)

Sometimes, it behooves the buyer's agent to fight the appraisal.  Especially, if the home is something your buyers really like.  This seller's market is hard enough without having to shop TWICE for a home your buyer will be happy with.  What if the second home has a similar outcome on appraisal? 

Good luck with your buyer,

Arlene Garcia Hanner

That is awesome to hear that you are not emotionally connected to the closing and have the attitude that you and your buyers will find something better.

In our area, that would be a very real scenario especially if the appraiser came in from out of area and included distressed homes in the mix. It will be this way for at least another few years. Hope it breaks the right way for your buyer

Yikers ... $20k is a crazy amount! Not to mention that the Appraiser went 2 miles out of the area! In TX, they stay in the subdivision and if nothing, then they'll go 1 mile out. 

Good for you to chose to spend the night with your son ~ nothing can be done about it until a decision has been made 1 way or the other!

Karen - Appraisals can be frustrating, and HVCC fixed everything don't you know?

Karen -- I feel your pain, as we had a loan fail due to low appraisal a while ago.  Last one that we had problems with, the appraiser set it at one condition level and then put in different condition level description -- we went back to them twice to get that brought into conformity.