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HOW DO YOU APPEAL A BAD, LOW OR FLAWED APPRAISAL SO YOUR DEAL DOESN'T DIE?

By Mary Thompson

Real Estate Appraiser with Lanier Appraisal Service CR004373

November 17, 2009 03:46 AM

Here is what you need to do to fight a bad, low or flawed appraisal.

First I must say not ALL appraisals are flawed and not all appraisers are incompetent like so many seem to think these days....but there are many appraisers who do not belong in the areas where they are appraising and there are many who just did not learn the proper way to appraise.

So here goes, pass this along to everyone you know, feel free to repost this blog, it will help!

1. Get a copy of the appraisal first. The borrower is by law supposed to get a copy before closing.

Review the top part of the form where the address is make sure that the address, borrower name and most importantly the legal description of the property is accurate. If they can't get these right, chances are the rest of the appraisal has issues!

2. Go over that same page and review the description of the property. Do they have this all correct. Is the bedroom and bath count accurate (REMEMBER appraisers separate the terrace or basement level rooms and square footage from the upper finished levels, so the bed and bath count will only be those rooms on the main and upper levels (above grade) but credit is given for basement area and finished rooms in the basement just at a different value per square foot.)

If they have missed important amenities or basic information like is the home on septic or sewer, etc. Chances are there are more errors to follow.

3. NOW here is the really important part:Look at the page where the comparables are noted and where the actual adjustments are made. If you see across the board adjustments for something like condition or quality of construction:+$10,000 or -$10,000 for example and the description is they are average in quality and the subject is above average, chances are there is a problem here. How can every sale that is defined as average compared to the subject's above average quality be exactly $10,000 inferior in value to the subject. This applies to condition and most definitely to SITE VALUES....watch out for those adjustments.

We appraise Lake front property and when I see an across the board adjustment of say $20,000 for above average lake lots as compared to average lake lots, this is impossible as no 2 lake lots are alike here and they certainly are not exactly $20,000 difference in overall value.

Site values are very important as you well know in many areas you can go just a few blocks over and while the house may be very similar to the subject property, maybe the lots on this block are worth far less than the subject site. So if you see that there are NO adjustments across the board for site values that are similar in SIZE only and you Know that these lots are NOT similar in value then you have cause to rebut this flawed appraisal

4. ANOTHER very important thing...LOOK at the comparable photos used in the appraisal report...ARE they the exact same ones that you see on your local FMLS or MLS? If they are you hit the jack pot, why? Because that tells me that the appraiser did NOT drive by the comps and take their own photos. This happens more than I care to admit but it is very important for you to know because USPAP (our uniform standards of professional appraisal practice) REQUIRES that appraisers drive by the comps! So you have a clear violation of USPAP here and when a LENDER hears this....Bingo you get another appraisal done because how in the world can they assess the home and more importantly the neighborhood in which these comps are located if they did not drive by the property!

5. When appraisers make dollar adjustments there are only 2 kinds.....Positive and Negative. So if you see a PLUS sign in front of the adjustment that means that the comparable sale is INFERIOR to the subject and we add to that sale price to raise it up to the subject. If you see a MINUS in front of an adjustment that mean the comparable sale is SUPERIOR to the subject and therefore we are subtracting from the sales price of that comp. Just remember that we always adjust the comparable sales price against the subject. Another way I like to remember this is CBS and CIA (Comparable better subtract, Comparable inferior... ADD) CHECK THEIR ADJUSTMENT TO SEE IF THEY MAKE SENSE, MANY TIMES AN APPRAISER MAY USE THE WRONG ADJUSTMENT FACTOR PLACING A NEGATIVE ADJUSTMENT WHEN IT SHOULD BE POSITIVE AND VICE VERSA. THIS AFFECTS THE BOTTOM LINE APPRAISED VALUE!!!!!

6. Toward the bottom of the comparable page there is a section where the appraiser must note past sales history of the subject and the comparable sales....Check these dates and make sure they are accurate.

Again, the whole premise is this....The more small and/or large errors you find, the less accurate that appraisal really is....and it does not take long to find such errors, even if you don't know how much the adjustment should be. Remember adjustments are not based upon DOLLAR for DOLLAR costs, it is based upon what the market will pay for the variance...so it could be half the cost, it just depends.....on many factors.

I reviewed an appraisal where they "cloned" another appraisal report of a home that was close to the property that they were appraising. Appraisers do this to save time and that is fine except what I found was that they did not remove those items that did not relate to the subject and so they had the description for the subject all wrong and they also had the addresses of the comps wrong. They were using the addresses of the old cloned report but using the actual data of the comp that they were using for the subject!

7. Drive by the comps used, make sure the addresses are correct, make sure that the PHOTO used in the report MATCH the home.....I have seen wrong photos in the reports, they did not match the actual homes!

8. Check the comps and map that is included which shows where the comps are located. Just below the address on the comps page there is a section that asks how FAR the comps are from the subject. Double check this number. Many times the appraiser will reduce that mileage by quite a bit so that it passes underwriting......I have seen some comps show they are only 2-3 miles from the subject when in reality they are 10 miles from the subject!!! Not good.

9. Check the sketch page where they draw the house.....make sure it looks right as far as placement of the rooms and the overall square footage. If they are off 100 feet or so this makes a difference on the appraised value of the home.

So you get the IDEA here......If you start adding up errors, you have the right to tell the lender the appraisal is flawed and this is without even dealing with whether or not the COMPS are good. That is a whole story in and of itself. If you know for a fact that the comps are bad, state why in your rebuttal!

10. Don't get mad about the whole process, just find the errors, state the facts and move forward...Tell the lender it is their responsibilty to use an appraiser who is familar with the area and who can put together an accurate report.

This will NOT always mean the value will be different but you have the chance to get an accurate appraisal on the home and then you will know for sure what it is really worth!

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If you work in the North Georgia area, we offer appraisal reviews. We have been very successful in getting lenders to order another appraisal or a review of the first one after they have seen my reviews!

Mary Thompson

www.marytappraisals.com

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John Pusa

Glendale, CA

Hi Mary,

Thank you for informative and helpful article.

John Pusa

Nov 17, 2009 03:50 AM

Tammy Woodin

Bellingham, WA

Sudden Valley, Washington

Hi Mary,

Bookmarked for future use. Thanks for the early Thanksgiving Gift!

Nov 17, 2009 04:10 AM

Debbie Konter-Danville/Avon IN

FC Tucker - Avon, IN

Avon Indiana Agent

MARY - THANK YOU FOR POSTING THIS. I'VE BEEN TRYING TO APPEAL AN APPRAISAL FOR THE PAST 3 WEEKS AND 3 WEEKS LATER....NO RESULTS!!! THE APPRAISAL HAS A $30,000 DIFFERENCE. MY QUESTION IS: CAN THE LENDER SPEAK DIRECTLY TO THE APPRAISER? I WAS TOLD TODAY BY THE LOAN OFFICER THAT THEY COULD NOT TALK TO HER AND THE APPRAISER SAID SHE COULD ONLY TALK TO THE LENDER ABOUT ANY CHANGES. WHO TO BELIEVE AND WHERE DO WE GO FROM HERE?

Dec 03, 2009 11:00 AM

Mary Thompson

Lanier Appraisal Service - Flowery Branch, GA

Lake Lanier Appraiser in North Georgia

Lender/broker cannot talk to the appraiser about value and vice versa. But you can appeal the appraisal and every lender must have a process you go thru. You need to give them comps that you feel are better than the ones used or reasons why the adjustments made to the comps used are inaccurate.

So ask them for their rebuttal procedures and make your case and get that first appraisal reviewed or ask them for another one. You must show where it is flawed, errors, bad comps, etc. or they will not do anything.

Good luck to you!

Mary

Dec 03, 2009 11:32 PM

John Occhi

AZ Veteran Notary Services - Marana, AZ

Mobile Notary Public/Certified Loan Signing Agent

Mary,

Some awesome Infoprmation - I'm going to go ahead and reblog this and help get the word out...

Merry Christmas,

John

Dec 08, 2009 04:39 AM

Tom Boos

Sine & Monaghan Realtors, Real Living - Grosse Pointe Farms, MI

Providing the very best of service to Sellers and

Thanks for your great suggestions on how we should review an appraisal for accuracy. I suspect this will come in handy for many of us in the future.

Dec 08, 2009 04:44 AM

Lyn Sims

Schaumburg, IL

Real Estate Broker Retired

Good post Mary. Thank you for joining my discussion today and adding your thoughts.

Dec 08, 2009 05:33 AM

Rachel Massey

Massey & Associates - Saline, MI

Competent, independent, impartial and objective

Hi Mary, I wanted to add a clarification to this quote (sorry, don't know how to put it in quotes)

USPAP does not dictate that an appraiser drive by their comparable sales. There is a statement in the URAR pre-printed scope of work that states: "...The appraiser must, at a minimum: (1) perform a complete visual inspection of the interior and exterior areas of the subject property, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street, ...." (bold for emphasis). That said, it could be argued that if the appraiser did not inspect the comparable from the street when they include they did in their scope of work, that they have not been honest and that could be argued to be a violation; but not inspecting the comps in and of itself is not a USPAP violation per se (that I can see - help me if I am missing it anywhere - way too many double negatives in the previous sentence). Remember not all appraisals require interior inspections and not all even require a visit to the subject site.

It is very important to remember that appraisers are not advocates. They are not facilitators of mortgage financing or advancers of their clients goals. The appraisers job is to be unbiased and to present a clear and credible opinion that is not misleading and in sufficient detail to enable the client and intended users to understand the thought process, analysis and conclusions for the intended use of the appraisal report. That said, appraisers are human and can make mistakes, just like every other human being. If mistakes are made that affect the credibility of the appraisal, then they should be brought to the attention of the appraiser to correct. There are processes to do this which allow the appraiser to remain free from outside influence, as appropriate to maintain the critical need for independence in the appraisal process. Approaching any issue in a professional manner is important from all sides of the equation.

Best wishes for a very happy holiday season!

Dec 23, 2009 10:17 AM

Mary Thompson

Lanier Appraisal Service - Flowery Branch, GA

Lake Lanier Appraiser in North Georgia

Rachel:

"It is very important to remember that appraisers are not advocates. They are not facilitators of mortgage financing or advancers of their clients goals. The appraisers job is to be unbiased and to present a clear and credible opinion that is not misleading and in sufficient detail to enable the client and intended users to understand the thought process, analysis and conclusions for the intended use of the appraisal report. That said, appraisers are human and can make mistakes, just like every other human being. If mistakes are made that affect the credibility of the appraisal, then they should be brought to the attention of the appraiser to correct. There are processes to do this which allow the appraiser to remain free from outside influence, as appropriate to maintain the critical need for independence in the appraisal process. Approaching any issue in a professional manner is important from all sides of the equation."

I am very much aware of the above statements as an appraiser and have stated so in my previous posts. As for the USPAP issue, you are correct, while it is not specifically stated in USPAP that the exterior of the comps must be inspected, here is where they violate USPAP... since the 1004 form statement of limiting conditions is signed by the appraiser they are attesting to the fact that they have inspected the exterior of the homes from the street. If you accept an assignment where the 1004 form is required, for example by Fannie Mae, the appraiser is bound by the supplemental standards to USPAP which Fannie Mae has the ability to establish and therefore appraisers must drive by the comps.

"....The appraisers job is to be unbiased and to present a clear and credible opinion that is not misleading and in sufficient detail to enable the client and intended users to understand the thought process, analysis and conclusions for the intended use of the appraisal report"....

When the appraiser uses MLS photos in the report and has never driven by the property to know what that neighborhood really encompasses, then they are providing a misleading report to the intended user. For example: The MLS photo can lead a reader to believe that it is quite nice, good quality construction and in a "like area" as compared to the subject. Just the other day we drove by a very nice home on acreage which we were using as a comparable. Well the home was located at the end of a gravel shared driveway where you had to pass 3 manufactured homes to get to this very nice looking property on MLS. If the appraiser did not drive by this property they likely would not have make an adjustment for locational influences and therefore they have just produced a report that is not credible or reliable for the intended user.

Competency Rule; which is clearly a USPAP requirement is violated when we do not drive by the comparables as we must make a determination on the comparability of a property and if we do not drive by the comparables, how can we be competent in selecting truly comparable properties?

Even the 2005 Exterior form states in the scope of work that the appraiser must "inspect each comparable at least from the street". You can use MLS photos in your report, but you must have driven by them and if you have, then why not take a picture and use them in your report?

Remember that you cannot amend the Certification of Limiting Conditions to say that you did NOT inspect the exterior of the comparables, you can only expand the certifications. When you sign this Certification if you did not do what you stated you did on this form, you violate USPAP.

I wish you a Happy Holiday Season as well.

Mary Thompson

Dec 23, 2009 11:55 PM

Rachel Massey

Massey & Associates - Saline, MI

Competent, independent, impartial and objective

Thanks for responding Mary, and I appreciate your blog post. My concern is that the agents might think that they can go back to the lender calling it a USPAP violation, when it is not. I agree with the point of driving by your comps to see the area around them and what they actually look like, but all of us have seen houses that look great from the outside and awful from the inside (and visa versa).

Competency is addressed in USPAP starting on page U-11 and there is nothing in this rule that I see that states you have to drive by your comparable sales. Again it is not an argument with your logic, but with calling it something which it might not be (and honestly, I think appraisers should steer clear of saying an appraisal violates USPAP in any way or another and simply stick with what you see - e.g., the comp photos are from the MLS and sale 2 had an incorrect photo in the MLS, therefore the appraisal may not have inspected sale 2 from the road as stated in the scope of work). Personally I simply stay away from citing USPAP violations. Just is cleaner to call out the good and the bad in the report and let the client decide what it is, or the state board if they send it there.

That said, I have never understood not driving the comps. It is so simple, and is pretty restful an activity (for the most part) and you get to know the area well plus it helps you understand the nuances of an area. Plus of course, if you do your appraisals on the Fannie forms, then you are stating in the scope of work that you have inspected them from the road so it is a pretty silly thing to do. I can't tell you the number of times I have questioned an appraiser about a sale and it turns out they never drove by it and they admit it.

As to the first comment about the appraisers role; I haven't read many of your blog posts, just this one and the blind appraisal one (good one) and was responding to the Realtor group so that they can understand that we can't be advocates. Always good to help people understand our role, as often times it is misunderstood.

Best, Rachel

Dec 24, 2009 12:13 AM

Mary Thompson

Lanier Appraisal Service - Flowery Branch, GA

Lake Lanier Appraiser in North Georgia

Rachel:

The Competency rule does not state in so many words that an appraiser must drive by the comps, but the rule does require the appraiser to be competent. If you violate competency you violate USPAP.

The ruie does not have to spell out driving by the sales to tell me that you violate competency and you are providing a misleading report when you sign a certification saying one thing and you do another.

"Plus of course, if you do your appraisals on the Fannie forms, then you are stating in the scope of work that you have inspected them from the road so it is a pretty silly thing to do.." It is more than silly, it violates USPAP for the reasons noted earlier.

As we both agree you must abide by the Certification you sign, which is required by Fannie Mae and the majority of lenders out there who want to sell their loans to Fannie. Even if they don't sell to Fannie Mae, most lenders want the report on the 1004 form. So bottom line is if you sign the Certification and you do not drive by the comps, you do violate USPAP.

They do not need to spell it out in so many words because it is the appraisers responsibility to provide a reliable, competent report that is not misleading the intended user.

I don't want to call anyone out if they are not violating USPAP, but these days appraisers are rushing the jobs as they are being paid 1/2 rate by AMC's in many cases or they just do not have the experience in the nieghborhoods in which they apprasie....and the Realtors as well as buyers and sellers have a right to know what is expected of the appraiser and whether or not the appraisal is truly sound and accurate.

Thanks again,

Mary

Dec 24, 2009 12:55 AM

Not a real person

San Diego, CA

Very useful information. I think I even know at least one person who would like to reblog it.

Happy New Year!

Dec 27, 2009 03:25 AM

Dawn Maloney

RE/MAX Trinity Northeast Ohio Real Estate Specialist - Hudson, OH

330-990-4236 Hudson & Northeastern Ohio

Mary, how do I fight a bad appraisal from FNMA? They increased the value on a property 100% and it is on a street with crack houses - and the city is about to tear it down! I need help fast, this is forcing my client into foreclosure.

Apr 26, 2010 06:58 PM

Dana Casey

Bridge Realty Inc. - Forest Lake, MN

Twin Cities

Interesting experience with a "qualified appraiser" here in MN. The appraiser came up here from a very old and neglected inner ring suburb to appraise our 5 acre lake property, I told her it was a tough one and she assured me, with a respectable amount of arrogance that she had it covered, over a week passed without anything coming back from her. Shortly after receiving a call from the lender, she asked for an additional $100 because it was "more difficult than expected." In the end, our 3/2 2 story walkout with 265 feet of frontage and 5 acres came back valued the same as 2/0 and 2/.75 slab homes, with baseboard heat and no central air, these structures were worth the same as our oversized main deck. The comps were not used and were on a similar neighboring lake (3 miles away) with lots the size of our driveway. I provided these comps to her and have not heard back. Also, her land comp was 8 miles away and not on water. I provided a land comp on water that was also neglected, though closer to our value in lake, land, size and amenities (also 40% higher than her piece of work appraisal). In the end we have a valuation that is 63% of true value. What can be done? I have been an agent here for over 20 years and wonder, how are AMC's getting away with sending these hacks out? Also, no adjustments for sale date or terms and ammenities a buyer would pay notably more for were also neglected to be included. What can we do here short of a repeal of Dodd-Frank?

Jan 16, 2013 07:12 AM

Inna Ivchenko

Barcode Properties - Encino, CA

Realtor® • GRI • HAFA • PSC Calabasas CA

I'm about to write a rebuttal email right now.

It was a pure mistake and an appraisal did miss a very important fact that affects the value of the property tremendously. After discussing all options~ rebuttal sounds as an easiest way to go. I'll give it a try.

Wish me luck.

Jan 07, 2014 06:08 PM

Bill Gassett

RE/MAX Executive Realty - Hopkinton, MA

Metrowest Massachusetts Real Estate

Excellent advice Mary. I like the way you have covered the topic. I have also written an in-dpeth article on how to challenge a low real estate appraisal. It not only covers what you need to do in this circumstance but what the appraiser looks at and what you can do to help the appraisal go smoothly.

Aug 06, 2014 05:16 AM

Mary Thompson

Lanier Appraisal Service - Flowery Branch, GA

Lake Lanier Appraiser in North Georgia

Thanks Bill

Aug 06, 2014 06:01 AM