This actually happened. A client of mine purchased two beautiful lots in the West of Boston suburb of Weston. Weston is probably the most exclusive bedroom community in Greater Boston, and there are homes there with price tags of over $20,000,000. My client's intention was to build the home of his dreams, and he planned on spending $10,000,000 on the project. He would contribute the two lots that he bought for cash, and then he was looking for a $7,000,000 construction loan, after putting $3,000,000 of his own money into the project.
The national lender involved, no names from me, required two appraisals to underwrite a loan of this size. Where did those appraisers come from? One was based in Vermont; the other in Pennsylvania. The Vermont appraiser was able to sift through the data and come up with an "as-built" value which justified the loan. The Pennsylvania appraiser was unable to come up with any comparables in Weston which would make the "as-built" value work. In the end, a local Realtor assisted my client by reviewing listings, and recent sales, which the Pennsylvania appraiser should have discovered on her own.
My point is this. Why do Lenders slavishly insist on using out-of-state appraisers when there are plenty of high quality, honest, and licensed local apprasers to do the work? I know at one time there were abuses in appraising. These were addressed, and licensing has eliminated many of the people whose appraisals were not accurate or thorough. Good local appraisers know nuances in communities. They know how a home two streets down from another can have an entirely different value even if the floor plans are identical. They know trends; they know values.
I, for one, would like to see appraising returned to local professionals. They have the best chance of developing accurate data, which we are going to need if we ever are going to pull ourselves out of the housing slump we still continued to be mired in