It seems all appraisals in today's market are reviewed in some way or another. However, I do have some question as to the selection and use of the review appraiser. First, as a Certified General, I take offense to someone merely licensed, located in a different market location, and having no training in appraisal review performing a review on my appraisal reports. I believe the review process should be elevated so that only those with specific review training are allowed to perform the reviews - and then, only in areas and markets of their competence. Secondly. I find many reviews are not done objectively but rather critically in attempts to market their appraisal services by bashing the competition. Finally, I fail to understand how the lender stakes all their confidence in a review appraisal which has had no interior inspection and is being performed for a minimal fee when the original appraiser physically inspected the property and formulated the conclusions. Instead of challenging the original appraiser to defend his conclusions against the reviewer's criticism, I would prefer a second full appraisal be ordered to support or refute the original value. I would have far more respect for the validity of a conflicting opinion derived from an entirely new report than I have for someone who has taken potshots at a well-prepared report.
I hear you, Richard!
I'm getting weary of redundant questions being asked of me that are already in my reports. It seriously makes me want to send over the bare minimum ... maybe less... Let's say I start entering just two comps per each report, no cost approach, no addendum statement... I won't bother with the maps, etc. I mean, I know that each and every report will come back with a question or two these days regardless of how thorough I am and so why bother with the details? There was an underwriter last week that wanted me to comment on whether the attic was upgraded and how much. That made me feel pretty good... as if I had covered every detail and so the underwrtier had to find something I would not have thought to bring up. On the other hand, I was tempted to condition the report with an inspector to determine whether the attic was actually finished properly since I am not an inspector. I should consider becoming a certified inspector. That way if these questions are asked of me I can just take off my appraiser's hat and put on my inspector's hat and send the lender an invoice from the inspector :-)
I have to agree. A recent desk review performed from out of state questioned the use of comparable sales utilized that exceeded typical distance guidelines and wanted comments on why these closer comps were not used, and listed those sales for my comments. They did not of course take into consideration that my house was a tiny two bedroom sale and I felt it more important to use comparable sized homes with two bedrooms rather then their 3 bedroom colonials! (all were in the same school district and neighborhood boundaries)
I do feel that some review appraisals are necessary in this market...I think they should be done by other qualified appraisers who already appraise in that specific area! They should be done as exterior inspections, not from a desk.
Ideally, I agree with Richard - they should be ordered at least as an independent exterior 2055 - then the bank can see two opinions of value.
Sara - I have recently moved to a new response to request for information already in the report - I highlight in bold red type the statements so they don't have to read the entire report and can easily find it. So far as inspector, I've always felt some comfort in the appraisal definition of "an estimate of value" - if the furnace doesn't work when turned on this fall, there's no gray area.
Michelle - In rural Northern Michigan, the 1 mile rule goes out the window. My favorite is the response to provide two sales within 1 mile and 6 months with minimal adjustments. I have 2 responses - 1) If the perfect comp were there, don't you think I would have used it? and 2) As soon as you (the underwriter) buy those 2 homes and close on them, I'll include them as comps.
My latest review was done at a desk several states away, admitted they couldn't verify subject or comp data (doesn't belong to local MLS), and sent 15 listings off some internet real estate listing site to reduce value from $158,000 to $130,000. I always thought we dealt with sales as comps.
I only have one thing to so, "BUT ZILLOW SAYS". If I hear that one more time, I'm going to puke. It seem like most of the good Underwriters, were replaced with Underwriters that got their training form the golden arches. Down here, sometimes when a bank take possession of a foreclosure, the tile transfer shows the dollar amount of the defaulted loan. To the untrained eye, it looks like a closed sale, and sometimes show up on third party services as a closed sale.
By the way, when is a pud in a guard gated community, less than 10 years old, with rules banning commercial vehicles and has other community standards, comparable to a 30-40 year SFR community, that allows dump trucks to be parked in front of the homes, that is not gated and anything goes? Could someone answer that for me please!
Richard- In a declining market(most of the country), you need to be looking at pending and active listing also. If the active listing is comparable, in style, size, site and condition, why would someone pay $158,000 for a home that they could buy in the same area, for $130,000? Isn't appraising about the Principle of Substitution? Thats appraisal 101
Michael - I understand being cognizant of market trends which can be indicated by listings, but the listings sent to me included manufactured homes, properties on sites ranging from platted lot to 20 acres, old stone farmhouses, and others to rap the stated value of a high quality new construction ranch home. If you or I tried to present these as comps, even after they've sold, the underwriter would chew us up.
Richard,
Sorry about that, I took it has the active listing were comparable. I had that happen to me also, I was appraising a SFR, and their sending me Townhomes as comps!
That's the point of the original blog. We're all human and may miss something once in a while; but I don't understand why the lender will align themselves with this poorly supported review and value cut when the reviewer has neither seen the subject firsthand nor has access to the local MLS data and public records which support the original value. If the reviewer cannot properly discredit the original value process, then why is his value placed in higher priority than the original. As stated, I'd prefer a second full appraisal were done.
I think you summed it up, Richard. I welcome the 'two appraiser appraisal' as long as both appraisers are located in the market where the subject is located and both appraisals are equal (ie: both full, both drive-by or both desktop).
Sara - Unfortunately, the lenders neither want to wait for 2 to be completed nor incur the cost of 2 appraisals. One appraisal report should be adequate. The problem exists in unqualified personnel reviewing and critiquing appraisals. When you've done a good report and covered all the bases with additional comments, on what basis does the underwriter request "corrections"? I believe the underwriters should have some appraisal education before this right is extended to them. Don't get me wrong - there are bad appraisers and errors on reports which need corrected. But I think we're (appraisers) all getting overly scrutinized as a result of bad lending policies and practices on the part of the mortgage industry. Once again (prior time was S & L bailout), we're being made the scapegoats.
Richard, thanks for the suggestion, "As soon as you (the underwriter) buy those 2 homes and close on them, I'll include them as comps." I will modify it a bit to avoid plagerism, but I will definitely make use of the concept. The client is welcome to rely on an unqualified reviewer if they so desire, but don't expect me to jump through hoops as a result of that idiocy.
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