When the appraiser wants to build you a ‘House of Cards’
It happened again this week…. Got an appraisal that came in $10,000 short. I wonder where this will lead?!?!?!
Now, to be fair…. there was some seller paid closing costs(just under 3%). BUT….. The contract was BELOW the list price of ~ $232,000!!!
Typical deal. Realtor writes up contract close to list price with seller paids…. All is good in approval land until the appraisal comes in really low. Then, yep, you guessed it, the listing agent calls me to tell me they have another appraiser who will be able to come in higher. They found some comps that were priced higher. Seems that the builder in town is putting out some killer incentives and driving down the existing sales market for the time being…. But they really feel like the property supports the higher price as it has upgrades itself.
But, it seems that this appraiser was willing to build an appraisal out of a deck of playing cards…. because these new comps are NEW CONSTRUCTION.
Now, lets not even get into the discussion about why you can’t use new construction for an appraisal comp on existing sales. I am sure that Meg Stewart can discuss all the ins and outs of that. But for ANY Realtor, regardless of which side of the transaction you are on, to suggest that we ‘need a new appraiser’ is absolutely ridiculous.
I blogged about this a while back…. “Don’t Be That Realtor” actually got all of 3 comments(one of them was my own comment). It seems that either this topic is a sore subject… or maybe it is just so darn ridiculous that no one thinks it is necessary to mention. But it seems that it IS worthy of mention…. Because it keeps happening!!!!
My first notice of this was when the appraiser left me a message. 30 minutes later I get a phone call from listing agent wanting to use new appraiser. My first phone call was to the referring Buyer’s Agent and she was rolling on the floor laughing. She would NEVER agree to a new appraiser. Besides, the current appraiser is very well respected around town and unless there are some FSBO comps they missed the Listing Agent will have to explain himself to the sellers.
So, we all agreed to have the Seller Agent submit any new comps to the appraiser for reconsideration as they do have a right to challenge the appraisal. And it seems that the Seller Paid Closing Costs will have to be amended out of the contract as the buyer wants to proceed. But myself and the Buyer’s Agent undoubtedly have counseled the borrower/buyer on the ramifications of paying full list price and have encouraged them to resist any thoughts of re-appraising the property so they can roll in the seller paids. Although it would be nice to keep that extra cash free for curtains and appliances, they do qualify with paying those expenses out of pocket.
How do YOU respond when the appraisal comes in low?
Or, for that matter…. how do you respond when an appraiser is willing to fabricate an appraisal out of thin air?
Tom Burris
DallasLoanGuy.com
Dallas, TX
“Cartoon credit: Andy White. Contact for rates.”
Hip Shot Cartoons
P.O. Box 48594
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Tom,
The low values are happening all over Colorado too. But as you said Tom, one can’t go “appraiser shopping”, I’m afraid that could be considered loan fraud.
Not only that but how ridiculous is it that the first thing the seller and listing agent due is the blame the only guy in the deal with any formal training in home valuation and a license on the line, with “faulty” work.
Could it be that an overzealous listing agent trigger too much seller greed when setting the listing price and now can’t admit their own mistake?
Couldn’t that really be the more likely issue, rather than an appraiser who knows what he’s doing, is what, intentionally under-valuing homes so he can spend the next 4 days fielding calls from angry agents, re-valuing additional comps, and blowing the profit margin on his $350 fee?
I think everyone can figure that one out!
I’ve had some very “candid” conversations lately with listing agents ( with I loathe to talk too, so you know it’s important if I stoop to doing so) who want to question my appraisers work.
I call them on their “market analysis” values that set the price too high setting the stage for the current debacle and remind them of the laws in place now in Colorado against attempts to “influence appraisers or their valuation reports”.
I also remind them of the fact the underwriter reviews all appraisals for “inappropriate adjustments” and has to agree with the valuation. So any attempt to manipulate the appraiser gets caught by an increasing “tight” underwriting slant now that values are trending down. And he’ll have the same problem with the next buyer.
One in the hand, is worth 2 in the bush!
With all that said, I’ve yet to lose a deal on a supposed “low value” scenario. I have had a seller refuse to lower the price and the buyer went elsewhere.
That house is still on the market…some people never learn!
Comment by Rob Blake — June 21, 2007 @ 3:22 am