Home Appraisal Problem

Pat, here is the reason they are given the sales price, and many hit it. If you have 8 homes to choose from in a neighborhood, you make a choice and put in a contract at say, 179,000. How would you feel if the appraisal came in at $177,500? Obviously the home is worth $179,000 or the buyer who had plenty to choose from wouldn't have put a contract in. But what if the parameters an appraiser is given and the heavy basis on price per square foot makes the appraisal come in at $177,500, the appraiser thinks its fine and goes with it? That would completely screw up the entire deal - you have to put more money down, which many can't do, or you have to renegotiate, or you have to get another house. Trust me, nobody, no appraiser, no Realtor, no Investor, is accurate down to .0083.

Why would anyone want an entire transaction to hang on the coincidence that the exact sales price is the exact number the appraiser came up with? You wouldn't. Basically appraisers are asked by the lenders "is it worth it?" Can you imagine if lenders only went on an appraiser's opinion of value and didn't disclose the sales price? I know some anal/conservative wholesalers that have tried that and they either changed their tune or they are now in some related business.

Now if you want to hire an appraiser instead of using a Realtor to price your house for sale, that would be a different subject. And yes, "mass" appraisals used by the appraisal district aren't worth the paper they are written on. Nearly anyone can challenge their taxes and win. If the public isn't pissed off, then the county has your home assessed too low. They expect it. Kind of like paying full sticker at a flea market.
 
Wick, I'm not trying to downplay the difficulty of appraisal and market research because I'm sure you know your market well. However are you suggesting these people doing drive by appraisals without ever stepping foot in the houses are so in tune with the market that they are just able to consistantly come within $1000 of the sales price? Sorry, these people aren't doing that.

I got a GREAT deal on a house in Dallas and the appraisal came $1500 above what I paid (this was lender's appraisal) An almost identical home sold on the same street for $10k more than I paid less than a month later. I've checked out both houses (actually been inside both unlike the appraiser) and there is really no major difference between the two. Guess what his appraisal came in as? $1000 more than he paid. So if I wouldn't have gotten such a good deal on my house I couldn't have gotten the loan? Sorry, I'm not believing that. The lender felt comfortable enough with the price and reflected it in both appraisals.

This didn't bother me one bit, even though there were numerous sloppy errors on the appraisal (I live in a conservation district and they didn't even get the style of house correct). I deal with commercial appraisals all the time here being in commercial development, and it's an entirely different beast. These residential appraisals are simply 30 minutes of drive-by time for someone and then putting some numbers into a stock form.
 
well she is headed out there again today, with company. i worked through a friend to get the loan, and so his boss (who i also know) is going to go out there with the appraiser and watch her measure. i don't think any of us really care what she comes up with, but it will be interesting to see how she explains the difference.

also i guess this appraiser has been trying to get their business for months. the boss used her once and didn't use her again. this was my friend's first time to use her and they both said that no one in the company will use her again. so i guess bitching about sloppy work gets something accomplished. and yes, i feel like ******* up this girl's week and showing her she can't get away with sloppy work is an accomplishment.
 
I was an appraiser for quite some time and I must say that it was one of the most useless occupations one could hold. It's no coincidence that the appraisal usually comes in at about the sales price, or at an 80% LTV for a refi. It's simple, if you don't hit the value then the loan officer or processor doesn't send you anymore work.

While I was appraising new construction I would always have some loan officer dictating what the appraised value would be, and it would consistently be a few thousand over what the current market value was. Why? Because these people would always want to roll financing and down payment assistance into the loan. Of course that would falsly inflate the market value for that particular area and you could then use that inflated sale as a comp for your next inflated sale. Then 2-3 years later (after the neighborhood was built-out) foreclosures start popping up everywhere because everyone was on a buy-down, couldn't afford the increase and nobody had any equity to sell.

The lack of ethics and professionalism was astounding, and I finally got tired of taking orders from some shady and uneducated loan officer who was only in that business because it was the only job he could get that didn't require a backgroud investigation. And I was a staff appraiser for a MAJOR bank in Austin.

Bottom line is don't put any stock into what the appraiser surmises from his/her cursory inspection of your property. You can do it yourself. Just get a digital camera, a tape measure, some graph paper and find a way to access MLS. It's all common sense.
 
So you are blaming appraisers for foreclosures. That is rich.

You really know the real estate/finance industry don't you?
 
I'm not blaming appraisers for the foreclosures. I understand the basic principles of supply and demand. I'm saying that in certain instances if the appraiser would actually appraise the property for what it's actually worth, instead of jumping through hoops for some GED having snake oil salesman, some of them could be avoided. It could either force them to come up with more money down or buy a home in their price range. I guess it's more of a morality/ethical issue for me rather than a financially profitable one. I was forced to back into the sales price numerous times by my boss so they could fund the loan (it's funny how you can adjust for a property's elevation on one street, but 2 streets over the same elevation gets no adjustment). Now, 2 years later, A LOT of these same properties are HUD foreclosures listed significantly below what the original sales price was. I know the market fluctuates, but it would have to be the mid 1980's for a decrease like this. And the properties are still in good living condition.

I don't really claim to be an expert on the mortgage business. Truth is it changes so often with so many different programs that even the mortgage brokers themselves aren't experts. I know the "profession" will never change and it will never be completely ethical, but I think a step in the right direction would be tighter regulations on appraisals. I think that VA appraisals are usually the most accurate because they are given to VA approved appraisers on a waiting list. You can't pick the friendliest appraiser because you are assigned one, ergo there is no worrying about getting future business, ergo an accurate appraisal without bias or external influence.

My original post/point was that 90% of the time an appaiser is not necessary, and in my experience I would say that most buyers, agents and loan officers would agree. And this coming from an ex-appraiser who found the business to be VERY lucrative. It was just too shady.
 
Fletch is right about how they jack the appraisal to support a certain kind of loan. I sold my last house to someone who only had about $2,000 for the down payment, and they appraised it at like $225,000. The house was $180,000, tops. Even the sales price was way high, but she really wanted to buy.

I was convinced the deal would never close because the appraisal couldn't support the loan, but it did.

El Guapo is correct E&O insurance is not there to help you make money, it is there so they can deny your claim after you faithfully pay premiums for 25 years, and then drop you in the grease.
shocked.gif
 
What exactly would be JohnnyM's damages in this situation, should he attempt to harvest that free money from the insurance tree?
 
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