All of us are fully aware of the recent changes in the appraisal industry. Another victim of yesterday’s market, there is now a “hands off” message that lenders take very seriously.
What I have observed is that the bigger the lender, the more distance that exists between loan officers and appraisers.
For instance, it’s my understanding that Bank of America uses a third party company to set up appraisers…whereas some of the more local lenders are able to “select” a pool of local appraisers thru whom they can rotate business.
As a listing agent, I have found that my input in this new climate is crucial. My job is not to influence, but to educate.
In a couple of instances, I have opened the door for appraisers who were clearly outside of their geographical comfort zone and the information and comps I have provided were important in verifying a clear market value.
A recent experience clearly confirmed the need for listing agents to meet with appraisers. The names, location, and exact pricing have been changed to protect the innocent…but, otherwise, this is a 100% true story.
In September, I received an offer on a condo that was listed for $1.45 million in Georgetown (three cheers for Georgetown, right? But that’s another story of market holding strong). After a round of negotiation, the seller accepted an offer for $1.375 million. The lender for the buyer was a large, national company.
Although I asked the buyer’s agent to let me know when the appraisal was scheduled, the lender did not keep either of us in the loop (perhaps he couldn’t…because he, too, was not in the loop) and, because the building had a concierge, the appraiser did his on site inspection without giving me notice.
The first I heard about the appraisal being done, is when I got a panicked email from the buyer’s agent, informing me that the appraised value had been set at $1.2 million.
The “good” news? A copy of the appraisal showed errors in square footage and amenities, as well as the use of “comparable” properties that were clearly comparing apples to oranges. Also, the buyer was financing just a little over 50% of the purchase price, so he could clearly go forward if desired. The “bad” news? The buyer, as was allowed under the terms of the contract, asked the seller to reduce the sales price to the appraised value…and then obtained a release from the contract when the seller refused.
Two weeks later, the property received another offer. This one was at $1.4 million and, again, was being financed by a large, national company. This time, I made it clear that I needed to be the contact for the appraiser. I met the appraiser, loaded with information verifying the correct square footage, provided a floor plan, and also pointed to comparables that were in similar condo developments. The result? This second appraisal came in at $1.4 million.
Two appraisers…and the price differential was $200,000…common?!
So, what have the new appraisal rules accomplished? I would argue that they haven’t accomplished much. I’m sure that there were abuses under the “old” system, but I don’t think that the answer is to set up policies that make it possible for appraisers to work outside of their geographical areas of expertise and go mostly unchallenged.
Once an appraiser establishes value, I understand that it is extremely difficult to get him or her to make changes…even in situations like the one outlined above where the appraisal contained clear inaccuracies.
And, of course, if the appraisal is for an FHA loan, the assigned value remains with the property for 6 months…so a “bad” appraisal can hold a seller hostage for an inordinately long time.
I know it’s always our job to adapt to different markets and to adjust our services accordingly — but when the pendulum has swung too far; and appraisers have become hamstrung, spineless or — any combination there of, I can’t help but have little sympathy for the appraiser (euphamism of the year for me!).
Regardless, in my humble opinion, any listing agent who isn’t bending over backwards to “work with” appraisers (at least from my experience), is probably doing a disservice in the current market.
What have others seen out there?
its strange times – I saw a bank reject a short sale because the BPO was $30k more than the purchase price and this was on a multi-million dollar home.
October 31st, 2009 at 1:30 pm
Now with the new rules and regulations it is not uncommon to have an inexperienced appraiser, someone “out of the area”, or even one who does not really care because he is only getting half of what he used to for double the work by an AMC. The new rules were originally created to protect consumers and all they have done is create more issues and problems.
October 31st, 2009 at 10:24 pm
I too have experienced 2 FHA appraisal issues the past couple of weeks. The first, the appraiser called for mold in the bathroom to be professionaly mitigated… the problem, was that it was on the caulk where the tub met the tub surround… solution, remove the mildewy caulk and recaulk. It wasn’t even a mold issues, let alone one that needed to be professionally mitigated! That same appraiser called for peeling paint that wasn’t even bad (probably painted 8-10 years prior). And although my buyer paid additional fees for the appraiser to go back out when the work was finished, a phone call to me from the appraiser asking what work was done let me to believe that he did not go back out, and called me to verify the work was done to save him from having to make another trip.
My second problem, on a different house, was a home that had been on the market only a couple of weeks. The sellers agreed to pay $3500 of the buyer’s closing costs, and although the buyers were not paying more than the list price, the appraisel was cut $4,000 from the agreed upon sales price. This was on a $150,000 house. I could see if it had been on the market awhile, but it was just listed, obviously a fair value or it would have sat longer! I think appraisers are tip-toeing too much now.
November 6th, 2009 at 11:37 am
apparaisals are all that matter in this day and age
November 9th, 2009 at 5:09 am