Shady Appraisal...how can I resolve this troubling issue

[Creditfox]

I recently signed a contract with a seller for $420K.  The contract was contingent on the appraisal.

If the appraisal was at or above $420K the seller would sell the property to me for $420K.  If the appraisal was below $420K we would renegotiate a new selling price.

Well, my lender orders the appraisal and the appraiser completes the appraisal in a relatively quick manner.  The property appraisal comes in at $415K. 

The appraisal, however, does not include two recently sold properties that are literally “a stones throw” (less than 400 feet) from the property that I am planning to purchase.  The two properties are RIGHT next door to each other.  One property closed on 3/13/10 for $380K and the house next door closes for $390K on 5/2/10.

I asked the appraiser why the two properties were not included.  And, he tells me that one of the properties was a relocation.  True.  One was a relo and the property was on the market for 4 months.  The initial offer price was $419K and the price was reduced over the course of three months and eventually sold for $380K.  He has no answer as to why the second property was not included in the appraisal.  The second property also had an initial offer price of $419K and sold 4 months later at $390K – not sure if this was a relo.

I am completely puzzled why an appraiser would not include these recent sales in the appraisal.  He is using sales that were finalized more than 6 months ago.

Do appraisers simply write-up an appaisal so that it fits the contract or are they suppose to assess the true home value?  Need help on this one...

[happy0510]

Hi Creditfox,

This is absolutely horrible for you!  I would love to find out what is going on here.

I'm a current homebuyer right now in Socal and the prices are of course NO JOKE!

Anything like this costs us bigtime.  The market is so crazy right now and I almost want to drop out!

But I need a place to live

Get some more opinions!!

[key2me12]

They are suppose to assess the true home value. On the house that I am currently under contract for is a duplex and both sides are for sale, he ended up using the other side for a comparable. Hope this helps

[Imhotrodcrazy]

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@Creditfox wrote:

I am completely puzzled why an appraiser would not include these recent sales in the appraisal.  He is using sales that were finalized more than 6 months ago.

Do appraisers simply write-up an appaisal so that it fits the contract or are they suppose to assess the true home value?  Need help on this one...

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You have every right  to question this appraisal report,  IF, those sales are similar to the property you are buying, ( i.e.), age, size and amenities.  An appraiser can not, and should not,  ignore two recent sales in the same ( tract ) and use much older sales that are not indicative of today's market  place.  At the very least, the appraiser should have included them in the report and stated why he/she did not use them.  This looks very bad when  a "review" appraiser looks at the report.  The review appraiser can reject that report if he does not agree with it.    All things are pertinent in today's market  place.  In addition,  each comparable  should be reported as to  how many times it has been listed for sale in recent months and how many  " days on the market"  each was listed before it sold.   It is the appraisers responsibility to report "all" data that is available, otherwise the report is incomplete. 

[Creditfox]

Thanks Imhotrodcrazy

I agree with your comments.  The appraiser claims that the relo property cannot be used because it is not indicative of the market...yet he did not even mention the property in the report.  The other recent sale (closed on 5/2/10) is show in the appraisal as a "Listing Comparable" where the list price is $419K; the property actually closed on 5/2/10 for $390K.

The two properties are slightly smaller than the property that I am trying to purchase (~ 2,580 sq. ft. versus 2,777 sq. ft.)...yet he did not include them in the appraisal.

I also do not consider the relo as a stressed sale; Prudential listed the house for 3+ months.  And, Prudential purchased the home for $371K and sold it one week later at $380K. 

You would think that we would have learned our lesson regarding overvaluing properties...

[Anonymous]

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@Creditfox wrote:

Do appraisers simply write-up an appaisal so that it fits the contract or are they suppose to assess the true home value?  Need help on this one...

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They are supposed to assess the true value.  But what happens to an appraiser who doesn't play ball?   He stops getting phone calls.

If the system randomly picked an appraiser out of a pool and he was paid out of a fund then his loyalties would not be in question.  As it is, the system is corrupt.

[Creditfox]

Thanks...In my opinion, the appraiser should not be given the contract price before the appraisal.  Why does he need the contract price if he is going to be doing an objective appraisal...giving the appraiser the contract price before the appraisal sounds fishy to me

[ShanetheMortgageMan]

On any appraisal is asks for the details of the purchase agreement, without the purchase agreement the appraiser would be unable to complete the appraisal.  You'd have to take that issue up with USPAP and the GSE's (Fannie & Freddie).

It sounds like the effective date of your appraisal may have been before the other comparable closed, and it was just a listing at the time.  If the effective date was after the comparable closed, then it should have been reflected as a closed sale on the appraisal report and the lower eventual sales price used.  If that is the case, and it wasn't reflected as a closed sale, then the appraisal needs to be updated.  If it wasn't sold by the appraisals effective date, you can still request it to be updated and the comparable data changed, however it may cost an additional fee.