Calling all mortgage lenders! In the new world of appraisals - in which you are no longer allowed to actually speak to the appraiser - what is the procedure for challenging erroneous information or erroneous values?
As if mortgage lending wasn't crazy enough in today's market, here we are dealing with another flawed law to address lenders and appraisers who "conspired" to inflate values. Loan officers and their managers are no longer allowed to have direct contact with appraisers in order to prevent any "undue influence" on the appraised value. While protecting consumers is unquestionably important, the question of the day is what is the procedure to challenge a clearly erroneous appraisal - erroneous in the information or the market value? Let me provide a recent example:
A property was on the market for less than 10 days and received multiple offers. Multiple, multiple offers. The lowest offer was $725k and the highest offer was $750k. The lender for the accepted buyer ordered the appraisal through their centralized appraisal system as required. The appraised value of the property per the out-of-area appraiser was $600k. Seriously, if you were an idiot and did nothing but search the MLS by square footage, bedroom and bathroom count - completely ignoring location and amenities - it would be impossible to derive a value less than $715k. When the lender was contacted, the response was, "We're sorry and terribly frustrated too."
What is the procedure allowed by the current law to challenge inaccurate appraisals?
Wendy Cutrufelli
Broker Associate
925.917.1135
The positions on this site are my own and don't necessarily represent Alain Pinel Realtors' positions, strategies or opinions.
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Wow, that's a huge difference. The procedure is different with each lender, but I don't or wouldn't let this issue go quietly. I would call the appraiser, now that you have the appraisal, and I would try to submit data to support the higher value.
Also, I would highlight any parts of the report that are inaccurate or that just don't belong. Some people are finding SFR with 3 beds compared to homes with 2 beds. Those are some obvious things to argue with the underwriters or whoever you can get to listen.
Check out my blog about HVCC...it's a nightmare for so many people. Good luck and you should get people to check out www.HVCCpetition.com
Good luck!
Most of the Appraisal Management Companies have a dispute policy in place. I haven't had to dispute a value yet but I do know that you can dispute a value based on your research. You can suggest comps on this rebuttal form. The loan officer should have been one of the first people to be aware of the shortage and hopefully is all over this for you and the buyer.
The new code of conduct is producing a lot of lower than expected values, but giving a value of over 100k off is unacceptable. What also gets me here is that whether or not this value is accurate, an appraiser (before May 1st) would have addressed the difference in value beforehand. Right or wrong, there is an opinion an appraiser has before an inspection and in this case with such a big difference, to me taking the clients $400 for a worthless appraisal is like stealing...
Jason: The buyer, not the loan officer, notified us of the problem. The lack of proactive attention to the problem by the loan officer is what made me think that the dispute resolution process was difficult to determine.
Mark: All good suggestions. We have submitted the comparables AND copies of every offer. After all, market value is truly determined by what ready, willing and able buyers are willing to pay. In my humble opinion, since appraisers aren't to have contact with loan officers (or Realtors either, it seems), then HVCC should also prohibit out-of-area appraisers!
I'm curious how I am going to handle a similar situation. I am an appraiser. My home estimated in '04 and '07 appx 200k higher than a recent "out-of-the" area appraiser in '10. The appraiser utilized sales that were foreclosures and short sales and made no comments about a recent similar sale down the street more in line with our house in square footage, quality, location, etc. My loan officer seems to think there is nothing we can do about it but I am going to take action as these actions can easily result in being reprimanded by the State Appraisal Board. It is just as wrong to deflate a value as it is to inflate a value. Unfortunately, we are probably going to be seeing a lot of this these days. By the time this is all over, I should be more familiar with the rules and regulations of lenders of erroneous appraisal reports.