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Old 12-19-2012, 06:29 PM
 
19 posts, read 46,538 times
Reputation: 11

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This is mind blowing, funny and everything you ever feared about the banking business. The bank was dragging it's feet about giving us a copy of the appraisal for a refi of a 3 family, and sent us a form to waive our right to see it before closing, something I've never seen before and this is my 5th mortgage and 6th application. When they finally send me the PDF weeks after they recieved it, I see the plans drawn of my 3 family are wildly wrong, with 20% less area than actual. The amount appraised for the refi leaves me having to come up with closing cash rather than being able to roll it into the principal, so I want this clearly and incontrovertibly defective appraisal recalculated. Every number in both the rent based and sales based calculation is factored by the relative sq ft. Even another 5% would make the difference.

The banker's response:
Quote:
My wife owns a real estate company in Hoboken that has 20 agents. Your house was reviewed with the agents and they feel that the appraiser did a pretty good estimate in assessing the value. Not sure what more I could possibly do.

I'm not disputing the fact that he screwed up on calculations of square footage. I can go back to have him fix it but I assure you he will not adjust the value. Unless, I have 3-5 comparables that are more similar to your property than the ones he used, supporting a higher value. I checked the MLS for other comps and I'm not seeing anything supporting a higher value.
As far as I can tell, he's basically admitting that the numbers are groomed to make the appraisal come out to whatever is the predetermined value. I think I'm going to walk away and sue them in small claims for the appraisal cost. At least there the judge won't say "so what". anyone had a similar experience? The whole business is like gangsters.
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Old 12-19-2012, 06:47 PM
 
Location: MID ATLANTIC
7,463 posts, read 17,090,956 times
Reputation: 7850
How many square feet is he off? And where are you getting your square footage?
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Old 12-19-2012, 07:04 PM
 
1,266 posts, read 1,400,906 times
Reputation: 3302
I was a state-certified R.E. appraiser for several years in the early 90s in southern California. Miscalculating square footage is not acceptable in an official bank financing document. I encourage you to pursue getting a corrected appraisal. In fact, the original appraiser should do it for free. But before you get too upset, bear in mind that it is true that a 20% under-estimate of sq. ftg. may not affect the appraised value by much, if any. As long as they are comparing properties that have the same number of units and each unit has the same amount of bedrooms and baths, the income approach would be the most heavily weighted approach in determining the value for the bank's purposes. In other words, it's the units' incomes (not the reproduction cost or market value) that best determines the value for appraisal purposes. But---you are right in saying that understating the square footage would most definitely affect the cost or market approaches to valuation. But with income properties---the rental income is the most heavily weighted approach for income properties. Feel free to send me a private message if you want more detailed explanations. I'd be happy to assist in answering questions if you need it.

By the way---I was waaaaay to honest for that profession. Bankers were constantly pressuring appraisers to "bring it in" at whatever number they wanted. I was known for my honesty and resolve for refusing to give in to their numbers. A lot of mover-shaker types (hot shot mortgage bankers & brokers) didn't like me----too honest for them. But homeowners LOVED me, and I saved many a homeowner from taking on bad mortgages. That part I felt good about. But in the end, I left the business because of all the slimy mortgage people.
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Old 12-19-2012, 08:24 PM
 
19 posts, read 46,538 times
Reputation: 11
My measure was 2978 vs his 2364. I used the same gross footage method as his drawing, the outside of the structure. I checked his math to be sure that's what he did.

Tam, I wouldn't expect the appraisal to move 20%, and said so. I said 5% would do it for me. The Banker didn't think it was worth calling out the appraiser on his negligence. It was ludicrous, he not only got the length and width of the main house wrong, but he had the back extension on this rowhouse drawn as 10' wide and 6' deep, and attached an exterior photo to the report clearly showing it the 25' deep it actually is.

FWIW, they used the sales comp number rather than rental comp, I've found this common in rentals under 5 units. And they weighed the rental comp by the mistaken footage, so it was lower too. I've done this dance before, and knew that the comps would be bad, this is a gentrifying area near a new commuter rail stop and they comped against much worse areas. The gradient in values there is very steep block by block. I have a friend one block over on the most desirable street there who can't refi because there are no sales on his street and anywhere else is not anywhere the value.

The changes to the business since 2008 were supposed to get rid of the collusion, but it looks like there's something going on. The method numbers are suspiciously close together considering he got the area so wrong. sale:$325k: rent: $333k, cost $340k. And no one could build here for $90/ft anyway!
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Old 12-19-2012, 08:37 PM
 
132 posts, read 1,135,730 times
Reputation: 55
Did you include your garage (which I assume you have) in your measurement and maybe they didn't? You're not supposed to include garage space, only air conditioned/heated insulated living space.
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Old 12-19-2012, 09:01 PM
 
19 posts, read 46,538 times
Reputation: 11
No garage. This is a 3 family urban rowhouse. Think Sesame Street.
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Old 12-19-2012, 10:12 PM
 
Location: OK
2,698 posts, read 6,180,053 times
Reputation: 1819
Quote:
Originally Posted by Jellicus View Post
I have a friend one block over on the most desirable street there who can't refi because there are no sales on his street and anywhere else is not anywhere the value.

!
This is pure nonsense. If there aren't any sales on his street the appraisal will go elsewhere and adjust for location.
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Old 12-19-2012, 10:14 PM
 
Location: OK
2,698 posts, read 6,180,053 times
Reputation: 1819
Quote:
Originally Posted by Jellicus View Post
No garage. This is a 3 family urban rowhouse. Think Sesame Street.
Are there any rooms with sloping ceilings?
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Old 12-20-2012, 05:50 AM
 
Location: MID ATLANTIC
7,463 posts, read 17,090,956 times
Reputation: 7850
Any rooms below grade?
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Old 12-20-2012, 07:19 AM
 
1,266 posts, read 1,400,906 times
Reputation: 3302
Quote:
Originally Posted by Jellicus View Post
Tam, I wouldn't expect the appraisal to move 20%, and said so. I said 5% would do it for me.
Hi there---I think you may have misunderstood my post. I was referring to the 20% understatement of square footage, not a 20% increase in value. I understood what you meant by the 5%, but my point was that even if your place is 400-500 larger than the comps---it may not affect the final value estimate.

And, I am surprised the sales comps were weighted more heavily than the income comps. Perhaps methodologies have changed since I was an appraiser. But when I was doing it (I've done thousands of appraisals), the income approach was considered the most reliable approach for rental properties (2-4 units, typically). Honestly, it's the only approach that makes sense for 2-4 units with that type of square footage.


Quote:
Originally Posted by Jellicus View Post
The changes to the business since 2008 were supposed to get rid of the collusion, but it looks like there's something going on. The method numbers are suspiciously close together considering he got the area so wrong. sale:$325k: rent: $333k, cost $340k. And no one could build here for $90/ft anyway!
I can tell you this---it's all cooked up and most appraisers (the ones I knew anyway!) actually never did prescribed math (extrapolation) to arrive at their numbers. It was all about getting it done fast and on to the next one (the more you did, the more $$ everyone made.) And yes--the cost approach is a joke. Of course you cannot rebuild the property for $90/sf. Most appraisers just back into that number so that it's close to the other two approaches. Really--trust me, it's a joke. This is exactly why the slimy mortgage people hated me. Because I actually did a proper math-based analysis---took time to use the best comps I could find, and ultimately provided a reliable number for the homeowner. Even my boss would argue with me about it. (He just wanted a cookie-cutter process to collect as many fees in a short amount of time as possible.) Oh! And because of my professionalism and steadfast focus on doing it properly, I saved him hundreds of thousands in a lawsuit that cropped up. He thanked me---and never argued with me again.
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