My broker screwed up my appraisal (A blessing in disguise)? (loan, escrow)

[coolcats]

For some reason he gave the appraiser a wrong price that was lower by $4k than our actual contract price. So the appraiser valued it at just above the incorrect price, but below the contract price. This was actually a blessing in disguise, because after we signed on this house, my wife found her dream house. It gives us a quasi-legitimate “out.” A couple of questions – is it legitimate to use this to invalidate the contract? The seller does have two backup offers, and I don’t think he’ll have a problem selling.

On a larger scale, this is not the first screw up he’s made. I had to make several corrections on the loan application – The largest was that he put an amount less than we wanted. I caught all those, and made the corrections before it was too late. But should I stick with this guy since we are so far along in the process, or go with someone new? Do I reimburse him the $350 for the incorrect appraisal or try to get him eat the cost?

[akcher]

I am in escrow at the moment for our first house. Our contract had loan, appraisal and disclosure contingencies and it has to be removed in 14 days (normal is 17 days). My understanding is if you do not fulfill this, then the contract is broken.

[SmartMoney]

You'll still have to go thru the motions in your contract with the low appraisal. And technically, the sales price should not influence the appraised value. But, let's not argue that one today.

Most contracts require the seller be presented with the appraised value and he then can chose to accept it or counter offer. It's my understanding if he accepts the lower value, you still may be under contract.........ALL CONTRACTS ARE DIFFERENT, SO PLEASE READ YOUR CONTRACT AND CONTACT YOUR REAL ESTATE AGENT OR ATTORNEY.

But if you do move on to another property, I am going to deviate from what I would normally say (and that would be to go elsewhere). I think given all the changes and challenges (not to mention hassle), I would be inclined to have a stern talking to with your mortgage guy.....Tell him you aren't blind to the mistakes being made, and while you want to give him the benefit of the doubt, you don't want it to be at your expense. I don't know that it's entirely fair to ask him to eat the appraisal fee - remember technically, value is value and sales price is not suppose to influence the final outcome. If he is sensitive to your concerns, he will find a way to make it up to you.

Whatever you do, do not go and write on another property without a release from this one.....make sure you are off the hook.

[renriq02]

i would be mad at the realtor as they should've done a CMA before you put in an offer on the house

[SmartMoney]

Excellent point!

Originally Posted by renriq02

i would be mad at the realtor as they should've done a CMA before you put in an offer on the house

[coolcats]

Oh, I think even at $290 vs. $285 the house was worth it. The appraisal comps were all higher, except for one short-sale. It's just the appraiser's final value of $286 was listed suspiciously close to what he thought the offer price was. I'll pay the $350, as I am using it to our advantage. The sellers have signed a relinquishment of our earnest money.

I think the seller was actually relieved a little bit. He's a custom builder and priced it at cost to unload it. However, he forgot about the landscape bond, so he was actually losing money on the deal. This gives him the chance to relist for a slightly higher price, and I think he'll still get the sale. He did get three offers the first day, the first time around.

[Goodpasture]

Originally Posted by coolcats

For some reason he gave the appraiser a wrong price that was lower by $4k than our actual contract price. So the appraiser valued it at just above the incorrect price, but below the contract price.

The appraiser apparently violated USPAP by targeting a value in advance of doing the appraisal. I would consider filing a complaint against the appraiser. Contract price is totally irrelevant when valuing a piece of property. So is the cost to build the property. The only thing that matters is what the market says it is worth.

Originally Posted by coolcats

It's just the appraiser's final value of $286 was listed suspiciously close to what he thought the offer price was.

An appraised value is a number that represents a range of values. I am certain that if the seller had just paid the 5th or 6th monthly payment on a house he can't get rid of, he would take a 10%-15% discount just to unload it. Similarly, if a buyer falls in love with a house, he might consider offering MORE than the listing price, just to make sure he gets it. That brings us to the concept of "significant number" in a value estimate. The first significant number will establish some of the parameters of the range of value for the property. The first significant number is the first real number to the left of the decimal point. I have seen appraised values with numbers like $142,585. Numbers like that are absurd because the first significant number is 5. that means the house is not worth $142,586 and is not worth $142,584. In your case, The appraiser is saying the house is worth $286. Not $285 or $287. If the first significant number is a 5, on your appraisal, that indicates a range of $280-$290. If the estimate of value is $290, with the first significant number being a 9, that is telling us that the range of value is $280-$300......and on a house of that value range, that is about as accurate as you can get. It is my opinion that the appraiser was appraising to the sales price, and was NOT appraising to market value as defined in the Assumptions, Definitions, and Certifications of the URAR.

[renriq02]

i dont think you read his/her comment

it clearly stated that it didnt match the purchase price

the poster is 'speculating' in how/what did appraiser did to come in for the value.

Originally Posted by Goodpasture

The appraiser apparently violated USPAP by targeting a value in advance of doing the appraisal. I would consider filing a complaint against the appraiser. Contract price is totally irrelevant when valuing a piece of property. So is the cost to build the property. The only thing that matters is what the market says it is worth.

An appraised value is a number that represents a range of values. I am certain that if the seller had just paid the 5th or 6th monthly payment on a house he can't get rid of, he would take a 10%-15% discount just to unload it. Similarly, if a buyer falls in love with a house, he might consider offering MORE than the listing price, just to make sure he gets it. That brings us to the concept of "significant number" in a value estimate. The first significant number will establish some of the parameters of the range of value for the property. The first significant number is the first real number to the left of the decimal point. I have seen appraised values with numbers like $142,585. Numbers like that are absurd because the first significant number is 5. that means the house is not worth $142,586 and is not worth $142,584. In your case, The appraiser is saying the house is worth $286. Not $285 or $287. If the first significant number is a 5, on your appraisal, that indicates a range of $280-$290. If the estimate of value is $290, with the first significant number being a 9, that is telling us that the range of value is $280-$300......and on a house of that value range, that is about as accurate as you can get. It is my opinion that the appraiser was appraising to the sales price, and was NOT appraising to market value as defined in the Assumptions, Definitions, and Certifications of the URAR.

[Annemieke Roell]

For some reason he gave the appraiser a wrong price that was lower by $4k than our actual contract price. So the appraiser valued it at just above the incorrect price, but below the contract price.

For starters, the sales price of a property is completely irrelevant when determining the market value.

Second, by FNMA Guidelines the appraiser should have been supplied with a copy of the contract for analysis.

Do I reimburse him the $350 for the incorrect appraisal or try to get him eat the cost?

[/quote]

Just because the appraised value does not match the sales price does not make the appraisal incorrect.

Although I do wonder about one of the comparables being a short sale. Is the Subject a short sale?

[Goodpasture]

Originally Posted by renriq02

i dont think you read his/her comment

it clearly stated that it didnt match the purchase price

the poster is 'speculating' in how/what did appraiser did to come in for the value.

It came in $1,000 above what was thought to be the contract price. That is 0.35% of the sale price. Pretty close targeting. If it was accurate, why would the owner be wanting out of the contract so he could relist it at a higher price? If it was a credible appraisal the seller would be trying to hold the deal together. He isn't, so the report, based on what I've seen so far, is not credible....a violation of the ethics portion of USPAP. As a Certified Appraiser, a Certified Appraisal Reviewer, and a Certified USPAP Instructor, I am pretty safe in my assumptions. Your assumption that I did not read his/her comment is without support.