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Old 07-24-2009, 03:41 PM
 
38 posts, read 139,324 times
Reputation: 21

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After getting over shock ,I looked through appraisal and found discrepencies.We have a home ,6 acres,& detached garage/shop.On one comp he credits us $700 per acre,another comp $800 per acre,And $1000 on another.Then he talks about another property 6 miles away as this one and needing further title search???????Says this is a new construction and previous transfers and sales were lot transfers only.This place has been sold 3 times in the last 25 years with a 44 yr. old house on it .He also has the garage at 620 sq ft when it's actually 1350 sq ft. Also lists no fencing when 3 acres are fenced and no porches which his own pictures show 2.We're looking for a re-fi to purchase vacation property.He won't return calls. He was running late when he came and had several more to do. I think he got them all jumbled.What recourse do we have?
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Old 07-24-2009, 09:22 PM
 
Location: Pawnee Nation
7,525 posts, read 14,540,277 times
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You can file a complaint with the appraisal board. If he misrepresented the property then he is in violation of appraisal licensing laws (USPAP).

I haven't seen it done yet, but if his misrepresentation caused you harm, then I would think he could be held liable. but so should the lender. They should have safeguards/reviews in place to evaluate the reliability of the report, and it apparently didn't get caught. In fact, I would LOVE to see you sue the lender for using a bad report in their loan decision.

But I'm not holding my breath.............
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Old 07-24-2009, 09:24 PM
 
Location: OK
2,717 posts, read 6,289,617 times
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Contact your lender and point these issues out.

Incidentally, it is not unusual to have a different land adjustment for properties on acreage. I would be concerned if the adjustment was equal across the board.
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Old 07-25-2009, 05:44 AM
 
38 posts, read 139,324 times
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Thank you for your replies.We went through a broker and she has put in a rebuttal when she saw what he did.He hasn't returned her call.She said we will wait until Monday .She would like to give him the opportunity to explain and correct.There are factual errors on every page.
Schousse- When appraising ,is the actual cost per acre of the area included,or is there some kind of formula? Land here (2 mile radius and beyond) sells for $6000 quick sale/$6700 not so quick.The most he gave us is $ 1000 per. Is that normal?He also goes on to say NW Indiana is a viable suburb of Chicago and the state enacting a 1% property tax cap makes this a very desirable area with a good stable market.So it's not that we're in a decling market and he's looking to protect the lender.The lender will give us the loan,just less than what we need to complete the sale.We'll have to really raid our savings cushion to buy the other property. I don't know how you all keep your sanity that are in the business.I would love to call this guy up and ask if he was smoking crack or what when he did this report.And lace that with alot of expletive deleteds.But that will get me nowhere.
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Old 07-25-2009, 08:05 AM
 
Location: OK
2,717 posts, read 6,289,617 times
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Quote:
Originally Posted by wayneswife View Post
Schousse- When appraising ,is the actual cost per acre of the area included,or is there some kind of formula? Land here (2 mile radius and beyond) sells for $6000 quick sale/$6700 not so quick.The most he gave us is $ 1000 per. Is that normal?
Let me give you the standard appraisers' response. It depends.

It depends on the price per acre, the zoning (can the lot be subdivided or not, in case of the latter we are dealing with a contributory value) and your local market, just to name a few.

Quote:
.We'll have to really raid our savings cushion to buy the other property.
Once you get a rebuttal (or better yet, get the appraisal reviewed by a competent review appraiser) and things are sorted out and the appraisal still comes in lower than the purchase price, can you re-negotiate with the seller?

I know you want to move in as soon as possible but you will be served well to be patient and let this run its course.

Quote:
I don't know how you all keep your sanity that are in the business.
Speaking for appraisers only, it helps tremendously if you start out slightly insane.
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Old 07-25-2009, 08:37 AM
 
392 posts, read 1,400,307 times
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it is unlikely that you will get another appraisal done. The lender probably won't allow it. However, if you can supply comps that you feel would have been a better comparison of your property then the comps the appraiser used, you can often challenge the appraiser and he may increase his assessment based on the new information. Keep in mind, if no recent sales of similiar property has happened, he may have had to go further away or longer back in order to get comps.

Good luck
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Old 07-25-2009, 09:34 AM
 
Location: OK
2,717 posts, read 6,289,617 times
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Quote:
Originally Posted by NJ987654 View Post
it is unlikely that you will get another appraisal done. The lender probably won't allow it. However, if you can supply comps that you feel would have been a better comparison of your property then the comps the appraiser used, you can often challenge the appraiser and he may increase his assessment based on the new information. Keep in mind, if no recent sales of similiar property has happened, he may have had to go further away or longer back in order to get comps.

Good luck
Sorry .... bad advise.

Any time a borrower feels the need to provide me with "better comps" they are usually sales that are higher in value, but are in NO way comparable to the Subject.

If the report is as bad as the OP states, and it ends up being non USPAP compliant, the lender has an obligation to either reject the loan completely OR have it reviewed.

And as usual, I am hereby offering to review the report pro bono. I can not review it on value, unless the property is in Oklahoma, but I can review it on USPAP compliance, which includes the credibility and suppportability (is that even a word?) of the report.

Please DM me for my email address if you want me to look at the report.
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Old 07-25-2009, 09:43 AM
 
Location: Pawnee Nation
7,525 posts, read 14,540,277 times
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There are three methods used to determine land value for residential properties. The first is sales comparison where you find a tract nearby that recently sold that has similar amenities (view, access to the community, topography, etc). This method comes with substantial problems as no two tracts are identical......but if both are in the same or similar subdivision, are similar in size, and there are sales that support a value, it can be done.

The second is the allocation method where you allocate a percentage of the total value to the land. Frequently this is the best method in older subdivisions where there have been no sales of vacant land in years.

The final method (there are other methods, but they are all income based) is extraction. This is where you calculate the cost to build the improvements, subtract it from the total value with the remainder the value of the land.

I recently did a review on an appraisal where the subject was a new lot in a new subdivision valued at $28,000 for a 9,500 foot lot. A 6,500 foot lot was valued (through allocation) at $16,000 as was a 5,500 foot lot. but a 30,000 foot lot was valued at $14,000.

In trying to understand the differences, we have to look at who the typical buyer is in that neighborhood, how the land is shaped, and what is it's highest and best use. What we call disaggregation is the process of identifying the typical buyer. So lets look at the houses being sold and see what kind of buyer is spending their money for those houses. The houses are all brick and vinyl sided, on small lots and minimal amenities. A purchaser of these houses does not have a lot of money (price range is between $120k-$150K), they are looking for low maintenance, and do not have a present interest in large gardens, livestock, etc. The most they will use their back yard for is for a playground for their kids or to barbecue and entertain. Chances are, if they put a pool in, it will above ground. In driving around you see a lot of boats parked in the driveways, some campers, several small "sports" type cars.

In looking at the tract that was 30,000 sf, I saw that it was a long narrow lot, without any real use for the back yard other than, perhaps, a large garden. Otherwise all it is is a place to spend your Saturdays mowing. That makes the land excess, not surplus. (Excess land is land that cannot be converted to usable land and is just more of the same; surplus is land that can be converted to another use such as another lot)

Why are the other two lots only worth $16,000 while the subject is being sold at $28,000? I think it has to do with the age of the lots, the upkeep of the neighborhoods themselves, and the marketing of the new lots.

What ever the reason for the discrepancy in values square footage was NOT a factor. When developing a value estimate for a tract, you must look at not just size (actually, except in commercial environments size is pretty much irrelevant), but location, externalities like the proximity to schools, employment, police and fire protection, churches, and shopping......but most of all, the expectations of the typical buyer. Those factors are far more important than size.
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Old 07-25-2009, 02:29 PM
 
28,383 posts, read 67,903,744 times
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Goodpasture demonstrates a nice understanding of what I see too little of in inexperienced appraisers: knowledge of the proper methods of valuing property.

Sure the other lots might be much smaller, but as shown, the additional value of lot that is just bigger (and not sub dividable, or sellable for a different zoning classification) can be minimal.

On the other end of the spectrum it is equally possible that a piece of property that has significantly more appeal / broader sales potential could be far more valuable on per sq ft basis, and GP's statement support the methods that COULD be used to support such a value.

Lately I have been seeing FAR FEWER adjustment of any kind on appraisal reports. I suspect that this is sign of the relatively less effort that appraisers are willing to put into the report, the scrutiny that lenders are giving to anything that is not "black and white", and perhaps even a lower overall level of quality people on all sides of the transaction.
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Old 07-25-2009, 03:11 PM
 
Location: Pawnee Nation
7,525 posts, read 14,540,277 times
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Quote:
Originally Posted by chet everett View Post
Sure the other lots might be much smaller, but as shown, the additional value of lot that is just bigger (and not sub dividable, or sellable for a different zoning classification) can be minimal.
It can be non-existent. It can also REDUCE the value of the property. Excess land (not surplus) can frequently be a liability. A large tract that must be maintained without some sort of a return on the investment of labor is an expense.
Quote:
Originally Posted by chet everett View Post
Lately I have been seeing FAR FEWER adjustment of any kind on appraisal reports. I suspect that this is sign of the relatively less effort that appraisers are willing to put into the report, the scrutiny that lenders are giving to anything that is not "black and white", and perhaps even a lower overall level of quality people on all sides of the transaction.
One thing that has encouraged appraisers to "come in low" has been the willingness of lenders to not do a deal. If they can get an incompetent to appraise a property 20% below its actual value, get either the buyers to add to the down payment or get the seller to reduce their price, the lender is well protected. What happens to the market is that the market continues to reach an "artificial" low just as they hit an artificial high just a few years ago.

Unfortunately it is the borrower who is going to have to hold the lenders and appraisers "feet to the fire" by demanding accurate appraisals. The only way to do that is to show damages to either the seller or the buyer, and prove it in court. This is going to be a VERY hard proof, and I doubt it will happen often, if ever. Absent that, the public is going to have to suck it up and live with it.
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