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I think you asked a very simple question, and my knee jerk reaction would be "yes", this may be fraud. I have been appraising for over 30 years and do not understand the answers you've been given thus far. 1) It is true that only your lender (and/or managment company) will get a copy of your appraisal. Appraiserss are not even allowed to send it to the applicant regardless that you may have paid for it. 2) Appraisers are required to analyze the sales contract for things such as seller concessions, seller contributions, personal property, etc. being included in the sale price and their impact on price. 3) The sales price is not a consideration except for ascertaining if the property does or does not fall within a range indicated by market and sale data. 4) Value is not arbitrary, and any change upward or downward requires explanation. Receiving a different sales contract with a different price is not an adequate reason UNLESS there is something in the contract that might indicate a value increase - such as: seller contributing monies toward replacing a roof or some other capital improvement or major repair. Personal property is not real estate, and lenders to not mortgage personal property. For this, one would need to determine how much personal property is contributing to the sale price (if any). I mean substantial personal property, not things like curtains and rods. If the report is an exact copy except for the value change, I find it difficult to believe that the same lender, upon review of the two, would accept such the revised appraisal, particularly if it wasn't explained. It also seems that the value range spread must have been wide enough to encompass a range between $195K and $210K. That is a little broad for my taste, but it's possible that there were few sales to work with. Regardless, I'd be checking my adjustments and/or including additional sales data to derive a more narrow range.
Other possible reasons for a value increase is a change in market conditions, such as values are rapidly increasing, the property has had multiple offers, incentives are involved, list price was low, seller wanted a quick sale, rates were recently lowered, supply became limited, etc. It sounds like the appraised value change took place within a matter of days; therefore, I doubt market changes are probable reasons.
Even if the revised appraisal were sent to a different lender, appraisers are required to report any prior appraisal services performed on the property within the previous 3 years, and that would likely raise a red flag.
I actually performed review services for two different lenders over this exact situation where an appraiser submitted two different reports for the same property using the same sales data and raised the value. Neither lender was aware of the other as this appraiser did not disclose the prior service. I did note that in my review of the revised appraisal that adjustments to the sales comparables were changed to elevate the value conclusion. However, the change in adjustments was not defended or defensible. Not disclosing prior appraisal services is an ethical violation of the Uniform Standards of Professional Appraisal Practice (USPAP). So is rendering a misleading and confusing report to any defined user. If nothing else, the appraiser is probably in violation of USPAP. Fraud is a legal question, and I am not an attorney; hence, hesitate in offering such determination. If it were me, I would question the reports with the lender. If that is not satisfactory, and you believe that something is very much questionable, you could hire another appraiser to perform a review service for you. If something amiss is detected, you can contact your state's department in charge of licensing and file a complaint along with copies of the apprasials and the review appraisal. If for any reason this appraiser is a member of any appraisal organization (such as the Appraisal Institute), a complaint may also be filed with the organization.
FYI - I did contact both lenders over my review appraisals, and I filed a complaint with our state department for further investigation due to USPAP violations. Their findings were in accord with mine.
Appraisers DO and SHOULD know the contract price. That's the law.
any appraisal is "an opinion of value" by the appraiser- why would an appraiser want to know the contract price? this would be too much bias for or against an objective appraisal
the purpose of an appraisal is to attach a range of value to a property based on value factors
the bank wants to know what the fair market value is -in todays r.e. market
banks have to minimize risk, so if the appraisal comes back 50k below contract price, then this might be outside thier risk factors...
the appraisal should be objective...
now, have r.e. agents called appraisers and said,,,wtf??? yes and will ask how they justified or validated the value....ive also seen r.e. offer comps and give to appraisers..
I had my home appraised a few years back,,,I took comps of what sold of like properties and had my value range,,,,
the appraiser did the appraisal....and he used comps of properties 5 towns away and 8 months old....
I had comps,,,he didnt even look (like properties nearby that sold recently) at , so we had an intersting conversation
The Uniform Standards of Professional Appraisal Practice (USPAP) are the set of rules that all licensed and certified appraisers are required to live by. They have been adopted by law by all states and all federal agencies. Appraisers MUST comply with them. Period.
"USPAP Standards Rules 1-5(a) and (b) require an appraiser, when the value opinion to be developed is market value, and if such information is available in the normal course of business, to analyze (1) all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal and (2) all sales of the subject property that occurred within three (3) years prior to the effective date of the appraisal."*
*As stated in Advisory Opinion 1 (AO-1) of USPAP.
It is extremely rare for the current agreement of sale not to be available to the appraiser in the normal course of business. The appraiser is still allowed to appraise the property in this case. But in my experience, if the appraiser were to report that the agreement of sale were not made available to the appraiser after he/she requested it, this lack of disclosure raises a huge red flag to the lender and bank regulating agencies.
any appraisal is "an opinion of value" by the appraiser- why would an appraiser want to know the contract price? this would be too much bias for or against an objective appraisal
the purpose of an appraisal is to attach a range of value to a property based on value factors
the bank wants to know what the fair market value is -in todays r.e. market
banks have to minimize risk, so if the appraisal comes back 50k below contract price, then this might be outside thier risk factors...
the appraisal should be objective...
now, have r.e. agents called appraisers and said,,,wtf??? yes and will ask how they justified or validated the value....ive also seen r.e. offer comps and give to appraisers..
...
Knowledge of the current contract price is not used to assist the appraising in deriving a market value estimate. But it is a tool that helps to uncover fraud on behalf of the borrower. If anyone remembers the huge S&L failures of the '80s - you will recall that some properties were bought and resold several times in the same day with the sales price going up drastically over the course of 24 hours. The appraiser also needs to know of any other transactions in the last 3 years - for instance if the property sold in 2010 for $150K and in 2012 for $250K, why is that? Renovations, changes in the market? Something the appraiser and the lender both need to know.
Never heard of "attaching a range of value". A range of value is typically derived in the appraisal analysis, however market value is reported as a specific value not a range.
And you are saying that agents ask "wtf" and ask how they justified their value? WTF INDEED??? That would not only be unprofessional but also unethical. That is not the agent's business and the appraiser should tell them as much.
50K below contract price outside of their risk factors? Never heard of that - this is not an accurate description at all. Basically banks work on loan to value ratios. If the value comes in that far below the contract price, the borrower will be required to have that much more in cash as a down payment, if he (stupidly) decides to go ahead with the loan.
After all of the above silly and inaccurate comments, I find it hard to believe that you are a licensed broker. If you are, you need some more education I'm afraid.
Knowledge of the current contract price is not used to assist the appraising in deriving a market value estimate. But it is a tool that helps to uncover fraud on behalf of the borrower. If anyone remembers the huge S&L failures of the '80s - you will recall that some properties were bought and resold several times in the same day with the sales price going up drastically over the course of 24 hours. The appraiser also needs to know of any other transactions in the last 3 years - for instance if the property sold in 2010 for $150K and in 2012 for $250K, why is that? Renovations, changes in the market? Something the appraiser and the lender both need to know.
Never heard of "attaching a range of value". A range of value is typically derived in the appraisal analysis, however market value is reported as a specific value not a range.
And you are saying that agents ask "wtf" and ask how they justified their value? WTF INDEED??? That would not only be unprofessional but also unethical. That is not the agent's business and the appraiser should tell them as much.
50K below contract price outside of their risk factors? Never heard of that - this is not an accurate description at all. Basically banks work on loan to value ratios. If the value comes in that far below the contract price, the borrower will be required to have that much more in cash as a down payment, if he (stupidly) decides to go ahead with the loan.
After all of the above silly and inaccurate comments, I find it hard to believe that you are a licensed broker. If you are, you need some more education I'm afraid.
feel free to go hump someone elses leg.....
these forums allow us brokers to be more casual.. so if you cant take a joke....no sense responding to you
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