Unsatisfactory Service
 

I have a situation and could use the assistance of the PBT (Pelican Brain Trust).

In my quest for home ownership, I had 2 appraisals done on a property that I did not purchase, the first being the original appraisal, the second an appraisal review. For the purposes of this, the selling price on this home was $415K. First appraisal came in at $405K and appraisal review came in at $380K. Both of which led to lending not being extended and leading to escrow withdrawal. The home ended up selling for $420K.

I disputed both of these on a credit card having one win and the second did not as I did not complete the required form on the grounds of unsatisfactory service. On the one that was in my favor, I received a letter from the company stating that unsatisfactory service is not an acceptable claim and they are referring me to a credit/collection agency personally. I have since been communicating directly with them but they have refused to any/all rescinding/dismissal of charges on the grounds I noted.

The amount in dispute is approx $300 but I believe that on principle that if an unsatisfactory service was provided, then one should not have to pay especially when an opportunity was made to resolve the disparity.

Just wanted your thoughts. And if it were me and someone was unhappy with my work, I would certaintly hear them out and address the concerns as not to lose a customer but I do not feel that they value this aspect as I do.

What's your complaint? That you wanted the appraisal higher so you could get the loan? Seems to me perhaps you got two honest appraisals of what the property is worth.

My complaint is that the appraised value should reflect similar values not significantly disparaging values. $25K is a huge gap. Both appraisers stood on the fact that their appraisals were accurate and the fact that a property sells for higher than both leaves their appraisal competencies in question in my opinion.

It could be that the buyer over-paid without a loan.

they did what they were paid to do (unless you can prove they were biased in some way)

also, reporting you to a credit agency is a way that corporations can stick it to consumers, without the latter being able to do much about it - if you dispute it the credit agency often just throws it away

if the credit agency does enter the dispute it still doesn't help you much as your credit score will be dinged anyway

since you want good credit to buy the (next) house that is a second reason to pay them

I guess the question might be why did you have an appraisal done? Usually this is handled by the real estate people and they make it work. Were you buying a FSBO?

Also property values have been escalating lately so quickly that the appraisers might not have the comps to back up recent pricing. I'm sure I could get 50K more for my house today than what the comps show because a lot of the comps reflect short sales.

The appraisal itself needs to be inspected.

Was the information about the home accurate?
Was it compared to three or more similar properties that sold recently?

Unless there are glaring inadequacies, and/or the appraisals do not reflect common appraisal standards, it looks like you got what you paid for- A professional opinion of the home's current market value.

You are stuck.

1)- even though you paid for it, the appraisal is the property of the lender who ordered it, and the appraiser did his job and delivered a finished product, which is also a licensed / protected trade.

2)- the house may have sold for $420K but unless the specifics of the deal are known (downpayment, etc. etc or maybe buyers paid cash) that doesn't mean was actually worth that much.

Well, if the deal closed and they did pay $420K then now, it is, but usually in that situation it's a cash buyer- who doesn't need to have an appraisal done.

rjp

I can't understand why they like to appraise homes so low. they benefit nothing from it. I complained about this here some time ago when I try to refi.

Chris, you are not the only one. My home is worth over 600k, I know because I jsut sold (opened escrow) a similar home half a block up the street for 54K more then that just 2 weeks ago. the bastard appraiser appraised it at 370k and report it with all sort of things wrong with the roof and a crack on the concrete pad on the side of the house. He think it may be structural.:rolleyes: Since there wasn't enough sold houses in the area to accurately judge the price of our home and he had to use houses down the hill ( some were short sales and foreclosures). My lender and I were, put it lightly, bend out of shape over it. He said they do it all the time so there isn't anything we can do about it. it took over two months but we finally got it after kicking and screaming with our bank.

Two competent appraisals came in $25,000 apart? And you have to pay for it? I can see their point if both appraisals were close and you were just unhappy with the results, but it looks like they are charging you to make wild guesses at the value of the place. You need to get the details of each appraisal and make them justify their numbers.

An appraisal is an OPINION. Opinions are like arseholes, everybody's got one. Many appraisers are contractors that couldn't cut it in the industry. Just sayin'........

Pendulum Swing
 

Remember that back during the real estate boom of approx 2000 - 2007, many appraisals were artificially inflated. Of course then it didn't matter because all home values were always going to go up forever!!! I have been told by Real Estate Agents and others in the industry that many appraisers got their hands slapped, were threatened w/ lawsuits, etc over artificially high appraisals and now the reaction is to make the appraisals artificially low.

If this is true, the theory that pendulum swings even out would explain current appraisals being much more conservative.

This is the heart of your complaint and from what you've posted, you failed to back it up.

As mentioned, an appraisal is subjective and no two will be identical. There is no direct correlation between an appraisal and final selling price, as noted. You have not shown any evidence of unsatisfactory service, only that you dislike the final report of that service. The service includes the methods used by the appraiser to come up with the report. If those were standard methods used by the industry and used in a competent manner, then the service was satisfactory. In addition, two different appraisers using the same methods and data on the same property will likely come up with different final results--that's how subjective the field is.

I can understand the company sending you to a collection agency. They performed their service as contracted (presumably), produced a report, and expect to get paid for that service. Unless you can show the appraiser failed to use the proper methods or proper data, you cannot say their service was unsatisfactory.

You did not receive unstatisfactory service. You received an unsatisfactory (to you) outcome. You do not have a legitimate complaint. The appraisals were within ten percent of each other and both well under the sale price. Someone overpaid for the property. It wasn't you.

Is it me or is $25,000 NOT that big of difference on a $405k appraisal...we are talking about ~5% difference between the two, sounds reasonable to me.

And whoever said they don't benefit from appraising low, you couldn't possibly be more wrong. Say they just went in and said yep, it's worth whatever the hell you want it to be and 6 months down the line you realize you hate the house and its worth less so you walk away. The bank will want to know why the house was appraised so high when it was clearly worth less.

Just because the appraisal came back lower than the OP wanted doesn't mean they didn't do their job. Sounds like anything less than the appraisal coming back at the offer price would have upset the OP. If the appraisers worked that way it would be useless to have appraisers at all.

agree 100%.

The appraisers are doing their best to determine what an "average" buyer is going to pay for the properties, and it's a bit of a guessing game because every buyer and every house is so different.

Hell, I had three offers on a 430k home last week, they varied by almost 15%... each buyer thought their price was perfectly justifiable, and none of them were "wrong", but only one got the house. How's an appraiser supposed to make a guess that's better than a well informed buyer??

[QUOTE=MRM;7353335] Someone overpaid for the property. I/QUOTE]

Not neccessarily. The appraisal process is generally too simplistic to determine a real value. Plus, the appraisers that I have known really didn't have a sufficient understanding of house construction and construction/renovation/repair costs to really understand what they were doing. Houses vary far too much for there ever to be "comparable" sales and an appraisal is very superficial, at best.

Home inspectors can be equally clueless.

JR

One other thing too: the methodology that the original appraiser used may have been a bit lenient compared to what the lender wanted to see.

What probably happened is they took the original appraisal and compared it to the AVM - an electronic valuation model that lenders subscribe to; it takes the area and uses the address and what's on electronic file at the assessor's office (rooms, sq foot, lot size etc.) and gives the lender an approximate estimated value of the home.

Either the paper appraisal comes close or approximates that number, or it doesn't. It's all based on what the appraiser used for comparables VS. what the AVM is using for comparables. Apprisers like to get cute and use much more expensive houses than the subject and then adjust DOWNWARD to make comps.

Any excessive adjustments beyond a set percentage usually gets the appraisal flagged, also if there are comparables in the area that are a better match than the ones the appraiser chose will get you killed.

Imagine the process like this: say you were buying a condo, and they were middle of the road in value. You have neighbors that moved in last month, and their condo is identical to yours. There are also super high end condos across the street that cost 2x as much per square foot.

If you got an appraisal done, the appraiser has to use the condo of your neighbors that closed last month when they bought it, not the ones across the street as that is an exact match. If the appraiser tried using the one across the street and the lender saw it- good bye, it's over.

Appraisers can get their necks on the chopping block if the lender sues it's determined that the value of the property wasn't there because of improper methodology. They can also get themselves kicked out of the lender (blacklisted) for poor work, so there really isn't much of an incentive for them to stretch values.

Stretching values is one of the biggest excuses / reasons given for the current housing crisis, so they are gun-shy.

Comps have to be based on CLOSED sales, and I think within the last 6 months (could be a year, I don't know the current guidelines), and of course within a 1/2 mile or so of the subject.

If there are no comps that fit the subject then the appraiser has to go further away, then the lender hates that too, so good bye on that issue as well. But, the appraiser can try it, and it's legal but the lender doesn't have to accept it since that method isn't allowed for in the lending guidelines.

It sucks, but that's the way it works.

Coupla points i'd like to make here;

1-Appraisals for residential property prior to buying are worthless. The only one that matters is the bank ordered appraisal used to determine financing suitability. If you are buying as an investment and have enough cash that financing isn't an issue then you should know better than relying on an appraisal to determine value. Pull the comps yourself and study the market.

2-If you actually read the appraisals you might see where the differences in value turn up. The difference is relatively small and frankly not a suprise at all.

3-Agreeing to pay for a service then contesting it on your credit card is theft.

ALso, every appraisal goes through an AVM comparison, if it fails that's a flag and then a field review happens. that 2nd appraisal was a field review, although it's pretty common it's usually a sign that something is pretty fouled up with the appraisal. Actually, I would ask your loan officer why they thought getting a field review was a good idea if the appraisal was that questionable. They kind of threw YOUR money at the deal.

They should've said, "hey it failed the value check, we can ORDER a field review, it's $400, and I don't know if that will make a difference, mr. customer, it's up to you."


A good loan officer can tell if the appraisal is gonna make it or not based on the comps chosen, and I would've strongly told you to drop it had the value not made it and I thought the appraisal sucked. It's a gray area since it seems that I could be talking you OUT of taking a loan of off the road of assistance, a big discrmination no-no.

In 15 some-odd years and probably close to 1,000 transactions of one sort of another I can honestly say I have had less than 5 field reviews I ordered. Then again, back then I got to choose the appraiser. NOt so anymore.