In May I wrote a post about the changes in the appraisal rules that were taking place as of May 1, 2009 for residential property appraisals. I know some of you thought I was exaggerating when I noted that we just might be seeing out of area appraisers using comps from North Redondo to value Manhattan Beach property.
It wasn't a joke and I had it happen 2 weeks ago on a property I sold in Manhattan Beach. The appraiser was from Granada Hills and worked for a company out of Costa Mesa. He valued the property a $100,000 below the sale price... He used a similar home on a 7500 lot in east Manhattan, a home ineast Manhattan on a 4900 sq ft lot and a newer two on a lot townhome in North Redondo which he said was a single family home. He took a picture of the property but still didn't quite figure out that that it was not a 67 year old 915 sq ft house. He also used another home in North Redondo and a pending sale in Manhattan on a smaller lot that was very close to Aviation.
When was questioned about the value he stood by his appraisal and said he was very familiar with the South Bay and added homes in the Golden Hills across from Mira Costa that were on 25x100 lots as additional justification for his value.
The problem of course is how this affects the buyer and seller. The buyers wound up having to resubmit their loan to a new lender because under the HVCC rules if the appraisal comes in at the sale sprice they do an automatic review but if it comes in uner the list price they will do an appeal but not a full r eview appraisal. The buyer had to pay for a new appraisal. This time the lender requested that the third party company use a local appraiser... and the local appraiser brought in a price that was higher then the sale price.
It wasn't a joke and I had it happen 2 weeks ago on a property I sold in Manhattan Beach. The appraiser was from Granada Hills and worked for a company out of Costa Mesa. He valued the property a $100,000 below the sale price... He used a similar home on a 7500 lot in east Manhattan, a home ineast Manhattan on a 4900 sq ft lot and a newer two on a lot townhome in North Redondo which he said was a single family home. He took a picture of the property but still didn't quite figure out that that it was not a 67 year old 915 sq ft house. He also used another home in North Redondo and a pending sale in Manhattan on a smaller lot that was very close to Aviation.
When was questioned about the value he stood by his appraisal and said he was very familiar with the South Bay and added homes in the Golden Hills across from Mira Costa that were on 25x100 lots as additional justification for his value.
The problem of course is how this affects the buyer and seller. The buyers wound up having to resubmit their loan to a new lender because under the HVCC rules if the appraisal comes in at the sale sprice they do an automatic review but if it comes in uner the list price they will do an appeal but not a full r eview appraisal. The buyer had to pay for a new appraisal. This time the lender requested that the third party company use a local appraiser... and the local appraiser brought in a price that was higher then the sale price.
The buyer is confused... how can this property be worth $xx the day they purchsed.. then only be worth $x and then suddenly be worth $xxx a week later. The buyers now believe there is something fishy going on with the lender to get such different values by so called "professionals" and they feel they are being screwed on the price. I can't say I blame them for their feelings. The want to use the first appraisal value and feel the second value was too high. The whole thing stinks.
The seller, on the other hand is relieved that the second appraisal was so much higher. However all is not over because now that the appraisal came in a full value it must go through a review appraisal. This was not required when it came in under the agreed upon price but it is required if it comes in at the price. I hope everyone is following this scenario...
Since May 1, 2009 when the new law was passed... at the behest of Andrew Cuomo... there have been numerous problems very similar to the one I noted above nationwide. Most of the issues are based on two things... first the price the buyer pays for an appraisal has gone up a lot.. in the past my buyers would have paid about $375 for an appraisal ... this one was almost $460. If there were questions about the appraisal, a review appraisal would have immediately been ordered at no cost to the buyer. The buyer now had to pay full price for a new appraisal... that just doesn't seem right.
The second issue is that the third party companies who were brokering appraisals sent them to appraisers who were willing to accept the least amount of money. This means that most of the appraisers used by these companies were new or possibly not quite as qualified. Local and /or experienced appraisers were no longer wanted because they expected to be paid for their knowledge and expertise. Now this is not to say that a newly licensed appraiser isn't competent... many are very good... but if they are coming from Riverside or Northeast Orange County then they just may not know the area.
The complaints have been so numerous from across the country that on June 25th, Representatives Childers (D-MS) and Miller (R-CA) introduced HR 3044, legislation that calls for an 18 month moratorium on HVCC. Whether or not the bill passes... and it looks as if it will... the issues has been addressed far quicker then I expected.
The seller, on the other hand is relieved that the second appraisal was so much higher. However all is not over because now that the appraisal came in a full value it must go through a review appraisal. This was not required when it came in under the agreed upon price but it is required if it comes in at the price. I hope everyone is following this scenario...
Since May 1, 2009 when the new law was passed... at the behest of Andrew Cuomo... there have been numerous problems very similar to the one I noted above nationwide. Most of the issues are based on two things... first the price the buyer pays for an appraisal has gone up a lot.. in the past my buyers would have paid about $375 for an appraisal ... this one was almost $460. If there were questions about the appraisal, a review appraisal would have immediately been ordered at no cost to the buyer. The buyer now had to pay full price for a new appraisal... that just doesn't seem right.
The second issue is that the third party companies who were brokering appraisals sent them to appraisers who were willing to accept the least amount of money. This means that most of the appraisers used by these companies were new or possibly not quite as qualified. Local and /or experienced appraisers were no longer wanted because they expected to be paid for their knowledge and expertise. Now this is not to say that a newly licensed appraiser isn't competent... many are very good... but if they are coming from Riverside or Northeast Orange County then they just may not know the area.
The complaints have been so numerous from across the country that on June 25th, Representatives Childers (D-MS) and Miller (R-CA) introduced HR 3044, legislation that calls for an 18 month moratorium on HVCC. Whether or not the bill passes... and it looks as if it will... the issues has been addressed far quicker then I expected.
I believe there should be some changes. Lenders should not be able to influence appraised values. However lenders should be able to request that local appraisers be used. There is a big difference in price between North Redondo and East Manhattan. There is more then a $5000 difference in price between a 4900 sqft lot in east Manhattan and a 6600 sq ft lot in east Manhattan and there is an even bigger difference between a 5000 sq ft lot in North Redondo and a 6600 sq ft lot in east Manhattan Beach.
2 comments:
Kaye,
Regardless, prices are slowly tumbling down...
anon 6:15,
Yes they are...
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