This fine home- and 4 acres- on the Texas prairie, not far from Pisinit Creek, was recently appraised by the cash-strapped city (unable to raise the tax rate) at a mere $25 million....
Posted on 08/08/2009 9:01:36 AM PDT by LouAvul
I'm helping the friend of a friend sell a farm/ranch. It's a unique property for the area and when I tried to find "comps," ("comparable properties") I was unable to do so. There just weren't any comparable properties in our area.
They had it appraised in 2000 and again in 2009. It appraised at $315,000 and $376,000, respectfully. We listed the property at $376,000 and accepted an offer of $372,000.
We were set to close but the day of the closing we learned that Chase Bank's (the buyer's lending institution) appraiser only appraised the property at $315,000, and Chase wouldn't make the loan for $372,000.
The property passed all inspections with flying colors. The local real estate market is strong (we never had the "bubble" or the "crash" of some other markets).
I've left several calls to the appraiser but he won't call me back.
My question is, have appraisers been instructed to tighten up their appraisals in the last six months, so much so that a property loses $61,000 in value? Because, like I said, the property hasn't changed one iota in that time.
thanx.
BTW, the second appraiser, in order to get some comps, had to go to a 10 to 15 mile radius. Ditto the appraiser with the lowball figure.
I just sold a house. In our case the mortgage company for the buyer would NOT accept a power of attorney from the husband to the wife.
I didn’t know that was legal.
Going on the high side was probably a mistake in this market. Most people are sick of overpriced real estate and every property is “unique”.
A general observation regarding real estate at-large (nationally, not locally).
There are many (upwards of one million) mortgages that are in default and that SHOULD be foreclosed upon. However, the banks categorize these mortgages as assets. As soon as they foreclose, they right that “asset” off their balance sheet. The short of it is that many banks would suddenly be insolvent if they were forced to foreclose on defaulted mortgages. They are using every trick in the book to prevent foreclosure...not to be “nice” and “caring,” but to save their skin. We also found out that the FDIC is basically broke ($800 million or so). So maybe there is some collusion among the federal government, the “central bank” we call the Federal Reserve, and FDIC to allow these banks to cook their books like this.
All this to say, the real-estate market (and the finances behind it) is not what it appears.
It’s NOT! A specific power of atty is used a lot in real estate - I had to sign for my then-husband to complete the sale of our property because he had to WORK at the new location before we actually moved.
I’d absolutely challenge that mortgage company! I realize it’s probably too late and you went thru extra trouble to get closed.
Depending on the state, you can file a complaint. That "may" get his attention....Who ordered the appraisal...? You may be able to delay payment until you get a call...
Texas link: The Texas Appraiser Licensing and Certification Board (TALCB)
Chase no doubt used a management company to order the appraisal, not somebody on staff. The strongest indication of value, and the sale given the most “weight” is the actual arms length transaction that resulted in the subject property going under agreement in the first place. If there was no compelling reason to dispute the sale price, then the appraiser was simply lazy and / or incompetent.
In answer to your question, no, appraisers have not been instructed to tighten anything up. They are now free to appraise a property correctly (”it is what it is”) rather than try to appease their masters by dishonestly pumping up values in order to help them get loans approved.
Appraisals can usually be appealed by providing better comparables. Do not go directly to the appraiser. Let the lending institution handle the appeal.
All very true. I’ve read that if ‘Mark-To-Market’ were to be reinstated, many many banks would be instantly insolvent. The same with foreclosures. Many banks are just sitting on their defaulted mortgages, often letting the people live in the property for free for a year or more before foreclosing. If the banks were forced to assume their losses, they would be insolvent. What’s funny is how, due to ‘accounting rules’, they appear to be profitable on paper.
Ghost of Philip Marlowe is right - FDIC is bust. The banks are all teetering on the brink, and nobody is willing to take chances. Also, it is illegal for the appraisers who did the appraisal to talk to you. Everyone is tightening up a great deal just because they WAYYYYYY over estimated values previously.
No comps does make evaluation difficult. Appraisal rules changed in May. Now on a supposed round robin system that is failing miserably.
BTW - forget about the property being “unique”. A good way to get a quick idea of value is to take the average $$$ value per square foot or per acre or whatever in your area and multiply that times the size of your property. If you really want to be conservative on the estimate, take the LOWEST value and use that as the multiplier.
I’m shocked it took until the day before closing for them to get the appraisal to you. We are two weeks away from closing and we already have ours in hand.
The challenge with bank appraisals is always that they compare that home to ones that have sold in the area recently. If you are in a neighborhood with a wide discrepancy in prices, there may not be comparable homes to go to.
This may be a case where you have to go back to your mortgage broker and see if they can find a new lender/underwriter unless you can afford to pay the difference down.
Even if you got 1,000 other appraisers to certify that the property is worth $372,000 you're always going to be tied to whatever a lending institution says.
Maybe I'm wrong, but I would think Chase has all the authority they need to simply say: "Fine -- you've got 1,000 people to say it's worth $372,000 . . . we're not going to lend more than $315,000 against it, so if you don't like it then find another lender."
Is there any way the buyer can come up with a larger down payment to cover the difference?
This fine home- and 4 acres- on the Texas prairie, not far from Pisinit Creek, was recently appraised by the cash-strapped city (unable to raise the tax rate) at a mere $25 million....
You need a separate Corporate Power of Attorney for almost every financial institution in this county.
Have the buyer apply for a loan at other banks and mortgage companies. They all use different appraisers and you and the buyer may luck out.
Differences in appraisals happen even in good markets, and now with the market down and all the mortgage problems, banks and appraisers are even more conservative.
I am not sure it’s true, but with the changed law, I think I read that appraisers can be sued for appraising a property “too high”, i.e. it value goes down.
As an earlier posteer said, the new appraisal rules are in the category of “the cure is worse than the disease”.
Farm/Ranch? I seen many posters here talking about buying land for farming. I would venture a FR would be interested.
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