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....
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.
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.
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.
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....
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.
based on what I read in the trade pubs, New Home Builders feel they are getting screwed by appraisers.
Two are mine and two I inherited.
Appraisals are off the chart in conservative.
Appraisers don't want egg on their faces and banks have let the fox (government) in the henhouse and are scared too.
I have heard that one third of appraisals are coming in light on what folks are willing to pay....at least in the nicer areas of Nashville which has mostly escaped the downturn except in starter homes....this trend will eventually get back to normal...i think appraisers are just scared...a lot of psychology goes into appraiser minds...some good/some petty. I have commissioned over 70 commercial appraisals in the past 12 years
I opine here frequently on borrowing commercially. I can tell you that banks that used to call me begging me to move my loans to them are now tight as tick.
They took those tarp loans and paid off their bad debt....none of that except indirectly is being used to fund new lending.
Your radar that something is up with appraisers is dead on. I got into it with appraisers for a refinance deal and learned the following:
1) The mortgage lender picks their appraiser and disregards any other appraisals, even if it was done in the last six months. The mortgage lender will most likely bring in a national appraisal company so local appraisers cannot skew the appraisal in the property owners favor.
2) The appraisers are to be left alone, no arm twisting or complaining by your brokers to get the deal done (very common in the past according to my broker).
3) The appraisers will only do comps that are less than six months old and within a few miles of your property.
4) The appraisers have been given marching orders to drive the market prices down. I discovered this by calling them out on my appraisal for picking comps that were not physically close to my property and for adjusting the square footage spread very unfavorably for my property (their excuse, we can do whatever we want so take a hike).
The nature of unintended consequences is that the “new” appraisal approach will protect banks from bad future loans but is going to kill the existing market for refinances and selling of old property (like yours) and will eventually impact the tax revenues of local communities when every one uses their “new” appraisals to reduce their taxes.
Perhaps the buyer should go with a different lender and tell Chase to go pound sand.
appraiser opinion, please