Just had a nice long conversation with an appraiser who is getting alot of REO and short sale appraisals.  Out of frustration, I called him to seek understanding of a recent appraisal that we just got for an REO property.  The property is worth 450,000 to 500,000 in repaired condition at best, assuming we used the highest priced sales in the neighborhood.  The home is in very bad disrepair.  We had 13 inches of rain the two days before the appraiser did his report and the house filled with water from a major roof leak. Enough water that your pant legs would be we up to 4" up.  The home needs about 150,000 in repairs and updates minimum to make it worth 450,000 to 500,000 and then 450,000 might be a long shot.

The appraisal came in at $495,000 in as-is condition.  No repairs were mentioned and the home was considered to be in average condition.

House has been on the market for 4 weeks, we had two offers come in, both at 250,000 and one countered at 275,500.  Bank rejected because they were too far off from appraised price.

When I met with the appraiser, he was very excited to get these appraisal orders.  He went on to tell me that the bank tells him which comps to use and what adjustments to make and that he rarely gets to do an appraisal based on the comps that he thinks are closest.   

How would the bank benefit from overvaluing a property and letting it sit on the market?  Insurance? MI?  Anyone care to guess?

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Thanks Ron, first off he is certainly not my friend :)  Just got word that another appraisal that he did on an equity sale for a waterfront property did not appraise for enough.  

Back to the original post, yes he did a full interior appraisal.  

It is about money and nothing else.  Obviously the business he is getting is more important than any ethical or moral issues.   

It is one of the big 3 banks that hires thier own appraisals thru a company that they own. 

Brian Avery, it is already a foreclosure, it is a bank owned property that he was appraising.

Funny part is that he over values every single REO property and undervalues EVERY appraisal for a purchase.  Out of the last 4 that he did, 2 were REOs that were overvalued grossly and still have not sold and 2 were for purchases that came in too low.  One in particular was appraised for 230,000 and actually sold when that deal fell apart for 275,000.  

My guess is that for some reason they don't want it to be used as a sold comp at the moment.

No surprise here. Values are being inflated again are are going to come crashing down in the very near future.

I agree with Bryant. Our current "unreal" estate market is a mirage manufactured by government and the banks. What Jeff s experiencing is just part of that manipulation. The banks know the whole economy is a sham and the housing market recovery is not real. The are just trying to keep the show going a while longer so tey can milk it. I would recommend checking to see if that same bank owns another REO nearby that they are trying to inflate by overvaluing this other property. I think that is what Kevin was saying as well, by the bank not wanting it to be a sold comp right now.

Based on my experience, if you want to know what a property is really worth (especially a deeply distressed property), the last person to ask is an appraiser. Even without the banks helping them violate USPAP, most appraisers cannot make their artificial +/- valuation method actually match what buyers value. Since buyers determine market value that is a problem. There are a few good ones that get it, but typically not the ones that work for the big appraisal mills.


Just another sad, sad tale in a long line of sad tales about "too big to fail" banks.  JPM, C, BAC and WFC (at the very least) all need to be broken up and Glass-Steagal needs to be reinstated.  They aren't just too big to fail, they're too big to manage.  Any "real" banker would know what a fiasco your story is, Jeff. 


Wow, never heard that before. That appraiser could (and should) loose their license and the Bank should be reported to the Feds, it's influencing the appraisal and against the law.

Greed pure and simple. Greed on the part of the appraiser wanting to keep the bank happy and get more business and greed on the Bank thinking someone would step up and pay more with a higher appraiser.

Just when you think you've heard them all, shame on them both!


The bank might have to keep it on their books in the asset column. Don't forget, they have to balance their numbers each quarter for their stockholders. Once the property is sold they have to write off the loss which now goes into the liability column. It's a numbers balancing game. They can only have so much loss each quarter to balance their books to show a profit. Remember a bank is a for profit business.

Did I miss something? Isn't the obvious answer to why a bank would do this is because they are paid by the investor monthly for a property until it is sold. Not sold,  monthly payment continues.

You stumped me on your later comment of low appraisal for purchase - I can't think of why a bank would be pleased to not get a new asset to sell off to another bank or collect monthly maintenance from the investor for it. Unless the bank is scamming the selling bank by going back demanding a lower price after a short sale approval (or to the seller if not an SS - easier prey)? Thus giving more value to this property in case of a future foreclosure?  If banks are stingy about making loans, as they are right now, maybe they are happier to hold off unless they get a property 20% undervalued?

2 yrs ago, I was told an appraisal had completed, but the bank didn't get the number - I always stay on top of when the appraiser actually goes out and get on the bank right away to minimize delays I found from the bank when I did not get on them right away. Well, after a week of no number, I called the appraiser. He refused to take the invalid comps from the bank and it was a stand-off.  (Apparently not like your "friend", this guy won't violate the law to keep the business coming from the bank - gee, I like people like this.)

I assume your fellow is a part of the corrupt system that got us into this mess, manipulated by the usual money people in/behind the bank who make their killing and move on if things get hot. I'm sure appraisers have been scrambling to make ends meet after the market hit the skids, too.

It is my opinion that. BOA should be shut down and those involved in this mess convicted of fraud. It is laughable that we are asked to sign arms length affidavits and yet look at this where they are fudging the appraisals. They want the insurance and don't obviously want the house to sell. If it goes to foreclosure then they get the insurance. The insurance companies should be going after BOA for fraud. Good luck. Perhaps see if they will do a deed and lieu and cut your losses.



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