Banks manipulating appraisals?
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?
Replies to This Discussion
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Permalink Reply by Carrie Zwagerman on
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Proud of you!!!
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Permalink Reply by Jeff Payne on
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Julie, I used to do alot of BPOs too and the asset managers tried their best to manipulate the values. I would never let them and finally they stopped sending BPO requests to me. Best thing that ever happened to me was to get fired from doing BPOs
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Permalink Reply by Kevin - Greenville, SC on
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kudos.
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You know I think we have talked enough about this. Who out in real estate land has a file now or in the past year that they suspect bank/investor manipulation of a Short Sale appraisal. I've got one, supported with Comparables.
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Permalink Reply by cynthia holiday on
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I have a loan modification file. I have a current Full Interior Appraisal at $675k present condition with dead on comps. Wells has a desk top at $789K I suspect some bad comps and no consideration for condition.
Is there an easy way to set up a Drop Box account with a spread sheet. Say we upload individual files then fill out the info on the excel spread sheet so we can start organizing the info?
I am not a computer expert so if anyone has an easier way lets get this done like the robo-signer lists.
Also are the agents that have made statements about the attempted bank coercion willing and able to make statements and name the parties in the banks requiring the appraisal fixing?
Is there an attorney that would take this on?
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I spoke with an appraiser yesterday and he told me that a desktop is not even a drive by, they are not required to drive by, just pull comps from their computer.
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Permalink Reply by Ann Howard on
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They would still have to be properties in the same location, size, and condition, and other factors. If they have information that shows the condition of the subject property compared to the condition of the comps how could they justify the price they arrived at?
The market is rebounding and maybe they are holding out for the prices to rise, but given the state of repairs the home is in and the water damage it has sustained which could cause mold issues, seems they should be willing to take what the home is worth. Just like we tell our Sellers, "It doesn't matter what you want or need, the Market dictates what the price is"
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I thought the group might be interested in this development.
The ECOA Valuations Rule takes effect January 18, 2014 for all extensions of credit and includes: Loss-mitigation transactions, such as loan modifications, short sales, and deed-inlieu transactions, if they are credit transactions covered by Regulation B
Link to Manual:
http://files.consumerfinance.gov/f/201305_compliance-guide_ecoa-app...
If your transaction qualifies then your borrower should be able to request a copy of any written valuation by the bank not only the appraisal.
Disclaimer: I have not read through all of this new ruling so there may be exclusions I did not catch yet.
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Permalink Reply by Dianna MacLaren, GRI, SFR on
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Cynthia,
Thank you so much for this information! Hopefully this will help. I've had two short sales fall to this over-valuation practice, and it just fries my bacon! :)
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Don't think a straight short sale will be included as I don't think Reg B applies since it's not "an extension of credit", like a loan mod, but there are probably others here who have a better take on it.
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I understand that on the face it does appear to be true that short sales are not included. However if you review the first few pages of the guide link you will see the intention of the rule IS to include short sale transactions. In my opinion that while short sales may not fall under this ruling directly via Reg B. The valuations rule is in the right direction and can be useful to refer to this ruling on occasion, as this shows that this governing agency has appraisal fraud within short sale transactions on the radar. The last thing that the people working within the lenders want is to be named, or deposed in a new investigation.
Remember you don't have to be able to beat up a playground bully you just have to hit him once to make him go pick on someone else.
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what guide are you referring too?
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