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 cynthia holiday on
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Please see link in previous posting.
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Permalink Reply by Kevin - Greenville, SC on
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too little too late. 2014?
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Until then, I find well worded and document supported agency complaints have reliable efficacy.
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Permalink Reply by Scott Korbin on
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Has anyone mentioned that by the bank's booking the value at the higher number, it reflects better on their balance sheet for the most recent quarter, something about which every bank CFO and CEO are concerned and upon which they remain focused.
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Permalink Reply by Karen Mordus on
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I'm having the same issue here in Delaware, not the big numbers here but still affects the parties the same. The property appraises at $165k max, Wells Fargo appraises it at $187k. This home is in need of a new septic field and new well. Yet none of these repairs were acknowledged on the appraisal. I have been told not to submit anything under $185k that it will be turned down. Then they put my file into the DIL department for consideration. What is going on here? I'm not going to but a buyer through any cost for inspections and appraisals when I know it's going to be turned down, so I need to concede?
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Permalink Reply by Ellen Dittman on
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I spoke with an agent that claims to do 100+ BPO's a month. Said the same thing, bank tells them what comps to use and what adjustments to make.
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Permalink Reply by joe beauchamp on
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Kind of interesting - how can a bank justify hiring a BPO agent to write down exactly what the bank employee would write down? Only using an agent to add false legitimacy to their process. Robo-signing by remote control?
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Permalink Reply by Jim McCormack on
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You have to understand the way that bankers now think. They do not care about the actual outcome of a situation. They only care about the external appearance that situation gives. In other words, bankers don't care about being good. They only care about looking good. Therefore, with their short sale files they just want CYA documentation to "show" what they want it to show so they can "prove" that they tried to get the best outcome for the loan investor. Whether they got the best outcome or not is irrelevant. The same is true for REO's. I have purchased 6 in the last 2 years and every one was grossly overpriced initially. As a result they ended up selling the houses to me cheap. Why? Because they wanted the appearance of trying to get the highest possible price more than actually getting the highest possible price. As real estate pros, we all know that it is most important to price a house correctly right out of the gate because the first buyers interested are probably the most motivated to buy it. Banks don't care about this and don't think this way. They just want to be able to show that they started out high and were forced to lower the price over time because of market conditions. It does not matter to them that they end up getting significantly less for a house. For example, I purchased a newer townhouse that was in a nice neighborhood. It was a HUD home listed at $105,000 due to their AS IS appraised value (don't even get me started on their worthless appraisers). The house was cosmetically beat up bad and was missing all appliances. Eventually, they dropped the price to $94,500 and after over 2 months on the market accepted my bid of $63,423. I spent about $24K in renovations and holding costs and resold it for $120K. HUD could have sold it for at least $80K if they just priced it right from the start.
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Permalink Reply by Ryan C Sanford on
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Hi Ron-
I would lodge a complaint against him with what ever regulatory agency that governs appraisers in your area. This is hindering recovery in your area, if he is in fact under valuing resales, yet overvaluing short sales and admits to it- he should lose his appraisal license. This is hurting the entire economy.
Ryan
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Permalink Reply by ALLAN ARTHUR on
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Hey Jeff,
Ive been following this discussion since you started the thread. It truely looks like the the banks are manipulating the real estate market from Coast to Coast. we know the banks get paid by the investors to service their investments. This manipulation is at the expense of the Investor, the Banks make it for a property to sell the more money they make pushing their bottom line up at the expense of the Consumer, Real Estate Industry, and Investor. ( After I typed this, I said to myself who can this discussion be escalated to who isn't making money on this manipulation. Truely not Congress there is not a stateman amoung 'um, Oh I know N.A.R. or one of the other Proffessional Organizations. All is rosey for them too! who would take this and run with it...Oh I know the Justice Department!! LOL. We Can't even agree to create a data base of possible fraudulant actions......Though many of us claim to have experienced this manipulation. It sort of it is up to us...)
What is the membership of SSSS? a small fraction of the industry it serves.
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Permalink Reply by Mark Sawyer on
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It doesn't seem to matter to anyone in a position of authority. I have filed formal complaints to no avail with the State Real Estate Commission regarding brokers and appraisers who provide fraudulent valuations and appraisals. Recently, a BPO agent submitted a value on a derelict property nearly $100K over the nearest, best, most recent comp. The BPO Broker simply wanted the listing - judging by the broker's track record, barely $1MM annual production that broker should be in another line of work.
Another one of the big three is using staff appraisers. I had an approved short sale and they sent one of their staff appraisers to reevaluate the property. That appraisal came in $115K over the approved sale price. It turns out that this was the first appraisal the appraiser had done in over 10 years. The lender recruited her from the list of inactive appraisers maintained by the state. She had been selling cookware for a department store chain for the past ten years. I challenged the validity of her appraisal based on the buyer's appraisal and her credentials and the sale closed at the originally approved value.
The point of all this is that the lenders don't care about reality and with ruthlessly manipulate value for their own benefit regardless of any ethical, moral or legal consequence. Regulatory authorities let them utilize these practices simply because they must support the current dynasty's claim that the economy is recovering. They are all aiding and abetting a fraud being perpetrated on the citizens of our country.
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Amen Mark. Anyone who thinks politicians are going to fix this is dreaming. I have filed complaints with state and federal representatives from TN and even a US Senator. Nothing happened. As you said, the government is complicit in this false recovery narrative and the marching orders are coming straight down from president BO.
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