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Andyg
08-21-2009, 07:15 PM
Sorry for the long rant.

My wife and I are buying a cabin/lot in Northern Wisconsin. We have been looking in this area for over a year now and finally settled on a place. We looked at building on empty lots, but they wanted too much money for empty lots and they didn't have very good lake frontage. We found a property that had a run down cabin on it and negotiated with the seller down to what I thought was a reasonable price. We would have to tear down the old house to build our new cabin.

So I talk to the local bank to get financing for this property and we decide to use a Lot Loan to buy it, allowing us to tear down the existing house. The bank ordered an appraisal from a local appraiser. The appraiser was supposed to appraise just the value of the land and not the existing cabin to see if the purchase price was in the range of the value of just the land. Well of course the appraiser appraised the full property including the house. The land portion of the appraisal came in around $45,000 less than what I was expecting based on this method. You know the method where they list the land value and value of improvements. As part of that appraisal the lot was valued at $180,000. I guarantee either the bank forgot to tell the appraisal company or the appraisal company didn't listen to the bank to have just a lot appraisal done. Now the appraiser is saying that even if they do just a lot appraisal it will come back at $180K. I understand their logic as how do they say one day the lot is worth only $180K in their original appraisal and the next day it is worth $225K. The problem is they are fricken crazy.


Based on all of the empty lots that I was looking at I figured this property with out a house was worth the same if not more than the empty lots on the lake. All of the empty lots left on this lake have asking prices between $235K and $250K, which means I could realistically get them for between $215k and $225K in today’s market. The lot we are trying to buy has 195 ft of frontage while all of the other lots have between 130 and 150 ft of frontage. So based on what I think I could get the empty lots for I expected this lot alone to appraise for somwhere around that. Not only does this lot have at least 40 ft more frontage it is level sand beach and has a two stall boathouse. All of the empty lots have elevated frontage and stone or gravel beaches and no boathouses.

There are not many empty lots on this lake and if they think I can get 195 ft of frontage on this lake for $180K they are nuts. The most recent lot that sold has an extremely steep bank and no beach. It has 133 ft of frontage and went for $179K. So they told me that the extra 60ft of frontage and the level sand beach are only worth $1K. I am so pissed right now I can't believe it. This appraiser by not doing a thorough job has screwed me. I have until tomorrow to have my financing contingency removed so I will be canceling my contract at this point.

My frustration lies here with how obvious it is that this piece of property is worth more than $180K. I know this market extremely well and would love to buy a 190 ft of frontage for $180K. However I would get laughed right out of any realtor’s office if I tried to place an offer like that.

I have no idea what to do know, other than walk away. I am so PISSED!

WilliM1940
08-21-2009, 09:32 PM
Maybe there is an inside job cooking to acquire the property for a preferred customer now that you have scoped it out. Hidden markets exist.

JimN
08-21-2009, 10:05 PM
Does the appraiser think you're from Chicago?

j2nh
08-21-2009, 10:13 PM
Happened to me once.
Get a second appraisal. Talk to the appraiser beforehand and explain the situation and what you are looking for. Bet it works out. Don't give up.

JohnE
08-22-2009, 01:18 PM
I was going to say the same thing. Have another appraiser do just the land.

FancySauceRules
08-22-2009, 01:57 PM
Appraisers are completely gutless these days and have zero to gain from appraising at the real value. They under appraise everything so as to avoid liability later. They no longer are hired based on relationships or talent, so they just simply don't give a sh#t. They old way of appraising(wink and handshake between mortgage broker) screwed the banks, now the new way screws us.

If you can't tell, I just got screwed too. My 600k+ property appraised for 490k based on completely false appraisal assumptions.

Finnsdad
08-23-2009, 01:37 PM
Hey FancySauce, what do you do for a living? Maybe I should come on here and say that everyone in your field is incompetent. Have you gone to school for appraisal, done a 2000 hour + internship, pass state and federal exams, had your work reviewed by a state review board, gone to continuing education?

You did get screwed, but it was not by the appraiser it was by the real estate market. An appraiser does not make up numbers or just decide what a property is worth, it all comes down to what similar properties sold for and are currently listed for. You should be happy that you did not get yourself into an even bigger mortgage and get further upside down in your house.

PS, guess what kind of business I own?

JohnE
08-23-2009, 01:50 PM
Finns, now that you got that off your chest what do you suggest to the OP?

Sounds like the land should appraise at what he needs it to. He even can provide plenty of comp's it seems.

cbryan70
08-23-2009, 02:02 PM
Hey FancySauce, what do you do for a living? Maybe I should come on here and say that everyone in your field is incompetent. Have you gone to school for appraisal, done a 2000 hour + internship, pass state and federal exams, had your work reviewed by a state review board, gone to continuing education?

You did get screwed, but it was not by the appraiser it was by the real estate market. An appraiser does not make up numbers or just decide what a property is worth, it all comes down to what similar properties sold for and are currently listed for. You should be happy that you did not get yourself into an even bigger mortgage and get further upside down in your house.

PS, guess what kind of business I own?


Well considering the other vacant lots with less lake front is going for about 40K more I would say they screwed up......

Andyg
08-23-2009, 04:26 PM
An appraiser does not make up numbers or just decide what a property is worth, it all comes down to what similar properties sold for and are currently listed for. PS, guess what kind of business I own?

Unfortunately I don't beleive this in this case. How does the appraisal of the house and property come in within $3000 of my contract price, which is $10,000 less than the assessed value. I am not that savy to have taken their asking price of $280,000 and negotiate it down to withint $3000 of its appraised value. Based on my experience, 9 appraisals in the last 7 years that most appraisals are done by fudging numbers and using comps that are not exactly the best comps until they get a number they are looking for.

There are two lots that are comps that have sold in the past year on this lake, actually the second is on a lake that is attached to the lake I am on which is less desirable based on the market prices I have seen. One sold for $179K (133 ft of frontage) and the other for $236K (240 ft of frontage). If you go off of these two real comps how on earth does 193ft appraise for 180K. Even if you split the differenct based off of the frontage of the two comps it should have appraised at $211K. So they are off by $30K.

My first question to the bank on Monday is going to be about the other lots on the lake. I am going to ask them if I were to put an offer of $225K in on one of the empty lots (150 ft of frontage) that they are asking $250K for would they not be able to give me a lot loan because these properties are only worth $180K according to their appraiser? I will be telling the bank they can either have someone else do an appraisal or give me my $375 back that I paid for the first appraisal and I will take my business elsewhere.

Andyg

Finnsdad
08-23-2009, 06:36 PM
Just like in anything, experience and talent varies greatly. Just think, every day hunderds of people trust their life to the worst commercial pilot in the country.

Did the guy doing your appraisal screw up are do a bad job? Sounds like it. Unfortunatley, you will not have an easy time getting your money back because the fee for an appraisal is not contingent on a deal working. It is that way for ethical reasons.

Since May 1st, most lenders can no longer choose which appraiser will complete the report for a loan. It needs to be based on a rotation, or ordered through a 3rd party vendor. Most big banks have gone the 3rd party route. So, the 3rd party company will find the appraiser who will complete the report for the least $, and then charge the bank much more (typically 50-100% more). Of your $375 fee, the appraiser likely saw $250 or less. By going to the lowest bidder, inexperienced newbies and part times have gained a large market share. It is also becoming more common for appraisers to come from larger markets to rural areas because they will complete the report for less. Andy, where was the appraiser from in relation to the lot?

Here are a few things everyone should do to help prevent appraisal issues:
1. Go to a local bank/credit union. Smaller institutions can still pick the appraiser, so you know they will choose someone they have a working relationship with.
2. Find out who the appraiser will be right away, and look them up with the state licensing board. If they have any judgements agianst them or are from a long distance away, demand someone else.
3. Find out when the appraiser is coming and meet them at the property. Be sure to point out any features and upgrades so nothing is missed. Give them a list of what you have done the house since you bought it or the last appraisal. If you have a copy of the blueprints, make that available as well to make sure the square footage is accurate in the report. If you have comparable property data, give copies of that as well.
4. If you are buying a property, make sure your realtor is there to meet the appraiser too. For what they make, it is not to much to ask for them to be there to answer any quesitons the appraiser might have.


If anyone has other appraisal related questions, feel free to PM me.

Double D
08-23-2009, 07:51 PM
All good suggestions. I can only bring to the thread that I had an appaisal done on my house so I could get a new HELOC (Home Equity Line of Credit) and build my new garage. In my situation, with the new government imposed requirements, the bank has to order the appraiser and they pick from a rotation. The first guy did a drive by and the bank paid for it. It came back at what it appraised for back in 1999 when I built it ($160) and I was shocked. I had an appraiser friend look through it and he found many mistakes. I worked with the bank, pointed out the issues, and they aggreed to order another appraisal, a walk through but I would have to pay for it. I agreed and was here when they guy showed up. I discussed what I was trying to accomplish but never threw out any numbers. The second appraisal came back at $216 and the bank honored it.
The HELOC was put through and I have my new garage.:)
So try to work with the loaner and get them to order and honor a second appraisal and be there when they show up.
Good Luck!

Finnsdad
08-23-2009, 07:58 PM
The first guy did a drive by and the bank paid for it.

It should be made clear that a drive by appraisal was done because that is what the bank requested, not because the appraiser choose to do it.

JimN
08-23-2009, 08:17 PM
Unfortunately I don't beleive this in this case. How does the appraisal of the house and property come in within $3000 of my contract price, which is $10,000 less than the assessed value. I am not that savy to have taken their asking price of $280,000 and negotiate it down to withint $3000 of its appraised value. Based on my experience, 9 appraisals in the last 7 years that most appraisals are done by fudging numbers and using comps that are not exactly the best comps until they get a number they are looking for.

There are two lots that are comps that have sold in the past year on this lake, actually the second is on a lake that is attached to the lake I am on which is less desirable based on the market prices I have seen. One sold for $179K (133 ft of frontage) and the other for $236K (240 ft of frontage). If you go off of these two real comps how on earth does 193ft appraise for 180K. Even if you split the differenct based off of the frontage of the two comps it should have appraised at $211K. So they are off by $30K.

My first question to the bank on Monday is going to be about the other lots on the lake. I am going to ask them if I were to put an offer of $225K in on one of the empty lots (150 ft of frontage) that they are asking $250K for would they not be able to give me a lot loan because these properties are only worth $180K according to their appraiser? I will be telling the bank they can either have someone else do an appraisal or give me my $375 back that I paid for the first appraisal and I will take my business elsewhere.

Andyg

I thought the appraisal on my house was conveniently close to my offer, too and as it turns out, the whole mortgage mess was full of cases like this. I'd be willing to bet that when the appraiser is chosen by the bank, they have an "understanding" about the numbers as in, they tell the appraiser the asking price and offer before they ever go to the property. I'd like to see an appraiser go in blind and use their eyes, knowledge of the prevailing sales and the actual condition to come up with a number.

They just dod drive by assessments where I am and I may ask for an actual, mainly because I think my taxes are insanely high. The risk in my case comes from having done extensive updating and repairs to the interior, so I could end up paying more but I doubt it.

Finnsdad
08-23-2009, 08:27 PM
Review of the sales contract is a part of the appraisal process, and is required by state law.

cbryan70
08-23-2009, 08:33 PM
Just curious why a Sales contract would have ANYTHING to do with the appraised value of the house and or land.

JimN
08-23-2009, 08:45 PM
Review of the sales contract is a part of the appraisal process, and is required by state law.

That may be but it biases the appraisal, IMO. I know what my house sold for before I bought it, when it sold and what was done to it between that sale and me buying it. There's no effin way it should have appreciated that much in that time but between being the gung-ho first time buyer I was and with the almost useless bimbo at Hell's Cargo, I guess I can't really blame anyone else. I can't see a bank wanting the appraisal to be biased. If the asking price is higher than the property is worth, I sure wouldn't want to end up on the short end of a defaulted loan. Unrestrained real estate values is how we ended up with so many defaults, isn't it? If an appraisal doesn't match the selling price, the loan shouldn't be approved if the appraisal is low.

Finnsdad
08-23-2009, 08:52 PM
Just curious why a Sales contract would have ANYTHING to do with the appraised value of the house and or land.

It doesn't, and most appraisers agree that it has no impact. Fannie/Freddie wrote it into their guidlines, which are standard practice. By accepting an appraisal order based on their criteria (99% of appraisal work), the state laws require you to adhere to their criteria, it's called the Scope of Work rule. I think their intent is to have the sales price documented in the appraisal report so that the data can not be fudged after the report is done. Most lending is limited by either the sales price or appraised value, whichever is lower.

Andyg
08-24-2009, 12:58 AM
Due to the complexity of the project I am trying to complete I decided to choose a local small bank for the loan that I could work with to avoid some of the big bank issues. Obviously in my case it did not help, at least not yet.

I put together a spreadsheet today comparing the only 3 lots that sold in the past year and 3 lots that are currently for sale. I devalued the lots that are for sale by the average amount that the 3 lots sold for compared to their asking price. The purchase price for the 3 lots was about 5% lower then the asking price. I then calculated the price per foot of water frontage of all the lots and my lot came out to be the second cheapest at $1212 per foot of frontage. I did make one assumption that the boat house which is staying is worth about $15,000. Even if it is only worth $10,000 it still is the second cheapest lot per foot of water frontage. Of the six lots that are either for sale or already sold my lot is the only one with true level frontage. All of the other lots have a vertical bank ranging from 5ft to 60ft.

I sent the spreadsheet with a detailed explanation to my banker in hopes of at least getting someone else to do another appraisal. I guess we will see tomorrow what will happen.

Andyg

FancySauceRules
08-24-2009, 01:12 AM
Hey FancySauce, what do you do for a living? Maybe I should come on here and say that everyone in your field is incompetent. Have you gone to school for appraisal, done a 2000 hour + internship, pass state and federal exams, had your work reviewed by a state review board, gone to continuing education?

You did get screwed, but it was not by the appraiser it was by the real estate market. An appraiser does not make up numbers or just decide what a property is worth, it all comes down to what similar properties sold for and are currently listed for. You should be happy that you did not get yourself into an even bigger mortgage and get further upside down in your house.

PS, guess what kind of business I own?

Dude, so I didn't write a 3 page post to explain the full situation, no reason to fly off the handle and accuse me of things you have no basis for. I am fully aware how to value real estate assets. This guy literally didn't even appraise the house with the correct bedroom and bathroom numbers. That was just the start of it. And I was trying to take out a smaller mortgage, not bail myself out or get in deeper(refi'ing a jumbo to a conforming, but with a 490k appraisal I had to bring even more cash to the table).

I have to take part blame, I couldn't meet the guy, my wife had to, and she doesn't handle the matters well. You are correct, meeting with the appraiser is important if the deal hinges on a tight appraisal.

I still stand by the my original comment. The new way of choosing appraisers is no good for the individual consumer. I had to pay 400 bucks for some hack to cause a bunch of issues, and I am sure this is happening more and more often. I also believe it is better for the banks and the overall stability of the economy, as it creates an unbiased view of the value.

Your comments other than flying off the handle on my issue, were solid and helpful to anyone that doesn't know how to work the new system.

Finnsdad
08-24-2009, 08:22 AM
Andy- Did you figure in the costs to raze the current house (permits, labor, disposal)?

Finnsdad
08-24-2009, 08:30 AM
FSR- Sorry if I got a little upset. I worked really hard to build my business and these new regulations pretty much set everything back to equal. It's kind of a hot button issue for me. Most bankers/consumer have the idea that the best appraiser is the one who can deliver the highest value, and I thought that is what you were getting at. I know it's hard to take a loss on real estate, it's something most of us on this board (myself included) can relate to.

Double D
08-24-2009, 09:25 AM
It should be made clear that a drive by appraisal was done because that is what the bank requested, not because the appraiser choose to do it.

Yeah....... Thanks!

Andyg
08-24-2009, 11:10 AM
Andy- Did you figure in the costs to raze the current house (permits, labor, disposal)?

Yes, In fact I have to escrow that money with the bank.

Datdude
08-24-2009, 11:19 AM
Care to share where in N. WI?:confused:

Jorski
08-24-2009, 11:56 AM
My experience with banks has been all over the map - sometimes the things they do make sense, sometimes they don't. It would seem to me that your best bet would be to put together a very detailed package/presentation that contains all of the comparables, and the information that you have, and what you are looking for in terms of financing.

I would take that to a number of banks, and I would detail the problem with the previous appraisal, and why you are looking for a new banking relationship.

I think at this stage you are looking to sell a bank on the merits of your idea, and your building project. So start dialing for dollars.

It sounds viable to me, I am sure that you will be able to convince some bank, somewhere to lend you the money. Good luck!

stuartmcnair
08-24-2009, 12:10 PM
when I bought my lakehouse at the beginning of summer the appraiser listed three comps for it. All three were identical "mushroom" houses built on the same street in a crappy area that were not on the water. He appraised it at about $100,000 less than I could sell it for today. He would not go out on a limb at all to give it an actual value. I think because I bought it from a friend he just appraised it at $5,000 above the contract price and found some comps to match based on square footage.

That's just lazy.

The other house appraisals I have had done on my in-town house have all been very good. Hard to get comps on that house because of the acreage, barn, fencing and the fact that I built it myself on land that I owned so there was not really a sale price filed with the county.

Like any profession, I guess you have the good and the bad but I don't believe there is any special formula that they use.

djhuff
08-24-2009, 12:21 PM
I still think appraisers are gun shy and will keep the value low as to avoid any questions.

I refied my house this spring to get a lower rate, and the appraiser was the same one that did the initial appraisal. This time, he came in about 3K higher than he first one that was just over a year old (miraculously put me at 79% LTV). I would normally not question this, but I added 700 sf of heated space to the house since the first appraisal. Our market has not fallen like most, we have pretty much stagnated over the past 1.5 years.

Not upset because I still got the loan, but it seems very convenient that the appraisal fell in right in to where it needed to be. I was kind of looking forward to knowing what the finished basement would add to the value, but I guess I'll have to wait until I sell the house to know.

JimN
08-24-2009, 12:26 PM
when I bought my lakehouse at the beginning of summer the appraiser listed three comps for it. All three were identical "mushroom" houses built on the same street in a crappy area that were not on the water. He appraised it at about $100,000 less than I could sell it for today. He would not go out on a limb at all to give it an actual value. I think because I bought it from a friend he just appraised it at $5,000 above the contract price and found some comps to match based on square footage.

That's just lazy.

The other house appraisals I have had done on my in-town house have all been very good. Hard to get comps on that house because of the acreage, barn, fencing and the fact that I built it myself on land that I owned so there was not really a sale price filed with the county.

Like any profession, I guess you have the good and the bad but I don't believe there is any special formula that they use.

They can estimate the cost to build a comparable house today, knowing the labor and materials costs, the same way an insurance company does. That, along with recent sales, would be a decent way to come up with a number. If someone does most/all of the construction, that's more equity for them but most banks don't want to write loans to land buyers who say they'll build the house because it would be hard to guarantee build quality/have recourse if the quality is below normal contractor standards (yeah, I know). The same goes for unusual designs that may not be easily salable of the homeowner defaults- banks don't want to be stuck with a geodesic dome in the middle of a subdivision of colonials or ranch homes.

Andyg
08-24-2009, 12:55 PM
Care to share where in N. WI?:confused:

The bank and the appraiser are in your back yard. The property though is in Lincoln County.

Ski-me
08-24-2009, 01:24 PM
FSR- Sorry if I got a little upset. I worked really hard to build my business and these new regulations pretty much set everything back to equal. It's kind of a hot button issue for me. Most bankers/consumer have the idea that the best appraiser is the one who can deliver the highest value, and I thought that is what you were getting at. I know it's hard to take a loss on real estate, it's something most of us on this board (myself included) can relate to.

Thanks for the good info. Nice to get someone's perspective that is actually in the business. It's a shame that anyone can now appraise (newbies) rather than based on past experience. The way you build up your cliental is to do quality work at a fair price.....not the cheapest!

badams
08-24-2009, 10:28 PM
Just curious why a Sales contract would have ANYTHING to do with the appraised value of the house and or land. A property can only be worth what someone is willing to pay.

Monte
08-24-2009, 11:22 PM
They can estimate the cost to build a comparable house today, knowing the labor and materials costs, the same way an insurance company does. That, along with recent sales, would be a decent way to come up with a number. If someone does most/all of the construction, that's more equity for them but most banks don't want to write loans to land buyers who say they'll build the house because it would be hard to guarantee build quality/have recourse if the quality is below normal contractor standards (yeah, I know). The same goes for unusual designs that may not be easily salable of the homeowner defaults- banks don't want to be stuck with a geodesic dome in the middle of a subdivision of colonials or ranch homes.

Jim, I can see your point on most factors, but I have to insure most of the houses I cover above what they could possibly resell for. For example a 1500 square ft home in a decent little neighborhood would sell for around 120,000 in my area. I have to insure that house at @ 150,000 for replacement cost. $100/ sq ft. give or take. In this case however, I might not be able to meet what the bank wants me to cover the home for due to the value of the land. Of couse by law the banks cannot reqire you cover any more than the replacement value of the home, but they can certainly make my life a living hell whist I retrieve that paperwork:rolleyes:

Spot on with the rest of what you said, just interjecting the thought.

Andyg
08-25-2009, 02:07 PM
Well the local bank won't allow another appraisal to be ordered. So the appraiser that did this essentially screwed me. I should have just gone with the people I have been using in Madison for all of my lending over the years. Now it has put me back 2 1/2 weeks to get my financing lined up, so much for trying to close by when our contract date is, Sept 11th.

D3skier
08-25-2009, 02:25 PM
Well the local bank won't allow another appraisal to be ordered. So the appraiser that did this essentially screwed me. I should have just gone with the people I have been using in Madison for all of my lending over the years. Now it has put me back 2 1/2 weeks to get my financing lined up, so much for trying to close by when our contract date is, Sept 11th.

tell the bank they need to send the appraiser back out there to re-asses the property because he didn't use proper comps to get to the correct values.

JimN
08-25-2009, 02:29 PM
Well the local bank won't allow another appraisal to be ordered. So the appraiser that did this essentially screwed me. I should have just gone with the people I have been using in Madison for all of my lending over the years. Now it has put me back 2 1/2 weeks to get my financing lined up, so much for trying to close by when our contract date is, Sept 11th.

Got any friends who are lawyers and could send a letter to the bank and the appraiser regarding this?

Andyg
08-25-2009, 02:53 PM
tell the bank they need to send the appraiser back out there to re-asses the property because he didn't use proper comps to get to the correct values.

They won't even do that. That was what I was trying to get done and they said no.

Andyg

Andyg
08-25-2009, 02:54 PM
Got any friends who are lawyers and could send a letter to the bank and the appraiser regarding this?

Ya, my father in law. If they don't refund my $375 they will be hearing from him.

JimN
08-25-2009, 03:03 PM
Ya, my father in law. If they don't refund my $375 they will be hearing from him.

I don't know if this will help but they need to keep their standards up, so....
http://www.appraisers.org/ProfessionalStandards.aspx

Rockman
08-25-2009, 03:05 PM
Hey Andy,

Could be worse...you could have a jacka$$ up north there come out and survey your new lot...you then have the house built, pass all inspections without any problems and then have the tax guy come over a few years later and inform you that the house is too close to the lake.

Then you get a notice from the county / state asking you when you plan on moving the house!? :eek3:

Can you say lawsuit!?

The county / state backed down real quick on that one.

This happened north of our place a few years back.

Thrall
08-25-2009, 04:02 PM
[QUOTE=Rockman;627537]Hey Andy,

Could be worse...you could have a jacka$$ up north there come out and survey your new lot...you then have the house built, pass all inspections without any problems and then have the tax guy come over a few years later and inform you that the house is too close to the lake.

Then you get a notice from the county / state asking you when you plan on moving the house!? :eek3:
QUOTE]

I had to pull a tape from the house to the lake 3 times in Price County, because one of the neighbors (living in an old trailer) kept calling them about setback infringements.
(Bad part was, the 3rd time,I was shin deep in the water measuring to 75', good thing it was raining and the inspector couldn't totally see me thru the trees!:D