What Happened to Transparent Appraisals?

One local banker is blowing the whistle about overpriced homes in Forsyth County and decided to call in news reporter, Jim Strickland with WSBTV to investigate further. Many are concerned this looks similar to the foreclosure crisis that occurred eight years ago. Jim began asking if builders, bankers and lenders are working together.

Bypass the buzzwords and get to the heart of the story — a local banker was about to buy a home for $390,000 but the appraiser valued the house at only $365,000 (a $25,000 difference). When these situations arise, the bank would typically deny the mortgage based on the valuation. The buyer questioned this appraisal even more, because his builder said the lender was his preferred partner and “They’ve never had a problem getting the value needed.”

When they asked another appraiser to evaluate the house, it was priced at $390,000, the asking price. The appraisals differred in square feet as well as the number of bedrooms in the house, and as we all know, those do not change when the appraisals are completed at the same time.

The appraisal management company and builders wouldn’t interview with the reporters, but they decided to get a second opinion on the appraisals and call in Beryl Tylar a 30-year experienced appraiser. She boiled it down to the comparison section of the appraisal, and explained how this section of the appraisal can get a little fuzzy. The higher appraisal used a “comparable home” that was valued at $80,000 higher than the property in question. She mentioned it wouldn’t have been her choice to compare the property to but instead she would’ve used a home in the neighborhood. Berly also noted the paperwork looked a little suspicious, but none of this is proof the appraisal was wrongly inflated. It doesn’t have to be completely incorrect. If it appears to be improper, that can be enough.

It’s disappointing on many levels to hear this kind of news. It shines a negative light on appraisers, appraisal management companies, and bankers across the country who are doing the right thing each and every day.

The reality is that there are proper ways to dispute an appraisal. In every business interaction among all industries, impropriety is a risk. Luckily, there is a right way to deal with an appraisal assignment that you feel has an issue. This lender could have followed these 5 tips from the start to avoid any perception of an issue.

When does your regulator say you can dispute an appraisal?

1. To consider additional, appropriate property information, including information regarding additional appropriate comparable properties;

2. To provide further detail, substantiation, or explanation for the appraisers value conclusion;

3. To correct objective factual errors in the appraisal report.

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From this report alone, you can see how important and impactful choosing the best AMC is for your bank or credit union. Choose an appraisal management company with appraisers who have seen it all, like Beryl with 30 years of experience. At Mountainseed, over 60% of our staff have over 25 years of experience plus the industry’s highest designations. So if you have questions about your current appraisal management company or the compliance of your appraisers, Let’s talk today.