The Appraisal Blog

Lawsuits against appraisers who have conducted appraisal services for lenders are beginning to occur.  In this case, the lawsuit was settled by the Appraisal management company AMC Links.  The terms of the settlement were not disclosed other than that the appraiser had to watch a documentary called: "Our America: Lowballed."  The AMC "denied any wrongdoing" and the appraiser did not admit to engaging in "unlawful discrimination."

I was able to locate the subject doing a public record data search.  The subject is located in is Marin City just north of San Francisco.  It was a 1,720 sf 4/2 built in 1963 on a 9,600 sf lot.  They paid $550,000 in 2016, conducted a lower level add on sometime between 2019 and 2022.

The first appraiser placed the value of the subject at $995,000 January of 2020.  The second appraisal place the value at $1,482,000 5 weeks later, or 49% higher.  Obviously someone was wrong.  But who?  The default opinion seems to always be the higher appraisal was correct.  But was it?

The first appraiser used 2 sales in Marin City and 1 in Sausalito.  The second appraiser used 2 sales in Marin City and SIX in Sausalito.  Marin City is a small enclave of attached and detached homes, condominiums and businesses just north of Sausalito.  Have you heard of Sausalito, the ritzy community just north of the Golden Gate Bridge from San Francisco?  Of course you have.  Have you heard of Marin City?  Me neither.

Without getting to deep into the analysis each appraiser conducted, I took a look at Zillow ... which will allow you to look at the value of a property over time:

01/2020: $892,000
02/2020: $1,100,000
03/2020: $1,200,000
Current: $1,250,000

And here are some actual comps another local appraiser provided in one of the on-line forums:

50 Buckelew sold for $899,000 on 08/19.  1700 sf 3 bedroom w/ and ADU, remodeled kitchen and baths.
21 Buckelew sold for $1,100,000 on 05/21 (15 months after the 1st appraisal) 1590 sf 4/3 remodel.  Property sold higher than the 1st appraisal, which is to be expected, the market was appreciating, and WELL below the second.

I am not an appraiser in this area.  However the fact that properties sold well below the second appraisal after the original valuations is telling.  And it is curious that the second appraiser utilized so many sales in Sausalito versus Marin City.

I wonder how homeowners in Sausalito would feel about an appraiser going to Marin City for sales data to value their home?

Thoughts?

https://abc7news.com/home-appraisal-lawsuit-settlement-our-america-lowballed-systemic-inequities-in-racial-bias/12921112/

The citizens of California were lied to from the get go.  This never should have gotten off the ground and will never be financially viable.



https://www.msn.com/en-us/autos/news/let-s-face-it-california-s-los-angeles-to-san-francisco-bullet-train-will-never-happen/ar-AA18o7pZ

FNMA has updated their selling guide which dictates the procedures lenders need to follow in order to have their loans purchased by FNMA.  Part of the guide deals with valuation ... or appraisal.  In the latest itternation they are expanding the use of "appraisal waivers" ... no called Value Acceptance.

Basically this means that no appraisal will be necessary on certain products based on certain criteria.  Typically those criteria would include borrowers with high credit scores, (non-appraisal) valuations with high levels of confidence, and loans with low LTV's.

How many loans this will actually affect is to be determined.  However, the whole purpose of the independent appraisal is to verify that the collateral that is being used is secure the loan is accurately valued.  This seems, once again, like risky behavior.



https://singlefamily.fanniemae.com/news-events/announcement-sel-2023-02-selling-guide-updates

Appraiser bias has been a hot topic in the appraisal industry for a few years now.  The stories of black homeowners who have had a "low" appraisal only to have it reappraised higher after the house is "white washed" sound shocking.

I've been following several of these stories including this one.  My general observation is that there seems to be some fairly large misunderstandings about what an appraisal is, who it is for, and what impact it can and can not have.  In some cases I've actually researched the specific property and did my own analysis comparing the two appraisal.  Many times it appears that the second, higher, appraisal is actually the one in error.  Others it is not so clear.

It this video I could not identify the specific property, however I do take exception to some of the statements made by NBC and the homeowner.  

1) An appraisal does not have ANY impact on property taxes.  That is factually wrong.
2) An appraisal does not have ANY impact on insurance rates.  That is factually wrong.
3) An appraisal does not dictate what a house will sell for.  It may affect how much an owner or buyer can borrow for the property.  But you can sell your house for whatever you want.  And yes, appraisals cut the value of sales contract all the time.  It is not a rubber stamp.  They also, by the way, come in higher than contract prices too.

I'll have more to say about these claims as they come up.  Stay tuned ...



https://www.nbcnews.com/nightly-news/video/does-race-impact-home-appraisals-163040837806

I had the pleasure of speaking at the San Diego Chapter of VAREP this morning.  The Chief Appraiser of the VA spoke via Zoom regarding upcoming changes to the VA portal, Minimum Property Requirements, and the Tidewater/ROV process.  I was able to provide more detail on some of these items in addition to other general questions about the appraisal process.

VAREP is a group of patriots who advocate for our veterans and explaining and expanding the benefits of the VA Loan Guarantee program.  They are doing great work across the nation.  Check them out ...



https://varep.net/

A sign of things to come?



https://fortune.com/2023/02/14/remote-work-los-angeles-office-building-default-brookfield/

No ... no one is going to get shot.  A "drive-by" appraisal is an exterior only inspection of a property that is used in the lending business under certain circumstances.  Every lender has different underwriting criteria but it boils down to your credit score, How much money your are borrowing, the LTV (Loan to Value), and your income/ work history.  If these factors fit ... you may not need a full inspection for you appraisal!



https://www.rocketmortgage.com/learn/drive-by-appraisal

So Canada is banning foreigners from buying homes!  There are some exceptions... refugees (of course) and permanent residents (who are for all intents and purposes citizens).  But is this the right move?  Will it reduce foreign business investment if their employees must either be residents or renters?  As a free market proponent I'm thinking the later.  What do you think?

https://news.yahoo.com/canada-bans-most-foreigners-buying-211909539.html

The mortgage finance market is contracting ... it is going to be a bumpy ride!

https://www.housingwire.com/articles/new-american-funding-no-longer-in-growth-mode-lays-off-240/

Thee geek in me loves a good map.  And finding zoning information can be arduous.  It needs to be searched and verified for every appraisal assignment.  It has gotten easier over time with more and more municipalities moving to on-line and searchable databases ... but the disparity and availability of data is still a hurdle.  These 3D zoning maps might add another layer of complexity for those who choose to adopt them ... but boy would they be cool!!



https://concept3d.com/blog/map-software/how-municipalities-can-leverage-stunning-3d-zoning-maps/