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Appraisal Reconsideration Requests – How To?
By C. J. Coury
In accordance with the new Home Valuation Code of Conduct (HVCC) lenders are no longer allowed to select the appraiser or question them on their evaluations. While this will certainly all but eliminate fraud in the evaluation process it has caused some new concerns for lenders and Real Estate professionals.
Any time change occurs in our lives there is a certain learning curve that takes an unspecified amount of time to run its course. The HVCC is one of those changes that we must learn to navigate around while the industry deals with its ramifications and appeals for some sorely needed adjustments to be made to it. My hope is that after reading this column you will have a better understanding of how to assist the lender in presenting a reconsideration request that has a chance of resulting in a positive change to the appraised value.
Some common missteps that I have seen when requesting a reconsideration of value are:
1. Providing different comparables and stating that the appraiser should have used these rather than the ones they chose. Unless you are providing comps that were for some reason not available to the appraiser this will not work. The appraisal management company will not make the assumption that you know more about evaluating property and selecting comps than a 3rd party licensed appraiser, be it right or wrong, and they will reject your request.
2. Complain about the use of distressed sales and ask that these comps not be used in lieu of non-distressed sales. In a normal market you would be absolutely correct. However, when more than 50% of the competition is selling as distressed they can not ignore these comps. This request will be rejected.
3. Requesting another appraiser as the one who completed the work is not familiar with the special idiosyncrasies of the market. While this in itself may be a valid argument, there is a right way and a wrong way to go about making your point. Requesting another appraisal will rarely solve the problem. Even if another one is requested by the lender it is highly unlikely that the appraisal management company will chose one more to your liking than the first one.
The correct way to approach the situation is to take a thorough look at the adjustments made to the comparables that were used. This is the best opportunity to discover misinformation or simply a missing adjustment due to the appraiser’s lack of detailed knowledge about the subject market or the condition of a particular comp. Below is an example of what does work.
A few years ago I was attempting to refinance a house on the Grand Canal in Holmes Beach. Unless you were intimately familiar with Anna Maria Island you would not realize that this is not a normal canal. In addition, the property was located near the Bimini Bay end of the canal as opposed to the closed end.
When the appraiser completed his work he used all canal front homes that appeared to be excellent comps. However, all 3 were located on other island canals and 1 was at the closed end of its canal. The use of these comps was not a problem in and of itself but the appraiser failed to realize the vast difference in desirability between these locations and the indisputable effect on the sale price.
I wrote a 2 page letter with photos and back-up documentation showing average sale prices on both ends of the islands canals as well as comparisons of the standard canal home to those on the Grand Canal. This information was provided to me by a local REALTOR® who is extremely familiar with these Island properties. According to his research there should have been a $75,000 adjustment on one of the comps and $50,000 on the other two. I submitted this information to the lender, who sent it on to the appraiser, and the evaluation was increased.
I realize that I should not have had to do this but the bottom line is that the transaction closed and I got the value that I needed to accomplish my goals. Take this approach when requesting a reconsideration of value and you will find that most of your requests will result in a positive adjustment that just might save the deal!
C. J. Coury is a Senior Vice President with Bank of America and oversees their residential mortgage division serving Sarasota, Manatee and Charlotte Counties. Prior to joining Bank of America in 1995, C. J. was President of Mortgage Brokers of America in Birmingham, MI for 7 years. He has been an active mortgage finance professional since 1983. C. J. may be reached at (941) 952-2888 or by email at charles.j.coury@bankofamerica.com [2].
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