The Appraisal Complaint Process

Appraisals have become the biggest problem affecting an otherwise recovering real estate market. I’m not talking about a well documented appraisal that uses good, recent comparable sales data, even when the value is lower than I’d like. No. If the sales price of a home simply can’t be supported by actual relevant sales data, then so be it. What I’m referring to is the appraisal that was thrown together and has inaccurate data, uses comparable sales that are not comparable or refuses to use good comps and uses only poor ones. You know, compares a tri-level to a colonial or maybe a 1,500 sq ft home to a 1,900 sq ft home and so on. When there are more relevant sales to use they should be on the report. This is a follow up to last weeks post How Appraisers and Management Companies are Stifling the Real Estate Rebound.

Just in the past 7 days I have been fighting with an appraiser (actually fighting with the management company because we dangerous loan officers are not allowed to actually communicate with an appraiser) on a home purchase deal I am working on. I’m not even disputing the value which was actually higher than the purchase price. The problem is that the comparables used are all 3 to 4 miles away and two of them are 6 to 9 month old sales. Considering this house is in Rochester Hills, MI, a suburban community, guidelines call for comps to be within 2 miles and to have sold in the past 6 months. So, what happened when the loan was submitted for approval? Denied! Why? Due to poor collateral. I ask the appraiser to provide 2 comps that are within guidelines. The response – nothing available. Naturally I get with the Listing and Selling Agents and we come up with 2 sales and a pending which meet guidelines and I send them in to the AMC (appraisal management company) to forward to the appraiser. The appraiser sends back comments on why none of these can be used. One was “significantly larger” – the subject is 2,800 sq ft and the comp was 3,150. The second was too new – the subject is an all brick home built in 1994 with updated kitchen and baths and the comp was a couple of years old, otherwise they are the same size, style and have similar appeal. What are more relevant, similar homes that are within 1 mile and sold in the past 90 days or sales that are 9 months old and 4 miles away? Arghhhhh.

There is literally nothing I can do at this point because the management company says they cannot tell the appraiser what to use in the report. My only action is to shake up this appraiser by making a complaint with the State in the hopes that she, and other appraisers, will realize that they still have to do quality work or there will be consequences. The State will investigate every complaint and notify the appraiser of the investigation. That should do the job.
Appraisers are licensed and regulated in the State of Michigan by the Department of Energy, Labor and Economic Growth (DELG) and the web address is http://www.michigan.gov/dleg/0,1607,7-154-35299_35395_35396---,00.html. You can look up appraiser’s to see if disciplinary action has been taken in the past, print up a complaint form and get procedures for filing a complaint. When making a complaint be as specific as possible as to exactly what the faults are and offer better data.

It is really up to us, as real estate professionals, and as homeowners, to stand up and fight because nothing is hurting our business, or our property values, more than poorly done appraisals. Every time an appraisal derails the sale of a home or reduces the sales price, that damages a real estate market that is on the mend and an improved real estate market is the best thing for our economy right now. Standup, be counted. The next time a bad appraisal affects you make a complaint!