Posted on: 07th Apr, 2010 09:19 pm
I put an offer in on a home back in October of 2009. Sellers were asking $179K, I offered $169K with them paying $5K towards closing. This is a fixer upper and would require a 203K loan in order to qualify for FHA. After a month of working with contractors and getting bids, I was able to finalize my specification of repairs and get all the necessary paperwork submitted.
First issue began when the house appraised $14K less than what I offered the sellers (which was already $10K below their asking price). Having been on the market for over a year, this was understandable in todays housing market. They eventually accepted the offer at the appraisal price of $155K.
Here I thought we were ready to go. Now the bank tells me that there was an issue with the "after-construction" appraisal. Apparently the appraiser didn't process the after value correctly and only put a one-line sentence on the appraisal stating that the after construction value was $215K. The bank sent it back to be corrected and an extension for closing was given from the sellers. 3 weeks go by, and all I hear is that there is still an issue with the appraisal.
All said and done, there apparently were 4 total appraisals done by the same person. One for $200K, one for $210K, one for $220K and another for $217K. The bank called me and said that the final amount they went with was $210K and that was below the construction loan by about $8K. So we re-worked the loan by getting rid of my points to pay down the interest and some other items which left me coming up with $11K to close. Okay I did it! Paperwork was sent off to the underwriter at this point and I was waiting to close again.
NOW the bank calls me to tell me that the underwriter was concerned with 4 appraisals at 4 different amounts. They tried to contact the appraiser, but didn't receive an answer as to the different amounts. So NOW the bank is requesting yet another appraisal at their expense from a different appraiser (same company).
They apparently put a rush on it, yet still took another 2 weeks to get an answer back. This appraisal finally came in and is even crazier than the first 4 that were done! The as-is value of the home came in 10K higher than the last appraisal. Basically $119 a sq. foot. Okay, lucky me since the seller's already agreed to the lower valued price. However, by adding 900 sq ft of living space, a full bathroom, a brand new kitchen with all stainless steel appliances, finished original wood floors etc.
They appraised the after-construction value at $185K, only 20K more than the as-is value, which amounted to $81 per sq ft. Can someone please explain to me how a house completely remodeled can have almost a $40 per sq. foot loss? The supervisors met out at the home and backed up their appraiser by saying that the location of a gas station near the house was an automatic deduction of $20K for the value. Wouldn't this have to apply to the as-is value as well?
I am besides myself as there isn't even a home with the sq footage that this home will be at (2279) after completion for less than $110 per sq. foot. Needless to say, because the economy is hurting so bad, I went back to the construction bids, had several more bids done and found someone who wasn't the lowest or the highest but in the middle and who was able to meet the criteria of the work needing to be done with the amount of money we had to work with.
The seller's actually came down a bit more on their price and I was able to come up with $13K down. I should have signed yesterday and have now found out that while all of the conditions of the loan have been met and it looks like it is in approval status, we are now yet again waiting for the appraiser. Apparently there were two documents missing from the specification of repairs. He received those this morning with no response as of yet.
I am so concerned that there is going to be yet another issue with this loan! There are so many more details that I could write a book. It is apparent that these people are not experienced with these types of loans and don't know what they are doing.
To have had to go through 5 appraisals with the same company is beyond me! Does anyone get a refund for this "shoddy" work? No! My loan officer has been up in arms over the entire thing as well saying that in her entire 15 years of processing loans, she has NEVER seen anything so bad! Of course there is the government to thank for taking the "relationship" away between the banks and the appraisers, which to some extent I understand and agree with, however, we now have these 3rd party companies hiring appraisers for the banks who don't know what they are doing and have no one to answer to.
They are providing a huge "dis-service" to those like myself, a single mother trying to provide a home for my children, working hard to save money and build credit back after a divorce to finally buy a home and then this! Many have said, walk away...buy another home. Yes, I looked a this as well, however of the 20 homes in my price range in the school district I want my children to attend school at, only ONE was NOT a short-sale. Hmmm...seems like the home I want is pretty damn valuable at this point!
If it doesn't go through, after wasting 6 months trying to purchase this home, I will have now lost $550 for appraisal and credit check along with $700 for the FHA consulting fee, numerous hours off of work to coordinate contractors bids, stress of not having a home to live in for the past 2 mos. (was supposed to close on February 3rd).
Seems to me like somebody should have to answer for something? Not only that but due to their lack of "timeliness" i have now missed out on the wonderful "tax-credit" opportunity that would be available to me up until April 30th :-(
First issue began when the house appraised $14K less than what I offered the sellers (which was already $10K below their asking price). Having been on the market for over a year, this was understandable in todays housing market. They eventually accepted the offer at the appraisal price of $155K.
Here I thought we were ready to go. Now the bank tells me that there was an issue with the "after-construction" appraisal. Apparently the appraiser didn't process the after value correctly and only put a one-line sentence on the appraisal stating that the after construction value was $215K. The bank sent it back to be corrected and an extension for closing was given from the sellers. 3 weeks go by, and all I hear is that there is still an issue with the appraisal.
All said and done, there apparently were 4 total appraisals done by the same person. One for $200K, one for $210K, one for $220K and another for $217K. The bank called me and said that the final amount they went with was $210K and that was below the construction loan by about $8K. So we re-worked the loan by getting rid of my points to pay down the interest and some other items which left me coming up with $11K to close. Okay I did it! Paperwork was sent off to the underwriter at this point and I was waiting to close again.
NOW the bank calls me to tell me that the underwriter was concerned with 4 appraisals at 4 different amounts. They tried to contact the appraiser, but didn't receive an answer as to the different amounts. So NOW the bank is requesting yet another appraisal at their expense from a different appraiser (same company).
They apparently put a rush on it, yet still took another 2 weeks to get an answer back. This appraisal finally came in and is even crazier than the first 4 that were done! The as-is value of the home came in 10K higher than the last appraisal. Basically $119 a sq. foot. Okay, lucky me since the seller's already agreed to the lower valued price. However, by adding 900 sq ft of living space, a full bathroom, a brand new kitchen with all stainless steel appliances, finished original wood floors etc.
They appraised the after-construction value at $185K, only 20K more than the as-is value, which amounted to $81 per sq ft. Can someone please explain to me how a house completely remodeled can have almost a $40 per sq. foot loss? The supervisors met out at the home and backed up their appraiser by saying that the location of a gas station near the house was an automatic deduction of $20K for the value. Wouldn't this have to apply to the as-is value as well?
I am besides myself as there isn't even a home with the sq footage that this home will be at (2279) after completion for less than $110 per sq. foot. Needless to say, because the economy is hurting so bad, I went back to the construction bids, had several more bids done and found someone who wasn't the lowest or the highest but in the middle and who was able to meet the criteria of the work needing to be done with the amount of money we had to work with.
The seller's actually came down a bit more on their price and I was able to come up with $13K down. I should have signed yesterday and have now found out that while all of the conditions of the loan have been met and it looks like it is in approval status, we are now yet again waiting for the appraiser. Apparently there were two documents missing from the specification of repairs. He received those this morning with no response as of yet.
I am so concerned that there is going to be yet another issue with this loan! There are so many more details that I could write a book. It is apparent that these people are not experienced with these types of loans and don't know what they are doing.
To have had to go through 5 appraisals with the same company is beyond me! Does anyone get a refund for this "shoddy" work? No! My loan officer has been up in arms over the entire thing as well saying that in her entire 15 years of processing loans, she has NEVER seen anything so bad! Of course there is the government to thank for taking the "relationship" away between the banks and the appraisers, which to some extent I understand and agree with, however, we now have these 3rd party companies hiring appraisers for the banks who don't know what they are doing and have no one to answer to.
They are providing a huge "dis-service" to those like myself, a single mother trying to provide a home for my children, working hard to save money and build credit back after a divorce to finally buy a home and then this! Many have said, walk away...buy another home. Yes, I looked a this as well, however of the 20 homes in my price range in the school district I want my children to attend school at, only ONE was NOT a short-sale. Hmmm...seems like the home I want is pretty damn valuable at this point!
If it doesn't go through, after wasting 6 months trying to purchase this home, I will have now lost $550 for appraisal and credit check along with $700 for the FHA consulting fee, numerous hours off of work to coordinate contractors bids, stress of not having a home to live in for the past 2 mos. (was supposed to close on February 3rd).
Seems to me like somebody should have to answer for something? Not only that but due to their lack of "timeliness" i have now missed out on the wonderful "tax-credit" opportunity that would be available to me up until April 30th :-(
Where was the consultant in this mix of good cop/bad cop?
I work the Central MS area, am a home inspector, Energy Rater and 203(k) consultant. With my 35 years in the home building business I understand the appraisal business and I work closely with my clients as the consultant to advise them on border line situations that could result in value traps.
I feel that some of your fires could have been put out with a little help from the consultant. It's the duty of the consultant to help you not only determine health and safety issues of the home but to objectively review the package by using basic appraisal guidelines. One of the specific issues you mention is the location and possible hazards. Although I cannot comment on the specific situation without more detail, one critical point of interest to the appraiser should be adverse conditions. The consultant should have made, at a minimum, a comment about the condition is there was one. Did he/she?
It sounds like you needed support from someone other than the appraiser.
I work the Central MS area, am a home inspector, Energy Rater and 203(k) consultant. With my 35 years in the home building business I understand the appraisal business and I work closely with my clients as the consultant to advise them on border line situations that could result in value traps.
I feel that some of your fires could have been put out with a little help from the consultant. It's the duty of the consultant to help you not only determine health and safety issues of the home but to objectively review the package by using basic appraisal guidelines. One of the specific issues you mention is the location and possible hazards. Although I cannot comment on the specific situation without more detail, one critical point of interest to the appraiser should be adverse conditions. The consultant should have made, at a minimum, a comment about the condition is there was one. Did he/she?
It sounds like you needed support from someone other than the appraiser.
The consultant did a great inspection and all of the conditions of the home that needed to be met were met on the SOR. There was a heated dis-agreement between the appraiser and the consultant regarding the appraisal, as the appraiser himself updated the specification of repairs with items needing to be done in order to pass HUD/FHA inspections, however these items were already on the forms.
The consultant requested the name of the appraiser and said that he would be filing a complaint and would request an audit due to the obvious issue of not using the SOR to process the appraisal, if he had, then he would have noticed that the items he had listed were already on the SOR. This is a complete remodel/update to the home with finishing the basement to add 900 additional square footage of the home and completing the required items for FHA - updating entire home electrical, plumbing, adding Gas Heating, repairing cracks in walls, making sure windows open in all rooms etc.
The only "value" trap in question was the location of a gas station across the street on the side of the home, in which they deducted an automatic $20K from the after construction value. My concern was that they didn't deduct it from the as-is value. Again, my concern of how a remodeled home that has added 900 sq feet of living space and updating all of the above can lose almost $40 per sq. ft in value?
You have a valid point with regards to the consultant being more involved. He did in fact mention that he should be there to walk through with the appraiser to make sure it goes smoothly, however I am new at this and feel that if this were the case, shouldn't he have made the effort to be in contact with the bank/appraiser as needed?
I question the company who hired these appraisers and allowed the first appraiser to appraise the house on 4 separate occasions, all with a different amount and then not even reply to the underwriter with his reasons why?
In my opinion, due to timing etc. why wouldn't they have requested a new appraiser at a minimum after the first 2 were completed incorrectly? It seems that 5 separate appraisals both for the as-is value and the after construction value, with a spread from $185K to $220K tells me that the entire appraisal process is in question.
The consultant requested the name of the appraiser and said that he would be filing a complaint and would request an audit due to the obvious issue of not using the SOR to process the appraisal, if he had, then he would have noticed that the items he had listed were already on the SOR. This is a complete remodel/update to the home with finishing the basement to add 900 additional square footage of the home and completing the required items for FHA - updating entire home electrical, plumbing, adding Gas Heating, repairing cracks in walls, making sure windows open in all rooms etc.
The only "value" trap in question was the location of a gas station across the street on the side of the home, in which they deducted an automatic $20K from the after construction value. My concern was that they didn't deduct it from the as-is value. Again, my concern of how a remodeled home that has added 900 sq feet of living space and updating all of the above can lose almost $40 per sq. ft in value?
You have a valid point with regards to the consultant being more involved. He did in fact mention that he should be there to walk through with the appraiser to make sure it goes smoothly, however I am new at this and feel that if this were the case, shouldn't he have made the effort to be in contact with the bank/appraiser as needed?
I question the company who hired these appraisers and allowed the first appraiser to appraise the house on 4 separate occasions, all with a different amount and then not even reply to the underwriter with his reasons why?
In my opinion, due to timing etc. why wouldn't they have requested a new appraiser at a minimum after the first 2 were completed incorrectly? It seems that 5 separate appraisals both for the as-is value and the after construction value, with a spread from $185K to $220K tells me that the entire appraisal process is in question.