Gaming an appraisal

[beanmaestro]

We’re working on a refi, and the apprasial will be a close call. The trends and $/sq.ft. for our zip show the market at the same place it was when we bought in Nov 2009, and there are comps that support that. On the other hand, the place across the street (same floor plan, but was bank-owned and in bad shape) sold for 19% less than ours. So, depending on which comps the appraiser uses, and how he interprets the house across the street, we could be fine or miss badly.

How much and what should we be doing to influence the appraiser to the higher price? Provide a spreadsheet of high comps? A list of defects with the house across the street? A list of improvements to our house? Price per square foot graphs? Or is all of that against the rules? Should we follow him around and talk comps so that he gets the idea we’ll contest anything short of what we need? Is a mortgage broker helpful in giving the appraiser a hint?

I don’t know how the new appraiser rules change things, but it does seem like gaming the system (or at least giving him heaps of favorable data) is worth the trouble…

[NotCranky]

Don’t worry the appraiser already knows how to game the system. If it can be done they will do it.

[svelte]

Guess I’m surprised anyone would ask how to game the appraisal system on here.

After all, isn’t that part of what got us in this mess to begin with?

[Ren]

We had a similar experience last year. We were trying to refi, and the closest comp was a trashed foreclosure down the street (same floor plan) that sold for $15k less than we paid for ours. Because of that, the appraisal came in low, which meant we would have to bring a little cash to the table. It wasn’t much, but it was money we’d rather spend on something else.

We had made the mistake of going with the same lender who held our current loan.

I wrote a letter that took apart the appraisal bit by bit and made the appraiser look incompetent. I used five comps instead of three, formatted the same way they did, careful to use actual appraisal rules (some of which they ignored) taken from my recent real estate class textbooks. For example, I pointed out that one of the three comps they used backed to a street, while our house backs to a private park. They had made no adjustment for the location. I also contacted the buyer’s agent of the foreclosure and found out how much the buyer had to invest to get it into livable condition ($20k, doing most of the labor themselves). The lender dismissed the letter without a good reason.

We were kind of stuck, as it wasn’t worth it to us to lose the money and time invested so far, and the extra money we would have to come up with would just lower the loan amount (and therefore the payment) anyway.

Maybe I’m reading too much into it, but everything pointed to them going out of their way to deny us the refi. Even the customer service, waiting periods, red tape, etc. were a much worse experience than they were when getting the original loan, when they bent over backwards to make us happy. There is no doubt in my mind that an appraiser hired by another lender would have come up with a different number, or at least would have taken my contrary evidence into consideration.

I wouldn’t follow the guy around or be otherwise annoying. I had talked to our appraiser before he wrote his report, and he knew that the foreclosure was trashed – but they (or at least this particular one) do not take that into account. If it turns out to be inaccurate, just contest it, and maybe you’ll have better luck than I did.

[briansd1]

[quote=svelte]Guess I’m surprised anyone would ask how to game the appraisal system on here.

After all, isn’t that part of what got us in this mess to begin with?
[/quote]

It’s interesting to me that people feel entitled to have transactions work out the way they want.

They get angry and upset and when the numbers don’t work out to their advantage.

[quote=Jacarandoso]Don’t worry the appraiser already knows how to game the system. If it can be done they will do it.[/quote]

Generally, the “system” wants the transactions to occur, so there is definitely a bias to make it work.

[SD Realtor]

There are a couple things that you could try to do to help in a pre-emptive sort of way. The first thing is that comps are comps. Get your old realtor to send you comps for the area that will most closely match yours. Try to find out exactly what the situation is with the comps, condition, etc. If you could somehow show that the comps were lower for a good reason then that will help. Note that a good reason is not, “it was a foreclosure or a short sale”. It has to be tangible like the home was a P.O.S and it was a foreclosure and it was a cash deal. The could be environmental differences as well, street noise, busy front street, or the neighboring home is a crack house, or the home had unpermitted additions, etc… None of this gaurantees anything especially if you get a crappy appraiser but it shouldn’t hurt things. The broker will not help at all so don’t rely on him. Also if you have done upgrades that are major, that is over several thousand dollars then those should be pointed out and if you have receipts all the better. However if you have plunked 2 or 3 thousand here and there a few times, chances are that will not help alot.

All this legwork may not help at all but it shouldn’t hurt. Don’t follow him/her around and pester them to much, wait until they are done and then bring up your points. If you have data/notes to give them about the comps feel free but keep it brief.

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