Crooked FHA Appraisers

The BBQ Pit
1

Fucking crooks. Please explain to me why this house appraised at $7k above my buying price when I bought it two years ago and now, after I’ve put $7k into it, you’re holding up my buyer’s fucking loan. Hello? I’m selling well below market – are you waiting for a kickback from me? Your uncle the roofing contractor? The city? FHA? Guess what? We’re not paying you another $395 for your shithead “re-inspection”!

It just says how crooked this whole process is when my realtor called in another guy who “might come through for us.” Good thing FHA appraisers all adhere to the same strict standards. :mad:

2

Its common knowledge that many RE agents use different appraisers for when they buy, and when they sell.

3

Well, the real estate market is not where it was two years ago. House prices have fallen by quite a bit off their bubble highs. So I could see a house appraising for considerably less than it did two years ago.

4

I feel your pain.

Eight years ago my house burned to the ground, nothing was salvagable, not even the foundation. We had bought the old home from my wife’s dad after two independant appraisors gave it a value of 45G and 49G. We split the difference and bought it for 47G.

We bought replacement cost insurance, and the insurance company came through with 72G. That was based on quotes from several local contrators. The insurance company did right by us.

I borrowed another 10G from my life insurance to add to the mix, and we built a very modest shoebox (1440 sq ft ranch, full basement not finished) no garage. We had to cut corners so we got cheap carpeting, cheap (but entirely functional) faucets and such.

Then the State put a cap on property tax rates the cities could charge. The cities found the solution easy. Just send out the appraisor, and raise the value of what you are taxing. Not one of the independant ones the realtors use, but a full time employee of the city. My 82G shoebox became a 130G shoebox overnight.

I am now in the situation where my property taxes are well over half what my mortgage is (I used the insurance money to build a new house, I still owe on the original 47G loan).

I called the city and offered them a great deal, I said I would sell them the house they say is worth 130G for a mere 110G, and eat the 20G loss, and I could be out by the following week. They declined this great offer. Surprise.

My dad told me that something is worth what you can get for it, advice that has served me well. I guess that doesn’t apply to government, it is worth what they say it is worth. They do not seem to be willing to put money where thier mouth is, unless it is the taxpayers money.

5

Okay, couple words here about how appraisal of real estate works. Yes, I work for an appraiser and have been in the business, off and on, for twenty years.

An appraiser looks at a house and makes a determination, based on the recent market activity of similar houses, of what that house is worth. The real estate market goes up and down and appraisers are only allowed to go back a certain period of time (nine months where I am) to gather comparable sales. We have a similar issue right now in our market in that houses that sold last summer were priced a lot higher and valued higher than the exact same house would be this year–because the market is no longer red hot and prices have fallen quite a bit. The appraiser is only redacting the marketability of a house based on what the actual market is doing.

Also, a common misperception is that “putting money into a house” will automatically increase the value. It’s true that SOME things will automatically raise the value–adding a bathroom, remodelling a kitchen, adding a room (as long as the work is done with permits and can legally be considered as an addition to gross living area) or finishing a basement. However, it’s not a one to one ratio of dollars spent to equity increased, not by a long shot. Spend your money putting in bright purple carpeting and you might as well flush it down the toilet–just because YOU love bright purple carpeting does not mean the market agrees with you.

Other expense items such as replacing a water heater or a roof or a furnace may make your house more marketable, but will not increase the APPRAISED value, necessarily, as a functioning water heater, roof and furnace are considered to be things which are necessary to the house MAINTAINING value, but don’t actually increase that value unless you went over and above–say replacing a comp shingle 20 year roof with a fifty year metal one, or putting in a tankless water heating system, or replacing baseboard heaters with a forced air whole house system.

There’s also the issue of putting too much money into a house until you actually improve it to the point where it’s too good for the neighborhood–a million dollar house in a hundred thousand neighborhood is NOT going to appraise at a million dollars, whereas a hundred thousand house in a million dollar neighborhood will have its value increased due to its location–although not up to a million. The value there is in the POTENTIAL for putting a million dollar house on the land that happens to be in the right place.

You also mention that your buyer is going for FHA financing, which opens up a whole new kettle of worms–to hash a metaphor. FHA appraisals are a big fat pain in the ass for the appraiser as well as the buyer and seller because of the endles picky ass stuff the government requires the appraiser to note and thereby requires the seller to take care of–my favorite is that if you have any bushes or landscaping plants touching the house at any point you have to remove them before the appraisal is approved and the house can be sold. If you want to see this pain in the ass for yourself, go to the HUD appraiser site here and scroll down the page to the link marked “valuation protocol.” Warning–it’s a 4.5MB Word file detailing all the picky shit an appraiser is supposed to check on your house in order to do an FHA appraisal.

Many, MANY appraisers flatly refuse to get rostered with the FHA, because they don’t get any more money for an FHA report but they do have to work a lot harder, including having to come out again to check on any conditions they noted to make sure they’ve been done before the report can be signed off. You know, making sure you trimmed that bush that was brushing the paint. This means the appraiser has to make another trip that he/she doesn’t get paid for–and time is money to an appraiser. Also, FHA appraisals are subject to a lot more scrutiny than a regular loan, and Og help any appraiser who doesn’t comment on the stupid stuff at your house and the report gets pulled for a field review. If the appraiser didn’t comment on your brushing bush, the report gets kicked out and a complaint gets made to the licensing board, which is at minimum a huge pain in the ass and at maximum a complete loss of all revenue forever and the appraiser gets to find a whole 'nother job to do.

I don’t know the specifics of your particular appraisal, but I hope this makes at least a few things make more sense regarding what’s going on with your house. My best advice? Stick with buyers who can qualify for standard loans and fuck FHA!

I know, you don’t have any control over who your buyer gets finanacing from!

6

Have you looked into the appeals process for this? I obviously have no idea about your city’s regulations, nor your state’s laws, but here I’ve talked to people who got screwed with wildly inappropriate real estate assessments for tax purposes. The general consensus has been that once things get to a arbiter, or even a review board, the person defending the higher assessment has a very, very hard row to hoe.

If this is a city-wide concern as you’ve implied it might be, contact your state AG Office, it may be illegal, when done on a city-wide basis.

(Assuming that your neighborhood isn’t seeing an actual rise in housing prices. If it represents an honest reflection of the market, I’m afraid you’re likely SOL.)

7

See now, I’m on the opposite side of this mess–I live in an area that the city is considering snatching up to make a park out of. The assessor says my house and land is worth about 120K, but actual market value is more like 165-190K. If they decide to exercise eminent domain and take my house, THEY get to decide how much to pay me, and screw what the market says my house is worth–they’ll give me 120 and I can just like it and go fuck myself.

There’s something wrong with the buyer being able to set their own prices for things and then use the force of law to make it so–I’d love to be able to go buy a brand new car for 14.95 and a boat for six bucks, y’know? :rolleyes:

Well, at least here we have Measure 37, which allows property owners to sue for loss of value if the government does something that decreases the value of our property. It’s a pain in the ass and takes forever, but the possibility of having to pay a huge judgement and all associated legal and court fees does make them a bit more cautious about land grabs.

I must say, though, it’s really unusual for assessed value to exceed market value–there’s something really whack about what your city is doing here…

8

I just had to reply to SmartAleq on this one.

I remember a quote fom someone who said the afterlife is like real estate, only three things matter, “Location, location, location”.

It just made me laugh a bit. I do not dispute any of your very nicely written and informative post.

9

Okay, I am going to try to explain this the best I can although I don’t really understand it all myself, but have felt the impact.

Farmland was taxed just like any other land. Farmers quickly learned that it was more profitable to sell the land to developers than farm it. In an attempt to stem the tide of disappearing farmland, the State legislature passed a bill that based property tax for farmland on the crop yield, not acreage. Pasture land just became non-taxable. This caused the tax income for the counties and cities, especially those in rural areas to drop radically. They had to make it up somewhere. Farmers did not get by unscathed, as their property with buildings got a hike, but all in all they did okay. The tax burden shifted more to the urban dwellers. I am one of those. When I say urban, I live in the biggest city in Grant county, the largest county area wise in Wisconsin. Last time I heard, Grant County has more cows than people. When I moved here (from Chicago) in 1977 there was one stoplight in the entire county, it got hit by lightening and it took them over a year to get around to fixing it. Now there are ten or so just in Platteville. Maybe twenty in the county.

But I stray. The land values in my area are unusually high, because our modest home is near the University (about ten blocks). But face it, market value, no one is trying to buy me out. Too far away for the University to be interested in annexing, and their are plenty of older houses closer to the college for the slumlords looking for student rental units to drool over.

That aside, the way for Platteville to raise revenue is to increase the value of property, at least on their books for tax purposes. And that is exactly what they did.

10

I know how appraisals work and I’ve also pulled the comps for my 'hood and we are $10k below similar houses (I’ve been in some of them and I can say with confidence that my house is in much better shape). I’m not in one of the bubble markets and there hasn’t been any kind of balloon and subsequent crash in this area. I’m puzzled about how I could have bought this house with FHA two years ago, when it appraised over the loan amount in an inspection done by the FHA, and now it is far below. The renovations I’ve done are all elements that should have improved the house: total reno of both bathrooms and the kitchen, new water heater, new heater, new flooring, new sidewalk, etc.

11

All I can say is that no matter how much we’d like appraisal to be an exact science it really comes down to a matter of opinion. I recall a bit of a scandal when an old appraiser who’d retired and passed his business on to someone else had a whole raft of reports reviewed–turned out the old dude had this gigantic stiffy for any house that had river rock used in the construction and would drastically overvalue any POS that had a river rock chimney or porch pillar or the like. Some houses he’d overvalued to the tune of many tens of thousands all because of his irrational preference for river rock. In the same way, some appraisers can get prejudiced against certain neighborhoods or styles of construction and throw off a wack appraisal. This is why field reviews are ordered–I have two of them sitting here for a look through right now (but I’m reading Harry Potter and taking a break here instead, heh); someone will sniff a rat about a given appraisal and have another appraiser take a look at it to see if it’s kosher or not. That’s probably what your realtor’s trying to do–get that second opinion to see if s/he can shift the first appraiser into reevaluating the bottom line.

Nothing really underhanded, mostly just a matter of maybe pointing out to appraiser #1 some information s/he didn’t consider when putting together your report. If you have what you think are better comps, have your realtor send them to the appraiser and ask why s/he didn’t use those instead if they support a higher value. That’s what a field reviewer does–makes sure comps used were the best available and not cherrypicked to support a predetermined opinion of value. Also, if there’s no verbiage in the appraisal addressing significant improvements made to the property, make sure the appraiser knows these things were done, since that can make a difference in deciding which comp sales are truly the most like your house.

12

I’ll start gluing river rock to my chimney tomorrow :stuck_out_tongue:

Thanks for the advice. Our realtor is working on getting another appraiser out here since the comps and the appraisal are so out of whack with the norms for the neighborhood.