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Author Topic: Appraisal gone bad - seek legal advice?  (Read 1365 times)
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rittchard
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« on: November 05, 2012, 09:37:04 PM »

Trying to make this long story short.  A while ago I inquired about a refinance from Quickenloans.  Everything was looking good, paperwork, credit scores, everything was approved - net effect would be we'd be saving about $900/month.  I was ecstatic, I mean that would really open up things financially to pay down the principal or remodel or donate or whatever.  But then the appraisal came in - at $100,000 less than what I assumed (which was just that the value remained roughly the same over the past 3 years), which effectively killed the whole deal.  I sent Quicken an appeal/rebuttal/questions regarding the details of the appraisal, but they've been delaying and trying to get me to work on a different loan package (FHA streamline) which I more or less turned down.

Now you might assume I don't understand how appraisals are done (true) and may be underestimating how much the market has come down in my area in the past 3 years (debatable), but regardless, I feel like at bare minimum I deserve an explanation on a few key items.  These appraisals basically boil down to the comparables the appraiser chooses, and how they choose to manipulate the +/- factors compared to your home.  In other words, it still comes down to a single person's biased opinions and approach.  For instance, there's a number they use for how much each sq ft of living space is worth, and how much each sq ft of additional property, etc. (where do these numbers come from and why are they so drastically different from the numbers the appraiser used 3 years ago?)  Then they factor in things like "quality" and "condition" - which of course have a lot of personal bias.  Her primary comparable was a foreclosed home, and though it was clearly remodeled, I'd still be skeptical on the "quality" or "condition" of a 60+ year old foreclosed house vs. my 25 yo house which has been well taken care of.  The numbers can matter dramatically depending on which condition or quality they choose, in this case each tier was a factor of $30,000 different so her foreclosed comparable gets valued +$30,000.  In another interesting choice, she factored $20,000 for each additional bathroom (3 years ago my appraiser factored $5000 per bathroom).  

But here's the best part: after all her calculations, the number she came up with for 3 average comparables was VIRTUALLY IDENTICAL to the number in my appraisal from 3 years ago.  In her text, she even remarks that the market had stabilized.  Every market trend graph I've seen shows basically a stable curve in the zip code over the last 3 years, maybe a small % dip but nothing even close to justifying a $100,000 drop.  The property assessment has gone up and down over the past few years, but has always been consistent with the price we bought it for.  So if this new appraisal value is "correct," that means 3 years ago I was the victim of 2 faulty appraisals plus the County Assessor being wrong for about 10 years.

All that said, what really bothers me is that there seems to be a complete lack of process or protection against this - essentially your fate is left in the hands of a single person's biased opinion and manipulation of numbers.  Everywhere I've looked and asked and read, people just seem to be complacent about accepting the results.  Even buying/selling/valuing a car seems to have far more options, stipulations and protections in place than this mess.  I'm wondering if there is any point in contacting a lawyer to inquire about possible actions in the future, or if it's really as futile as everyone seems to be telling me.
« Last Edit: November 05, 2012, 09:50:38 PM by rittchard » Logged
ATB
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« Reply #1 on: November 05, 2012, 09:53:38 PM »

We had our appraisal come in 25k below where we needed it and disputed it. We got to see the sheet and saw that the comparables were bad and the appraiser actually missed a whole room on the house. Not to mention they undervalued our basement (which we were finishing at the time) by some 40k.

That said, we went with a local mortgage co, so a conglomerate like quicken might just brush you off.

As for legal options, pretty sure you have none other than requesting another appraisal or going to a different lender.

The mortgage isn't binding until you've signed it so either party can back away at any time before that.
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Azhag
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« Reply #2 on: November 05, 2012, 09:55:07 PM »

Yeah, our house sale recently had issues as some fannie mae automated thing marked our old zip code as a "declining market" which was the first any of the realtors or banks had heard of it. Had to get a second appraisal or something (I forget what exactly) to meet the requirements. Market may not have been perfect, but metro comes out there next year and is expected to be a strong net positive.
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« Reply #3 on: November 05, 2012, 09:55:36 PM »

It's black magic as far as I'm concerned. We were deathly afraid the appraisal on our house was going to be too low when we bought, but it came in (surprise) exactly at the purchase price. I mean, really? Exactly the purchase price and not a penny more? The comps were all over the place and from several years ago, so it looked pretty silly. But we got our house, so were happy.

I've heard of appraisals where they just drive by the house. As far as I can tell, the appraisal comes in however the bank wants it. In our case, they thought we could pay the money, so they made it work. In your case, they probably want the extra cash, so surprise, it came in low. Supposedly not a racket, but if it walks like a duck...
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pr0ner
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« Reply #4 on: November 05, 2012, 11:16:27 PM »

Have you checked a site like Zillow to see what their estimate is?  I'm about to close on a refinance myself, and my appraisal was really close to what Zillow estimated.
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rittchard
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« Reply #5 on: November 06, 2012, 12:52:33 AM »

Quote from: pr0ner on November 05, 2012, 11:16:27 PM

Have you checked a site like Zillow to see what their estimate is?  I'm about to close on a refinance myself, and my appraisal was really close to what Zillow estimated.

Yeah, the numbers on Zillow are pretty low, similar to what the appraiser had - but.... this was the same situation 3 years ago.  My house happens to be a bit of an oddity in the neighborhood it is in because it was torn down and rebuilt 25 years ago, and then about 10 years ago a major extension was made to it.  So it's much newer than the majority of the neighborhood and much larger as well, which is why 3 years ago I was also worried the appraisal may not come in - but like Teggy said, it came in exactly at the purchase price.  Even better, because it was through the FHA, we had to do 2 appraisals, and BOTH came in at exactly the purchase price. 

Now supposedly the appraisal process has changed in recent years so that it can't be directly influenced/controlled by banks, etc. - but that was the same thing I was told 3 years ago.  Supposedly these are completely independent entities, which makes the whole process even more suspicious.

ATB, how did you find/choose your local mortgage co?  I get a ton of ads every day but I don't know if they are trustworthy so I thought it would be safer to work with a bigger company.
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« Reply #6 on: November 06, 2012, 01:37:59 AM »

Wasnt this part of the problem with the housing bubble to begin with? Apprasiers over appraising houses so that refinancing now, can in some case come back with a value lower then even your existing mortgage... I think what happened is that we went in one extreme (over-valuing) and it caused problems, so now we are swinging into the other extreme...
You can request a 2nd appraisal, but you will have to pay for it regardless of what it comes out as and I'm not sure what would happen if it is drastically different...
You should double-check and make sure they really do have your whole house on the appraisal though..
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ATB
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« Reply #7 on: November 06, 2012, 02:16:12 AM »

Quote from: rittchard on November 06, 2012, 12:52:33 AM

ATB, how did you find/choose your local mortgage co?  I get a ton of ads every day but I don't know if they are trustworthy so I thought it would be safer to work with a bigger company.

I don't remember how we got connected with her the first time...I think she was a reference from my real estate agent.  If you want to PM me your zipcode, I can check Angie's List and see if anyone with high recommendations comes up in that area.

Otherwise, ask friends, co-workers, neighbors, etc.

Edit: Keep in mind that almost any small Mort. co is going to resell your loan to one of the big boys anyway.  So it's largely just the convenience of the process and things like that.
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« Reply #8 on: November 06, 2012, 02:54:06 AM »

Quote from: rittchard on November 06, 2012, 12:52:33 AM

Quote from: pr0ner on November 05, 2012, 11:16:27 PM

Have you checked a site like Zillow to see what their estimate is?  I'm about to close on a refinance myself, and my appraisal was really close to what Zillow estimated.

Yeah, the numbers on Zillow are pretty low, similar to what the appraiser had - but.... this was the same situation 3 years ago.  My house happens to be a bit of an oddity in the neighborhood it is in because it was torn down and rebuilt 25 years ago, and then about 10 years ago a major extension was made to it.  So it's much newer than the majority of the neighborhood and much larger as well, which is why 3 years ago I was also worried the appraisal may not come in - but like Teggy said, it came in exactly at the purchase price.  Even better, because it was through the FHA, we had to do 2 appraisals, and BOTH came in at exactly the purchase price. 

Zillow is probably pretty accurate, around here it's usually a little lower than what you can get by about 10%. However, it sounds like your MLO at QuickenLoans wants to sell you a different loan (that he/she likely makes more money on). If the underwriter has already denied the loan, I'd move on to another company. The approval process is usually fairly automated and once denied, it's not likely to be overridden unless you're at a small bank.

Banks also tend to work with the same appraisers over and over and they tend to know what the contract price is. Seriously, sometimes I think you can't have ethics to work in that industry...

Quote
Now supposedly the appraisal process has changed in recent years so that it can't be directly influenced/controlled by banks, etc. - but that was the same thing I was told 3 years ago.  Supposedly these are completely independent entities, which makes the whole process even more suspicious.

ATB, how did you find/choose your local mortgage co?  I get a ton of ads every day but I don't know if they are trustworthy so I thought it would be safer to work with a bigger company.

Aside from the normal "don't get your mortgage where your deposit accounts are" advice, might I suggest you look at your local banks instead of brokers? I don't know where you live, but I'd head to your regional bank (e.g., 5/3, Sun Trust, Zions, etc) or credit union and see what they can do for you. They're going to sell the loan (to FNMA/FHLMC) but retain the servicing rights. This means you still pay them and if you have a problem, that's who you deal with. A regional bank isn't typically going to sell your servicing to another bank, they just want to be able to lend the money again.

A broker, like QuickenLoans or "Bob's Hypothetical Mortgage Company", is probably going to sell both to whoever they work with.
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« Reply #9 on: November 06, 2012, 04:55:27 PM »

Quote from: Teggy on November 05, 2012, 09:55:36 PM

It's black magic as far as I'm concerned. We were deathly afraid the appraisal on our house was going to be too low when we bought, but it came in (surprise) exactly at the purchase price. I mean, really? Exactly the purchase price and not a penny more? The comps were all over the place and from several years ago, so it looked pretty silly. But we got our house, so were happy.

Got the appraisal back today on the house we're buying and it came back....exactly at the purchase price. I don't understand why the Appraiser knows the price. It's obviously a target to hit rather than an objective number. He also stretched the comps to make sure they met the number so we make the deal. I have no faith if the house is actually worth the price now. Of course on the house we're selling it didn't appraise and they did not take any of the numerous upgrades and addition into account at all.

The entire appraisal process stinks IMO.
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ATB
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« Reply #10 on: November 06, 2012, 05:10:52 PM »

Quote from: Jag on November 06, 2012, 04:55:27 PM

Quote from: Teggy on November 05, 2012, 09:55:36 PM

It's black magic as far as I'm concerned. We were deathly afraid the appraisal on our house was going to be too low when we bought, but it came in (surprise) exactly at the purchase price. I mean, really? Exactly the purchase price and not a penny more? The comps were all over the place and from several years ago, so it looked pretty silly. But we got our house, so were happy.

Got the appraisal back today on the house we're buying and it came back....exactly at the purchase price. I don't understand why the Appraiser knows the price. It's obviously a target to hit rather than an objective number. He also stretched the comps to make sure they met the number so we make the deal. I have no faith if the house is actually worth the price now. Of course on the house we're selling it didn't appraise and they did not take any of the numerous upgrades and addition into account at all.

The entire appraisal process stinks IMO.

This is astute. Before the drop, appraisers were often in the pocket of the mortgage companies and would come in right on number for the loan. Since the crash, though, it's supposed to be an independent process....maybe it has gone back to the old way...
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rittchard
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« Reply #11 on: November 06, 2012, 05:50:09 PM »

Quote from: ATB on November 06, 2012, 05:10:52 PM

Quote from: Jag on November 06, 2012, 04:55:27 PM

Quote from: Teggy on November 05, 2012, 09:55:36 PM

It's black magic as far as I'm concerned. We were deathly afraid the appraisal on our house was going to be too low when we bought, but it came in (surprise) exactly at the purchase price. I mean, really? Exactly the purchase price and not a penny more? The comps were all over the place and from several years ago, so it looked pretty silly. But we got our house, so were happy.

Got the appraisal back today on the house we're buying and it came back....exactly at the purchase price. I don't understand why the Appraiser knows the price. It's obviously a target to hit rather than an objective number. He also stretched the comps to make sure they met the number so we make the deal. I have no faith if the house is actually worth the price now. Of course on the house we're selling it didn't appraise and they did not take any of the numerous upgrades and addition into account at all.

The entire appraisal process stinks IMO.

This is astute. Before the drop, appraisers were often in the pocket of the mortgage companies and would come in right on number for the loan. Since the crash, though, it's supposed to be an independent process....maybe it has gone back to the old way...

I bought my house around 3 years ago AFTER the crash and when the new supposedly "independent" process was already in place.  I was concerned at the time because I had to do two separate appraisals, one from the FHA's choice and one of my own.  But as I mentioned, they both came in at the asking price, which seemed a little suspicious at the time, but I assumed they were allowed to know what the target price was and had to either justify it or not. 

As far as Quicken is concerned, they aren't a broker; they own the loan directly themselves.  What I don't know is who would benefit from the alternate package they wanted to get me in.  The interest rate was the same, but the MIP fees were outrageous; there's a starter fee around $11,000 and the monthly fee TRIPLES (WTF!).  Do they collect the MIP or is that an FHA thing?  Either way I decided not to go there.  Get this - if I had bought the house a couple months sooner, I would have qualified for the old MIP rates in the "Streamline" finance and no additional fees.  If I had bought the house a few months later, I would have at least qualified for a percentage rebate off the starter fee.  But I was lucky enough to have bought during the special few month period I like to call the FMF (FUCK ME FHA).

At this point, I just want to see a formal response addressing my concerns and then I'm ready to just drop it.  I don't want to go through this whole thing again so I'll probably wait for more favorable conditions or if I happen to find a different company I want to work with.
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« Reply #12 on: November 07, 2012, 07:23:34 AM »

Generally speaking (assuming you are financing through a bank) the appraiser isn't really working for you, they are working for the bank. They are providing some level of assurance to the bank that the value is in the ballpark of what they are lending to you, so that if you default on the loan, they can get most of their money back. This is why appraisals come in at the purchase price so often, because the bank is asking the appraiser to justify the loan.

By the way, I haven't done the math on this in a long time, but on a 30 year mortgage, a single extra payment can shave about 7 years off your mortgage, so it is definitely something to look into if you can.
« Last Edit: November 07, 2012, 07:26:09 AM by Misguided » Logged

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« Reply #13 on: November 09, 2012, 10:11:49 PM »

Quote from: Misguided on November 07, 2012, 07:23:34 AM

By the way, I haven't done the math on this in a long time, but on a 30 year mortgage, a single extra payment can shave about 7 years off your mortgage, so it is definitely something to look into if you can.

That sounds a bit off.
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« Reply #14 on: November 09, 2012, 10:37:17 PM »

Quote from: Jag on November 09, 2012, 10:11:49 PM

Quote from: Misguided on November 07, 2012, 07:23:34 AM

By the way, I haven't done the math on this in a long time, but on a 30 year mortgage, a single extra payment can shave about 7 years off your mortgage, so it is definitely something to look into if you can.

That sounds a bit off.

I ran the numbers in a mortgage calculator for my refinance, and an extra payment every year would only knock 4 years off my loan.
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« Reply #15 on: November 10, 2012, 02:26:58 PM »

I've heard nothing good about Quickenloans (primarily that their fees are outrageous).  I'd find a good local broker that will shop you around to several banks.  If you have a real estate agent you trust, they should have some strong recommendations on a broker. 
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« Reply #16 on: March 17, 2013, 10:29:25 PM »

Quote from: Freezer-TPF- on November 10, 2012, 02:26:58 PM

I've heard nothing good about Quickenloans (primarily that their fees are outrageous).  I'd find a good local broker that will shop you around to several banks.  If you have a real estate agent you trust, they should have some strong recommendations on a broker. 

I ended up doing this, going with a smaller local broker and everything seems to have turned out well.

However, today while I was deleting old emails, I ran across an article on the web aptly titled Ripoff Report:

http://www.ripoffreport.com/mortgage-companies/quicken-loans/quicken-loans-title-source-r-bpd2c.htm

And this more recently sounded familiar:

http://www.ripoffreport.com/tsi-appraisals-quick/loans/troy-michigan-d8891.htm

I thought it sounded too coincidental and really unbelievable, so I did a quick search and lo and behold, turns out Title Source (the company that screwed me over in the original post) really is FUCKING OWNED by Quicken Loans.  QL doesn't even bother trying to hide that it's in the QL "family":

http://quickenloanscareers.com/family/title-source/

Frankly I don't understand how this is even legally possible given that they themselves kept talking about the "rules" of how bankers aren't allowed to interact with appraisers and vice versa, yet somehow they can use a company that they OWN for their appraisals - gee, I wonder who they are gonna try to help. 

It just boils my blood, I don't even care about the money I lost to them, just the sheer audacity of it all irritates me to no end. 
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« Reply #17 on: March 18, 2013, 05:32:29 AM »

Keep in mind that if they aren't loaning you money, they aren't making any, so it isn't like this benefitted them, in some way. Unless you are doing a cash purchase, the main point of the appraisal is to assure the bank that they can get most of their money back out if need be.
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« Reply #18 on: March 18, 2013, 08:28:11 PM »

Quote from: Misguided on March 18, 2013, 05:32:29 AM

Keep in mind that if they aren't loaning you money, they aren't making any, so it isn't like this benefitted them, in some way. Unless you are doing a cash purchase, the main point of the appraisal is to assure the bank that they can get most of their money back out if need be.

I may not have mentioned that they collected a $500 non-refundable "deposit" at the time the original deal was approved (PRIOR to inspection).  So yes, it did benefit them.

Essentially this is what I think happened:

1 - Sales monkey promises you whatever to get your initial signature and deposit approval
2 - Handoff to someone else, who figures they can make a lot more money by selling a different loan package
3 - "Appraisal" used as a convenient way to kill original deal
4 - They hard sell the second loan; either they win or worst case for them, take your $500 for little more than a few hours of their sales monkeys' time

The Dodd-Frank Consumer Protection Act was meant to protect citizens from different types of corrupt behavior regarding home loans, etc.  My example is on the borderline, but surely you can see that having the lender have complete control over the appraisal could be used for all sorts of exploitation.

http://dodd-frank.com/dodd-frank-interim-rule-on-real-estate-appraisal-requirements/

It's apparently not explicitly illegal, but certainly questionable:

Quote
The interim final rule provides that a person who prepares a valuation or who performs valuation management services may not have an interest, financial or otherwise, in the property or the transaction. The Dodd-Frank Act does not expressly ban the use of in-house appraisers or affiliates.  However, because the Act prohibits appraisers from having an “indirect financial interest” in the transaction, it is possible to interpret the Act to prohibit creditors from using in-house staff appraisers and affiliated appraisal management companies.
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