Refinancing: Appraisal Value Lowered During Underwriting

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Fri Oct 13, 2017 12:27 pm

We're going through a refi, and paid for an appraiser to come out and evaluate our home. The appraisal came in at $550,000, for an LTV of 68%.

I was just informed that as a part of the underwriting process, they have issues with the appraisal, and now have changed the value to $360,00 - which actually puts us under water!

Here's what I got from them:
Just wanted to let you know that we had an issue with your appraisal. As a Fannie Mae/Freddie Mac product, we need to do a review on all appraisals that we receive. Please see attached.

The results of your review from the underwriter are noted below:

“Unfortunately, have a significant value issue for this file. I just received the Value Escalation (VRR) from Redbell and they lowered the value significantly. Even though our value was putting us at 68% LTV, the value cut with multiple negative findings put the value under our loan amount on this. The complete report is attached. The review also states that two of the comps in the URAR have extensive facilities for raising horses which was not disclosed on the report and making them undesirable comparables to subject and inflated subject market value. With these concerns and the high SSR score our only real alternative to proceed would be to go with a field review for the support. Of course, no assurance that would support value.”

Because it came back so much lower than initially estimated, in order to proceed, we will need to order what is called a Field Review to confirm the value.

A field review is when a second appraiser goes out to the property to verify the work of the previous appraiser. I can’t guarantee that the value will change based on the field review but it is the best option to proceed at this time. The cost for this field review is $355.

Can we go ahead and order this to keep your loan moving in a timely manner?
I'm rather livid. I already paid for an appraisal, so now I have to pay again because it was blown?

Should I just walk away from this and find another lender?

I used this lender as a result of going through a screening process at mortgagprofessor.com. Things have gone smoothly until now :annoyed
"I've been ionized, but I'm okay now." -Buckaroo Banzai

Carefreeap
Posts: 2105
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by Carefreeap » Fri Oct 13, 2017 1:12 pm

Is the property very unique? Have you checked the comps cited and did they seem comparable to you?

That's a really big spread in price. I've been working with a friend with an estate sale and the difference between the appraisals is in the 10% range which I consider to be normal. The house is in a suburban neighborhood with a lot of custom or customized houses with a lot of variation in lot size.

User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Fri Oct 13, 2017 1:28 pm

Carefreeap wrote:
Fri Oct 13, 2017 1:12 pm
Is the property very unique? Have you checked the comps cited and did they seem comparable to you?

That's a really big spread in price. I've been working with a friend with an estate sale and the difference between the appraisals is in the 10% range which I consider to be normal. The house is in a suburban neighborhood with a lot of custom or customized houses with a lot of variation in lot size.
We have 8.5 acres of property, with most of it wooded with a trail system we maintain going to/from a creek along the back border. So in that respect, it is somewhat unique. The comps in the report all had much less acreage (up to 4 acres), which is the main differential I see. We're not in a subdivision - just a house along a road with a lot of space out back. So I can see where getting good comps might be challenging.

The main beef seems to be that some of the properties used as comps in the original report, which do have comparable acreage, also have facilities for horses, which we do not.
"I've been ionized, but I'm okay now." -Buckaroo Banzai

rterickson
Posts: 76
Joined: Fri May 01, 2015 3:48 pm

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by rterickson » Fri Oct 13, 2017 2:52 pm

I think the key issue may be "multiple negative findings".

I would try to find out what this is about.

User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Fri Oct 13, 2017 3:13 pm

rterickson wrote:
Fri Oct 13, 2017 2:52 pm
I think the key issue may be "multiple negative findings".

I would try to find out what this is about.
It's pretty clear from reading the report that it's their difficulty finding the right comps. The "negative findings" all center around the original appraiser having used horse farms as comps. Which while I agree is not a proper comp necessarily, neither is a home in a subdivision with 3 acres.

I've responded that in order to move forward, 1) They need to extend the lock period (which expires this coming Monday), and 2) they wave the fee for the "field review," considering I paid for a proper appraisal using an appraiser whom they referred to us. I said I'd consider paying it as part of closing costs if we get to that point.

I'll post the outcome.
"I've been ionized, but I'm okay now." -Buckaroo Banzai

User avatar
Meg77
Posts: 2129
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by Meg77 » Fri Oct 13, 2017 3:57 pm

Mortgage lender here. It sounds like you're stuck. Unfortunately I had this happen to me once on the consumer side and my lender (a former employer no less) got the appraisal report back and didn't like the cracks in the brick on one of the pictures. So they requested that I pay for a structural engineer to give an additional report to support the value. Which means I DID have to pay for the report they wouldn't use, and I walked away instead of paying for an additional report.

I would ask whether you can appeal though. It sounds like they are citing actual errors in your original appraisal - i.e. bad comps were used. That is different and normally the bank would just go back to the appraiser to get the errors fixed.
"An investment in knowledge pays the best interest." - Benjamin Franklin

Carefreeap
Posts: 2105
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by Carefreeap » Fri Oct 13, 2017 4:15 pm

Meg77 wrote:
Fri Oct 13, 2017 3:57 pm
Mortgage lender here. It sounds like you're stuck. Unfortunately I had this happen to me once on the consumer side and my lender (a former employer no less) got the appraisal report back and didn't like the cracks in the brick on one of the pictures. So they requested that I pay for a structural engineer to give an additional report to support the value. Which means I DID have to pay for the report they wouldn't use, and I walked away instead of paying for an additional report.

I would ask whether you can appeal though. It sounds like they are citing actual errors in your original appraisal - i.e. bad comps were used. That is different and normally the bank would just go back to the appraiser to get the errors fixed.
I like the idea of an appeal but I'm not sure that the problem lies entirely with the appraiser. As you know, underwriters can be pretty...quirky themselves.

This sounds like a case where the appraiser used the best comps s/he could. Maybe the problem is that s/he didn't account for a change in valuation for the "horse facilities" but it also sounds like there would be at least a partial if not full off-set of those improvements by the subject property having double the acreage as the comps (depending on the zoning).

User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Sat Oct 14, 2017 6:32 am

Meg77 wrote:
Fri Oct 13, 2017 3:57 pm
Mortgage lender here. It sounds like you're stuck. Unfortunately I had this happen to me once on the consumer side and my lender (a former employer no less) got the appraisal report back and didn't like the cracks in the brick on one of the pictures. So they requested that I pay for a structural engineer to give an additional report to support the value. Which means I DID have to pay for the report they wouldn't use, and I walked away instead of paying for an additional report.

I would ask whether you can appeal though. It sounds like they are citing actual errors in your original appraisal - i.e. bad comps were used. That is different and normally the bank would just go back to the appraiser to get the errors fixed.
It certainly is beginning to feel like we're stuck. Seems like there should be *some* recourse for malpractice by an appraiser. But I guess it's like any other case of poor service, in that it just depends on what lengths in time/expense one wants to undergo to get satisfaction.
Carefreeap wrote:
Fri Oct 13, 2017 4:15 pm
This sounds like a case where the appraiser used the best comps s/he could. Maybe the problem is that s/he didn't account for a change in valuation for the "horse facilities" but it also sounds like there would be at least a partial if not full off-set of those improvements by the subject property having double the acreage as the comps (depending on the zoning).
Indeed. It also seems like the potential for recreational use should be a factor. For example, we have direct access to a stocked creek, with an adjoining 80 acre property that's in a conservancy. Also plenty of deer around for bow hunting and the like, although I'm not into that myself.
"I've been ionized, but I'm okay now." -Buckaroo Banzai

Bacchus01
Posts: 1147
Joined: Mon Dec 24, 2012 9:35 pm

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by Bacchus01 » Sat Oct 14, 2017 8:49 am

Try another lender. Or get another appraisal. An appeal will do you nothing. The underwriters job is to protect the company from undue risk. They are not trying to just make you mad or treat you poorly, they are managing risk. Sounds like you need to work through this issue but getting pissed about it probably won't do any good.

Carefreeap
Posts: 2105
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by Carefreeap » Sat Oct 14, 2017 11:55 am

Bacchus01 wrote:
Sat Oct 14, 2017 8:49 am
Try another lender. Or get another appraisal. An appeal will do you nothing. The underwriters job is to protect the company from undue risk. They are not trying to just make you mad or treat you poorly, they are managing risk. Sounds like you need to work through this issue but getting pissed about it probably won't do any good.
But they can be excessive as well. They are human after all. And the paranoia about how someone can cheat the system and they get blamed can affect their judgment. When I sold my mother's condo this summer, the hoops the underwriter was putting the buyer got to be ridiculous. The appraisal came in $30k over the sales price (private sale so I discounted the price partially for no commission). 80% LTV. The buyer's net worth was something like $5M with 3 paid off properties, over $200k in income, only debt was a $97k mortgage on their primary worth $600k, FiCO of around 830, savings something like $2.5M. Underwriter's obsession about an ANNUAL townhome HOA of $350 delayed the transaction by 2 weeks costing me personally over $2k. Fortunately for me, my mortgage broker's assistant pushed back and said "you don't need to know that in order to close this transaction. You already have a third party statement showing the fee". He says he hates to do that because folks don't like to upset the underwriter but enough is enough.

Over the years I've had over 10 mortgages and refis. As I warned my condo buyer, there's always something weird the underwriter comes up with. Try to be patient, try to understand where s/he is coming from but when s/he gets unreasonable you need to push back in a firm and polite way.

Good luck OP. If your mortgage broker can't help I'd go up the chain of command to see what options you have to amend/clarify the appraisal.

User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Sat Oct 14, 2017 2:16 pm

Bacchus01 wrote:
Sat Oct 14, 2017 8:49 am
Sounds like you need to work through this issue but getting pissed about it probably won't do any good.
Yes, a night's sleep does wonders for clearing up judgement somewhat. My cortisol level is back to normal now :wink:
Carefreeap wrote:
Sat Oct 14, 2017 11:55 am
Over the years I've had over 10 mortgages and refis. As I warned my condo buyer, there's always something weird the underwriter comes up with. Try to be patient, try to understand where s/he is coming from but when s/he gets unreasonable you need to push back in a firm and polite way.

Good luck OP. If your mortgage broker can't help I'd go up the chain of command to see what options you have to amend/clarify the appraisal.
Thanks :happy Yes, I was expecting things like gratuitous requests for documentation, questions about transactions on bank statements, etc. This surprised both me and the mortgage guy, who described it as "rare."

We elected to bite the bullet and pay for the field report. When we weighed that against costs associated with starting over, it didn't make much financial sense. So we'll risk another $355 to make this one work, and if it doesn't, we'll drop back and punt.
"I've been ionized, but I'm okay now." -Buckaroo Banzai

Carefreeap
Posts: 2105
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by Carefreeap » Sat Oct 14, 2017 3:16 pm

dougger5 wrote:
Sat Oct 14, 2017 2:16 pm
Bacchus01 wrote:
Sat Oct 14, 2017 8:49 am
Sounds like you need to work through this issue but getting pissed about it probably won't do any good.
Yes, a night's sleep does wonders for clearing up judgement somewhat. My cortisol level is back to normal now :wink:
Carefreeap wrote:
Sat Oct 14, 2017 11:55 am
Over the years I've had over 10 mortgages and refis. As I warned my condo buyer, there's always something weird the underwriter comes up with. Try to be patient, try to understand where s/he is coming from but when s/he gets unreasonable you need to push back in a firm and polite way.

Good luck OP. If your mortgage broker can't help I'd go up the chain of command to see what options you have to amend/clarify the appraisal.
Thanks :happy Yes, I was expecting things like gratuitous requests for documentation, questions about transactions on bank statements, etc. This surprised both me and the mortgage guy, who described it as "rare."

We elected to bite the bullet and pay for the field report. When we weighed that against costs associated with starting over, it didn't make much financial sense. So we'll risk another $355 to make this one work, and if it doesn't, we'll drop back and punt.
Have you had a chance to review the report yourself and look at what (if any) adjustments the appraiser made between the comps and your property?
If you haven't you should and you have the right to obtain a copy.

One of the weirder requests we got from an underwriter 22 years ago for the property we are currently living in was why we were buying a house four door up the street from our old house. I thought it was rather self explanatory; the "new" house had twice the square footage, 4x the lot size and a 300 degree view of the ocean and surrounding hills. All of these items were documented in the appraisal. My mortgage broker answered the question for us without getting my approval. I was really annoyed at the time but it was probably for the best. I probably wouldn't have been able to resist in my explanation a reference to the underwriter's reading comprehension level. :annoyed I'm sure that wouldn't have helped my case.

Good luck!

User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Sat Oct 14, 2017 4:44 pm

Carefreeap wrote:
Sat Oct 14, 2017 3:16 pm
Have you had a chance to review the report yourself and look at what (if any) adjustments the appraiser made between the comps and your property?
If you haven't you should and you have the right to obtain a copy.

One of the weirder requests we got from an underwriter 22 years ago for the property we are currently living in was why we were buying a house four door up the street from our old house. I thought it was rather self explanatory; the "new" house had twice the square footage, 4x the lot size and a 300 degree view of the ocean and surrounding hills. All of these items were documented in the appraisal. My mortgage broker answered the question for us without getting my approval. I was really annoyed at the time but it was probably for the best. I probably wouldn't have been able to resist in my explanation a reference to the underwriter's reading comprehension level. :annoyed I'm sure that wouldn't have helped my case.

Good luck!
I have both the original appraisal and the, uh, "counter-appraisal." I did't read the latter in extensive detail, but it was clear that since all the properties in my area with comparable acreage also have horse farms, they dropped those completely, and comped mine against everything that was left over.

I haven't read the original in great detail at all...I was so jacked to see the favorable valuation, I didn't bother. Ah, too good to be true...

I really appreciate all of the other horror stories, BTW. Misery, company, and so on :beer

I do wonder if there's any legal remedy for "unfair" treatment by an underwriter. I imagine the complainant's burden would be way higher that we could stomach, though.
"I've been ionized, but I'm okay now." -Buckaroo Banzai

inbox788
Posts: 4194
Joined: Thu Mar 15, 2012 5:24 pm

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by inbox788 » Sat Oct 14, 2017 5:08 pm

dougger5 wrote:
Sat Oct 14, 2017 4:44 pm
I have both the original appraisal and the, uh, "counter-appraisal." I did't read the latter in extensive detail, but it was clear that since all the properties in my area with comparable acreage also have horse farms, they dropped those completely, and comped mine against everything that was left over.

I haven't read the original in great detail at all...I was so jacked to see the favorable valuation, I didn't bother. Ah, too good to be true...

I really appreciate all of the other horror stories, BTW. Misery, company, and so on :beer

I do wonder if there's any legal remedy for "unfair" treatment by an underwriter. I imagine the complainant's burden would be way higher that we could stomach, though.
If you've been discriminated against, there are those legal remedies. But based on what you've provided, all I see is they have a problem with your appraisal and your property. Nothing is personal. Also, it's still unclear to me what you think the current appraisal should be and what it's based on. How much are you on the hook for pulling out now? What is your current rate and terms and what would it be if you were approved?

Is a zero cost refinance available, even if the rate is a little higher?

User avatar
dougger5
Posts: 216
Joined: Fri Nov 27, 2015 11:58 am
Location: Not far from Malvern

Re: Refinancing: Appraisal Value Lowered During Underwriting

Post by dougger5 » Sat Oct 14, 2017 5:42 pm

inbox788 wrote:
Sat Oct 14, 2017 5:08 pm
If you've been discriminated against, there are those legal remedies. But based on what you've provided, all I see is they have a problem with your appraisal and your property. Nothing is personal. Also, it's still unclear to me what you think the current appraisal should be and what it's based on. How much are you on the hook for pulling out now? What is your current rate and terms and what would it be if you were approved?

Is a zero cost refinance available, even if the rate is a little higher?
Like I said, or meant to say, we're nowhere near meeting whatever burden that would trigger litigation. Just a major PITA at this point.

It is also unclear to me what the proper value is. I'm almost certain that it's higher than the most recent valuation, $360k, and probably lower than the original, $550k. Where it falls in between that high and low is outside of my area. FWIW, Zillow has it at $440k.

Not counting the $355 were about to sink, we're $545 in. That's app fee plus appraisal fee.

Current rate is 4%, until next August - it's a 7/1 ARM that's in its 12th year; it's been resetting annually since 2012. Balance owed is ~369k.

Refi rate is locked at 2.75%, for a 15yr fixed. At least until Monday...the loan agent is going to try and get that extended.

I suppose we could consider a zero cost, but I'm trying for lowest total cumulative cost. I don't mind ponying up a bit up front. Our checking account has been inflated for the past few weeks in anticipation of funding the closing costs. Could've been earning that 1.2% in Ally savings... :annoyed
"I've been ionized, but I'm okay now." -Buckaroo Banzai

Post Reply