Advance Property Research is Vital
‘Subject to’ obtaining a correct legal description…
Appraisers, an unusual situation occurred with an appraiser buddy, who asked for advice. After reviewing the details and providing input, I decided that this would be a good ‘teaching moment’ for others.
See PDF for images below.
Appraiser was asked to do a ‘refi’ assignment for a home that was purchased about 6 months prior by the borrower. The report was completed and turned in. Not long afterward, the appraiser received a ROV request because the borrower felt the value was too low. In the course of this process, the prior appraisal done for the purchase – by a different appraiser – was provided to the current appraiser.
The primary issue in both appraisals was the site size. The borrower claimed the actual site size is about TWICE the size both these reports indicate. And the borrower may be correct. Except, the property legal description and site size relied on by BOTH appraisers does not include Lot 14 – as shown in red on the PDF. They both relied on county assessor info which is apparently incorrect.
This is a very strange and oddball situation. Normally, county assessors are pretty reliable in their property descriptions. Somewhere in past history, Lot 14 was either dropped out of the county’s legal description, or perhaps was never included.
The point of this article is to encourage appraisers to do careful and advance research on the subject property before trekking to the location. Use the available plat map from county records, and compare that with aerial image(s) to see if their might be an anomaly with any details, or obvious conditions. Read the legal description, and compare that to the plat map. Don’t take anything for granted.
Look at the aerial image on the PDF, and compare that to the Plat Map. Read the Legal Description. Note that there is a parking area just off the street on the left side of Lot 14. Then there is a walkway (or perhaps driveway) from that up to the front of the house. The house was built in the 1930’s, so this configuration probably existed then. The house appears to straddle the property line between Lot 14 and Lot 1.
Had this situation been noted by BOTH appraisers, each should have requested (or actually demanded!) a copy of a full Title Report before any report was written. Hopefully that would reveal the actual property ownership and transfers over time of the affected lots, and would have a more complete written legal description than the assessor has.
But, let’s say that the Title Report is silent about Lot 14. Then what? Can the property be appraised? Yes it can.
The appraiser would include in the report a detailed explanation of why this situation is a Hypothetical Condition. It is a physical and legal characteristic that is presumed and known to exist, but is contrary to what is presently revealed by the existing legal description. In other words, Lot 14 should be included, and the site size adjusted up from what the county shows.
The appraiser probably should include a mention of Lot 14 on the form in the Legal Description comment field, with a note directing readers to additional commentary elsewhere in the report.
The third thing the appraiser would want to do is write the report ‘Subject to’ obtaining a correct legal description showing all lots encumbered by the mortgage loan. That puts the onus on the LENDER to get that done.
Whenever screwball situations are discovered before or during the property visit, I always encourage appraisers to contact the client BEFORE finishing and delivering the report. Clients always appreciate knowing in advance what you’ve found out. The client may have underwriting processes or requirements we know nothing about until the call is made. In the case study above, the appraiser could advise the client that the report can be written as noted, if they wish. But get their instruction (in writing via email) first whenever you discover anything weird.
“Let’s be careful out there!”
Dave Towne on e-AppraisersDirectory.com
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I find incorrect legal descriptions on assessment data all the time, every time I bring mistakes up to the assessors are they more than happy to change it
Ross, be careful when ratting out an assessor to a larger improvement that you cause liability for yourself. Occasionally appraisers find an improper assessment due to over site between the developer and a buyer changing or a buyer changing internal options. In Calif, the original (base price) sets the value. The developer and the buyer pay M.V., therefore that not questioned, subsequent sales may be challenged. According to who your client is your big mouth or fat pen may incur liability.
I’ve had hard money clients who liked to know of adjoining lots or houses so they could have additional security. Know your client.
Ratting out the assessor with my big mouth? The legal description is public record, there is no liability, anyone can make that connection during a the normal course of research. I don’t reveal my clients personal property data without discussing it with them first if that’s what you are assuming “hard money or not”.
the appraiser should have picked up on this when she or he looked at the plat map. It would have also hit me when entering in the lot size that it was not correct. You can feel how large a lot is when doing the site inspection. This is a case of an appraiser or two relying too much on technology to form fill the report and assuming all that information is correct. Missing the lot size by half falls on the appraiser, no the county records.
Agreed. Even if he’d checked there are other clear encroachment issues between the purported assessor’s plat and the aerial view. There is an apparent encroachment of the roadway into Lot 14 or Lot 14 into the roadway. North sides of Lots 1, 2 & 3 as well as 14 don’t appear to match the paper boundaries either. All are side issues, but point to why we should not be in such a hurry to ‘assume’ or hypothesize something different without definitively having ALL the answers first.
The appraiser should have been able to recognize that the house apparently was not located on such a small site size. But nobody is perfect and mistakes happen !!!
The appraiser should include at least two (2) lot lines, or the adjoining condo’s in the drawings. Theirs lots of good reasons.
I found an associate years ago, NOT identifying the 40 year Indian lease, because of ignorance. This loan may never have closed because the lease had 20 years remaining?? or something. The appraiser has a great responsibility, including access thru easements, to an septic tank on an adjoining, a shared driveway, drainage easements across other properties.
Chris is correct; mistakes happen, we must find them before the report is signed or suffer consequences. Who has measured the wrong property??
There is no excuse for failing to identify the real estate ownership interest(s) one is asked to appraise. None. This is why it is critical to review the property data BEFORE ever accepting the AMC order (including those that are auto canceled if not accepted in an hour).
I respectfully disagree with Dave’s stated hypothetical in this specific instance which appears to be conflated with half extraordinary assumption and half hypothetical. The correct way (imho) of handling this once the discrepancy is suspected (and it SHOULD have been when its known the house sits on something other than the legal lot he’s being told it is on) is to demand an ALTA site inspection and report from the title insurance company. The appraisal is held up until that is complete. Takes about 2 to 5 days usually.
It is NOT the appraiser’s job to correct a legal description though it is our job to point out when they are definitively wrong. It’s not our job to facilitate a loan being processed either. There are issues of excess or surplus land (we don’t know which); HBU, and encroachment involved. Ignoring these and their impact results in a misleading report …even though that’s not the intent. It’s clear the discrepancy was not resolved after the prior appraisal. Continuing the charade of lot size merely makes the new appraiser as liable as the original one was (is).
For me it’s pull the deed, pull the plat, do a blank search of the owners (prev owners) names in the county/state systems and you’ll see discrepancies pop up more than once in awhile. Luckily for my areas they are all on-line now. Not that way when I started…Uggg All of this before I visit the property so it is known what I might come up on when arriving.
And nearby sales and ownerships, including the federal prison next door etc.
For every one appraiser who does their due diligence upfront to look for the craziness , there are 10 that blindly say yes (auto accept), themselves or who have non-licensed staff say yes on their behalf (out in the field). When fees are determined upfront (TRID), when in many cases appraisers have minutes to accept before the next guy, and with rubber stamps in hand, the powers that be don’t want the truth, but rather want issues swept under the rug. There’s nothing wrong with seeking the truth, and declining an order when you know you won’t be paid a fair fee for your local expertise.
Seek the truth, and act with knowledge in hand.
Last year I ran across a 2 story home which was really a 4 story, just mid height on one side of the home w/ variable heights. Get this one, the home seller had 2 appraisals, one for the buy, one for a refi, and both appraisals stated that home had a basement in addition to agla space and they had drawn the space in the sketch. The old listing was still on file and that one also had note of basement. So to my best estimates a minimum of 3 different appraisers and 2 different sales agents all failed to perform simple cross checking of data with the assessors office, reporting basement space which was not really there. The assessors had a valid sketch on file and sent that to me. Probably 3 appraisers just cheated and put that garden level as a basement on the sketch, and agents copied. If I would have used an inspection runner, a report typist, or relied on others information, that would have been on me and I would not have discovered this information through the process of redundant data checking and manual sketching. Trusty original Medina, still going strong all these years later.
Same deal for aerial views and plat maps. I use the alamode aurora aerial, include the assessors gis plot map w border outline shown and aerial image overlayed, and then also include this realist page which shows the lot dimensions around the outline. Easy, routine, effective. I can pass on the actual full quarter section map in most suburbia, and I never quote less than a full week.
I especially concur re time. I quote 5 to 7 WORKING days. That give ME the option of adding a weekend to make it 9 days if needed. I can usually figure out weird cases in 9 days or within my 5-7 working day quote. AMCs and lenders that try to push ‘faster is better’ cheat themselves and their clients out of good appraisals. They take a rare scenario where a property lends itself to 2 day analysis and reporting and impose that metric on all assignments.
ANY AMC that requires 2 day turn times should be investigated by both state agencies and federal regulators. They are NOT assuring either appraiser competency for the specific assignment or uspap compliance. Not ever.
100% agreed.
One only needs sign up as an active appraiser through a 2 minute online application process, then you’re on the mailing list. 90%+ of all amc’s take the quote fee and turn time approach, instant 48 hour expectations, accept it ahead of others, etc. Amc’s always pressure appraisers, and they do so more efficiently and effectively than individual mortgage brokers were ever capable of. C&R fee audit nationally for every amc out there would wipe them all out at once.
What’s the best method to confirm parking spot? Updating the appraisal with an addendum? This is before closing the next day from a QC perspective and closing the next day.
Scenario –
Appraisal shows #14, but then shows an image of spot 16 and states that the realtor states it as #16. Title shows P#14 which we are assuming means parking spot #14.
The addendum for closing on 2/18/21 has parking spot #16 crossed off and #14 written on it but is missing initials on the mark off.
In the groups opinion- What’s the best method to confirm parking spot? Updating the appraisal with an addendum?
Was space 16 a triple space and 14 a single. Was space 14 the other side of the swimming pool, was their a difference to be explained? The appraiser is charged with accurately judging the “Whole deeded and ancillary parts” of the property as described in the deed which will be recorded regardless of the escrows timing. Will the error be your fault or the others, will a separate action after the fact judge your appraisal be your Timely responsibility? Let them piss off the closing. Do it right.
Have the title company identify the correct space. That’s THEIR job.