House Measurement by Property Data Collector Gone Wrong
I’m sad and I’m mad!
I recently took on a measure job for a client who was questioning the square footage of their home. The couple bought the house at the height of the market last year. They paid 12% over list price to get the house. They put an appraisal waiver in the contract which meant they could not walk away if the appraisal did not come in at contract price. This was very typical last year.
I did a little research before going to the property. The buyers put 50% down. This, with their credit score and other factors allowed for not requiring a full 1004 appraisal.
A hybrid appraisal was done. Opinion of value was about 3% over list price. I do not have a copy of the report, it was shown to me at the subject.
This is where the train goes off the tracks. MLS showed GLA as 4200+ sq. ft. from tax records (CAD). The “trained” property data collector also came up with 4200+ square feet. The staff appraiser, a Certified Residential Appraiser with two years experience used 4200+ sq. ft. per sketch provided by property data collector. I pulled up the listing on the MLS. It took me all of two minutes to realize the issue. The listing photos show a large area of unfinished space on the second floor. Tax records show none. I go to the house and measure. Sure enough, 600+ square feet is unfinished. My measured GLA per ANSI standards is 3600 sq. ft.
The owners are now underwater by more than $100,000 due to paying above list and incorrect square footage. Their agent requested them to have the house measured during the opted-out period. They declined as they did not want to lose the house. The banks appraisal will show if there is an issue. They lost out on several properties before getting this offer accepted. It’s like they bought a carton of 18 eggs. When they got home, there are only 12.
This is where it gets me. The lender allowed an unlicensed person to collect property data who gave bad data to the appraiser. The appraiser was not experienced enough to figure out there was an issue. And there is no direct communication between the two. But I work for this lender and they will not let my trainee inspect on her own. As another appraiser said “it’s not the plane, but the pilot”.
Because the borrower put 50% down, the lender and investor (Freddie or Freddie) are covered. It’s the borrower who is left holding the bag. Best I can tell is everyone was covering themselves. No one was there to protect the borrowers. The borrowers made a mistake, but the system let them down.