I got caught looking at one of these properties and interrogated! I was also allowed to ask questions and found that the Buyer-Owner was suing the agent and the seller note holder for miss-representation and FRAUD. My client a lender, note broker from Seattle dropped the deal.

I have accepted several assignments, when instructed NOT to allow the owner to Know. Some of my clients were buying the Note represented by the Trust Deed, and they didn’t need competition from the property owner. My client-investor sought Due Diligence for any future possible litigation.
I always used an engagement letter for my contract explaining both My CLIENT, USE & FUNCTION.

If the correct sales are used then there is no such thing as a low appraisal. Unfortunately most appraisers do not use the right sales because they are subconsciously trying to make value. It is difficult at times but you must take a step back and detach yourself from the assignment. I am on the va panel. When I was approved I was told that the appraiser is protecting the veteran.

Not to be snarky but it’s not “learned information” unless your client provides you the opportunity to learn it. If the engagement letter says “DO NOT CALL THE OWNER” then I am not calling the owner. Hence my opportunity to learn the fact that the basement has been finished or any other facts about the property that is not publicly available or not observable from the exterior drive-by exists. It may be different in other states but here in KY our appraisal board weighed in on this issue a few years ago as a result of a complaint on a 2055 drive by. They (the KREAB) says that Information provided by the owner must be verified as they have a financial interest in the transaction. That is in USPAP as well.

What would solve this whole issue is smarter lenders. If they would spend a few minutes discussing the property they are about to take as collateral with the owner, it should be clear what appraisal reporting format is needed.

If the opposing parties think your work stinked, And you got paid.
You did good!

We sign each report attesting to the value estimate being “as of” the date of inspection in most cases. Guess what appraisers, if there are 5 offers that bid the price up, that is market data for the comparables. Your opinion of market growth should be based on the data! It is an egregious error to not bring your data current when even 5th graders know that the market is growing significantly. Talk about our reputation as appraisers when we do not consider the market as of the effective date of the appraisal. If you have a complaint filed against you and your MC analysis is bogus and unprofessional, guess what, you deserve what you get. Please don’t call yourself an appraiser. You are the one that causes honest and professional appraisers to have a negative reputation by the public and all that rely on our services. Guess what, all the course work and exams do not test if we are willing to do the work to warrant a reasonable fee. BTW, if you find that the MC analysis and addendum are a waste of time, you are most likely not doing the analysis correctly or you have so few sales that the indicators are anomalous.

5-6 hours on average nationwide to complete each 1004 URAR appraisal?! Please tell me what market has that much data that you only need 5 hours to do a professional job. I need 10 – 12 hours to do the job right. 35 years in this profession and our secondary market appraisals are no better than they were then.

Yes, too often appraisers do not bring their values current! That would take time, right! Low appraisals when there are 5 offers above the appraised value, yes that could be a bad appraisal. We are pledged to use the most current market value, why would you ignore it! Talk about USPAP violations. We do not deserve to be thought of as professionals if we haven’t earned the title due to putting out high quality work.

This long stream of conversation can be answered quite easily. Know your client. Know your order. What about the dude whom owns it or has substantial equity, just dipping in for a little cash or copping a better rate. Who cares if the numbers are not entirely accurate, the appraiser can be off by half and it’s still all good from both the lenders and borrowers perspective. If they want to press the easy button and get a report with more reliance on assumption and never have to bother with an appraisers visit, that’s their choice. Skip the preforeclosure drive by’s, they never end well. If you find yourself dealing with a lender or amc pushing drive by’s so they can pocket some skimmed appraisal fee money when they should have ordered a 1004, find a new client entirely.

Know your client. Know your order type. There is no firm rule of thumb. I like drive by’s for non distressed refi’s, low ltv sales, early term refi’s. Drive by’s in uniform tract housing is easy, especially so if there is a semi recent mls sales record. You don’t get the 2055 if the borrower is in manual underwriting territory, so in that case, low liability exposure to boot. Win Win.

Notice of a finished basement from the owner is learned information. You can’t ignore that. The assessors records does not always reflect what the building permitting department knows, they don’t always talk and share data like they should. Having assessment reflect something different than the current state of real property is not justification to ignore the current state of the real property. As long as the alteration passes the 3 tests, you should credit that basement based on assumption of learned information, decline the order, or request it be moved to a full interior inspection.

I did answer your question, it was a refinance. I’m not going to lay out all the particulars of my personal transaction. That’s silly.

Perhaps without Covid it would not have transpired the way it did. Regardless of what someone may feel, it didn’t pass muster with the bank. I don’t know why asking someone to make a phone call is so controversial…

Again, you didn’t answer my question!

What was their reasoning for ordering a driveby vs a full appraisal, particularly since you state your property was greatly improved/upgraded?

I haven’t done a driveby in more than a decade. Last time I did a driveby was for a loan that was in default and the lender was just trying to find out if there was any equity.

I’ve always been curious how interior condition on the date of an appraisal could be “verified” from a reliable source if the only source about interior condition is the owner, who is, by any reasonable consideration, not disinterested (or not “reliable” as a source of accurate information). It is possible to do appraisals without an interior inspection, but the circumstances under which those can be done in a way that conforms to the GSE SOW are extremely limited.

Hi Bill,
I had nothing to do with the appraisal, the issues and objections came from the bank because they were aware of the changes that had been made to the house (that were not represented in the appraisal, in fact the appraiser wasn’t even aware because he didn’t complete any due diligence). Again, the scope (as you put it) was to arrive at market value. I’m sure you wouldn’t disagree that if you’re basing your analysis off of faulty SQ FT among other things, that objectively (because that’s what the profession is built off of, objective data, analysis and professional discretion), then the appraisal would be flawed and rejected by a reviewer (which it was).

I’m sure you can appreciate that the banks are not all unawares when it comes to our profession. To be more clear, the intended user, THE BANK, was not happy with the work. Neither was I but that’s besides the point.

You can’t limit your scope of work when it doesn’t even meet the threshold of USPAP or an appraiser, licensed professional providing appraisal services. Based on your response, I guess we just have to agree to disagree.

It doesn’t take much to give 100%; when I get to the point where I don’t care anymore, well then it’s time for me to retire.

Nick, it sounds like you don’t understand the appraiser client relationship, nor the limitations (scope of work) associated with what was being asked of the appraiser. In your example, the appraisers role is to meet his or her clients (the lender) expectations, and its up to the client to determine if that gets done. If the appraisers work is to be reviewed by the lender, by a panel of his peers, or by the state review board, their needs to be a standard applied in order to pass judgement.

As an example, in part the scope of work for a drive by appraisal says the following.
(1) perform a visual inspection of the exterior areas of the subject property from at least the street, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street, (4) research, verify, and analyze data from reliable public and/or private sources, (5) report his or her analysis, opinions, and conclusions in this appraisal report.

Before you mention number (4) above in your defense, considering borrowers have a direct financial interest in the process, their reliability as a source often comes in to play. Good luck to those appraisers defending their actions in front of the review board when no verification can be found outside of what was said to them from the borrower.

Unfortunately Nick, no where in the review process would the borrowers expectations, or your want to expand the scope of work be given any weight.

Seek the verifiable truth.

For this particular transaction, it was for a refinance. It is not that I was not happy with the value. That’s an incorrect assertion. The market value was significantly missed, the comps that were used were wrong.

If the point of the appraisal is to arrive at market value, if the bare minimum threshold that should be met by a professional providing appraisal services is not met. There is a problem.

A ‘drive by’ appraisal is still an appraisal. An appraiser providing appraisal services is still bound by USPAP. It’s very simple.

I know you weren’t happy with the value. But my question was why did they order a driveby instead of a full appraisal? What was their reasoning for not ordering a full appraisal?

Hi, it was ordered to complete what was needed. The lack of follow up and communication resulted in the house being significantly undervalued and multiple improvements and capital expenses being missed. The comparable sales used were poor because the appraiser had no idea the house was completely different on the inside.

Lack of call and communication, despite attempts to reach him resulted in a very poor work product.

Nic, why did they order a driveby for your house in the first place? Why not a full appraisal?

This is not a trick question, but if an appraiser earns, $50,000, $100,000 or $500,000 a year, but saves borrowers $500,000, $1,000,000, or $1,500,000 per year (negotiated prices), what does the appraisal cost the average consumer?

Although my sample size is small, and perhaps tweaked due to the fact my typical transaction is now over $1,000,000 per, by my numbers, I would argue that for every $1 spent on the appraisal, on average $3 is saved.

Seek the truth.

The responsibility of the lender is clearly laid out in the engagement letter. They are not professionals and cannot provide appraisal services, that is why an appraiser is retained.

These types of conversations should are not hard to have. As if said in another comment. Whatever your comfort level is, it is. However, if a problem arises and it’s found that you did not do your due diligence, did not disclose, and did not quantify what you did and didn’t do, your appraisal will be much less defensible.

From what I’m seeing, a lot of people are becoming more complacent with the finger pointing and the he said she said, whataboutisms.

None of it matters when a deal goes sour and you’re held responsible. There are bare minimums that need to be met, if you’re not willing to do that know that there are inherent risks. Its not something that appraisers generally like to talk about (errors and omissions), you’re hired as a professional to use professional discretion. What’s professional? Well I guess you know it when you see it…