Property appraisals

[JDgreen227]

Guys, last week I visited my credit union and applied for a home equity loan. Said property I wanted the loan for is paid off and was given an actual appraisal inside and out by an appraiser back in early 2000, and his valuation of the property was $120,000 then. Cost me $125.00. In August of 2002, I refinanced to build on, and the same appraiser did a "drive by" appraisal then that cost me $150.00, and the appraisal for that time was $140,000. WOW. A $20,000 increase (on paper) in value in 2 1/2 years, and the taxes only went up $30 a year in that time period. The refinance money I borrowed was used to build on to and modernize the house, and it went from a 900 square foot 2 bedroom, 1 bath, to a 3-4 bedroom, 2 1/2 bath with 2500 square feet and full finished basement in the addition.

So, my credit union loan officer says I have to pay a $325 appraisal fee to borrow $70,000.00, and I just got a call from the SAME APPRAISER who did the 2000 and 2002 appraisals. He has some questions for me, and no, I have not contacted him yet. According to the paperwork, I will have to pay the appraisal fee even though the 2000 and 2002 appraisals clearly say the property is worth far more than the $70,000 I am borrowing, and should they check my tax records at the township they will learn my property has a fair market value of more than 4X what I want to borrow.

Can anyone tell me why appraisals are even required in situations like mine? The lender knows the property has no liens and I have clear title....and yes, I also have to pay an inflated fee for a title search. Makes no sense to me.

 

[impdaddy]

why does a dog lick himself?








because he (they ) can.:laughing:

 

[GPintheMitten]

Well, property values in a lot of the country have plummetted and your appraisal is now 10 years old. We recently sold the house my wife bought 12 years ago for about half of what she paid for it. And the title search is to prove that there are no liens. Lending on homes is a lot strictor than it was before the housing bubble burst.

 

[Tomtint]

Banks are making money on anything they can. The appraiser is paid a fee and the bank steps on it so they share in the fee. If banks lent money like they are supposed to do, and made mo ey on interest, instead of squatting on it and tacking on fees and service charges to prop up the bottom line. It would be nice.

 

[randy41]

seems to me that a 10 year old appraisal would be considered outdated. i also don't think tax appraisals are necessarily accurate. but they should have informed you before you started any application that the appraisal would be required and how much it would cost.

 

[murphy1244]

In a time of 2.75 interest rates the banks make money on higher fee's.

 

[300UGUY]

I've wondered the same thing. I bought a property last year, from the bank that owned it. They had just repoed the property, had all the ino, but I still had to pay for a title search. Basically it seems to be subsidy system for the industry.

 

[Clint S]

10 years is too long between appraisals that's the main reason. As far as tax appraisals they should be taken with a grain of salt. Mine went up 50k in the last 5 years even though housing market has tanked. Houses that are comps in the same town have been on the market for months and months without even an offer for less than mine, they can't sell. Towns will push up appraisals to get more taxes.
I would kill 2 birds, if the new bank appraisal comes in for less than your current tax one use it for leverage for grievance day.

 

[zzvyb6]

Shop around for another bank or credit union. Others are correct about appraisals then and now. Also see if borrowing less can get you a deal. If you only borrowed 1/4 of the value instad of 1/3, would they waive some fees? Around here (Brighton), some homes are now at 1/2 to 3/4 of their former values from a bank's viewpoint. Not so from the tax man.

BTW: 2 years ago, all my credit union cared for was whether the house was on the property. I only borrowed 1/10th of the value, though. I use the H.E.L.C for occasional emergencies or splurges. I could pay it off with a check from my IRA but I'm getting better rates on the IRA money.

 

[hchxoom]

Banks are making money on anything they can. The appraiser is paid a fee and the bank steps on it so they share in the fee. If banks lent money like they are supposed to do, and made mo ey on interest, instead of squatting on it and tacking on fees and service charges to prop up the bottom line. It would be nice.

Not sure how to say this without offending you (not my intent), but this response is just absurd. No, I do not work for a bank (never have, no reason to think I ever will). I'm not saying that there aren't banks that don't somehow make a spread because it is possible that could be the case, but I can say that in 25 years of dealing with banks personally, on behalf of clients, and on behalf of my employers, I have never seen that to be the case -and I have ALWAYS seen and approved the appraisal invoice (if not paid it directly, in the past). I've been involved with 15-20 deals over that time period with probably 7 or 8 different banks. I'm not in real estate, either.

The reason they are required even in this type of situation is gov't regulation post housing crash. They've always been required in most circumstances, but before regulation bankers had a reasonable degree of latitude. That latitude is almost entirely gone, either directly due to regulatory requirements or to new bank policies adopted to ensure the bank survives gov't stress tests and stays in compliance (and can prove it). While not the OP's issue, same regulatory environment is what is keeping money tied up... not banks choosing to sit on it. Go talk to any banker and you'll find them as frustrated as any potential borrower about how difficult it is these days to lend and borrow money (and the addtl hoops one must jumo through even if the borrower is well known and fully qualifiable).

Back to the OP... you've actually been quotes pretty decent rates. Regs have also increases for appraisers, so their time, effort, and liability exposure have gone up driving up your cost. For example, they can now typically rely only on comparable sales within the last 12 months (used to be able to go back further) , which in rural markets often means checking comps in more disparate markets... ie., more research, time, and travel. And, as others have posted, your most recent appraisal is 10 years old,,, which wouldnt have passed any bank policy even preregulation.

Before closing I will note that while the intense new banking regulations of recent years have had a major negative impact on lending and have resulted in higher costs for both borrower and lended, the intent behind them was to prevent another debt crisis due to over-liberal (sometimes bordering on criminal) lending practices -we're just suffering from unintended consequences.

 

[dave1949]

hchxoom: Your comment regarding more regs for appraisers makes sense, they were part of the problem too. One asked my brother on a re-fi how much he needed the house to appraise for, as an example.

 

[s219]

It's all about the paranoia in the housing market now, and the fact that property values have dropped quite a bit in recent years. The banks are required to get appriasals, and unlike older days, they have almost no say/influence in the choice of appraisor or the results.

 

[hchxoom]

hchxoom: Your comment regarding more regs for appraisers makes sense, they were part of the problem too. One asked my brother on a re-fi how much he needed the house to appraise for, as an example.

Yep, there were many examples of bad appraisers just as with bad bankers (and more than a few where bad bankers and bad appraisers were in cohoots with bad borrowers), thus the regulations. However, as with anything the majority (of appraisers, bankers, and borrowers) are good folks with good intentions... but they/we now have to live with the same costly regs put in place to hamstrimg the dummies and cheats (sins of the few cost us all). So goes the world as we move from individual handshakes, honor, and responsibility to asking the gov't to solve all ills through regulation (my opinion).

 

[ljohnson778]

Yup, seems crazy, until you do the math. When I sold my last house, the bank for the buyer had an appraisal done. Then they had a 'LARA' done. Think they called it a landsafe appraisal risk assessment. This was because appraisers were asking people what they needed the appraisal to come in at, and that's what they reported. Also, houses change, neighborhoods change, etc. So, a current appraisal is almost always required.

 

[JDgreen227]

Thanks to all who provided input....my loan rate is 3.75 fixed for a 15 year period which is basically a steal as the rate back in 2002 was 6.75%. I was simply wondering if the appraisal was actually even necessary, given the current township assessment...appears it's a CYA situation for the lender. Actually, their rate is competive with any other lenders I checked with and even though I could withdraw the $70,000 from a 457 plan, the tax hit on the withdrawal makes that a bad idea. Appears my lender has been using the same appraiser for a 12 year period...makes me wonder who is getting a kickback because I would truthfully prefer to have some other appraiser do the task so that one would not be parroting what he already knows. The two appraisals I had done in 2000 and 2002 are almost identical except for the property valuations and comps...

Thanks guys, for your input on the issue...:thumbsup:

 

[dave1949]

Yep, there were many examples of bad appraisers just as with bad bankers (and more than a few where bad bankers and bad appraisers were in cohoots with bad borrowers), thus the regulations. However, as with anything the majority (of appraisers, bankers, and borrowers) are good folks with good intentions... but they/we now have to live with the same costly regs put in place to hamstrimg the dummies and cheats (sins of the few cost us all). So goes the world as we move from individual handshakes, honor, and responsibility to asking the gov't to solve all ills through regulation (my opinion).

I agree that regulations are the result of bad actors. Life has become more complex. I relate to this more on environmental issues than financial, but it is the same root problem--stupidity and greed. For example, coal-fired power plants half way across the country can kill the forests here and load the water up with mercury so bad you aren't supposed to eat too many fish, and none if pregnant. What good is a hand shake going to do you in such cases? You don't even realize you are being "cheated" until years later.

On the other hand, the regulatory agencies aren't very cost-effective, often become protectors of the people they are supposed to be regulating, get behind the curve on the science, etc.. It's a problem waiting for a better solution, or better people, I guess.

 

[JDgreen227]

Just an update is anybody gives a (bleep) I got a copy of the newest appraisal today. The property was given an appraisal in early 2002 for $140,000, it was then a 2 bedroom 1 bath house on an 11 acre lot...we borrowed $112,000 to build on and that was ALL FOR MATERIALS AND NEW APPLIANCES no labor involved but for paying for new underground 200 amp service, excavation work, and a new well (about $9000 total) as it was mostly sweat equity. House is now 2400 square feet, 3-4 bedroom, 2 1/2 bath, formal dining, $20,000 invested in the kitchen alone, $6,000 corner whirlpool tub, 2 decks, orignal house was pretty much gutted and redone in the process, know what the appraised value is now? $190,000....meaning we spent $112 grand, plus interest on the loan, plus all that sweat equity, and it only added $50,000 to the market value.

I don't know whether to laugh or cry....but then again, we didn't really build on for the increased value of the property. At least I now have ammunition to deal with the next property tax assessment increase that I get. I think the appraisal is REALLY LOW....the house 3 doors down is lower quality, 1000 square feet less and on a minimum size lot, and the last buyer (3 years ago) paid $183,000...oh well.

 

[dmccarty]

Houses are not selling so getting an accurate appraisal is more difficult. When we were building, the first appraiser was a moron. No other way to describe the guy. Land in the same development was selling for much more than he appraised our property. Moron. We showed the bank how this the guy had messed up and they got a new appraiser who was at least competent. When the house was being built they had a dip scat show up to look at the construction. He pulled up in his convertible wearing really nice dress shoes. He was supposed to check out how much work had been done with the foundation, slab, and plumbing. He got out of the car, walked a few feet to the edge of the gravel, took a look at the foundation 20 feet away, wrote something on the clip board and left. Moron. He had no clue as to the work going on INSIDE the foundation.

We tried to get a ReFi but the appraisal was so low it did not make sense to continue. The comparable houses they showed were not even close to us in location much less other details. There are simply no houses selling to make decent comparables in our area.

Later,
Dan

 

[Bikewanderer]

Appraisers don't have a lot of comps to deal with. My house was appraised three months at at 153k, house two doors down with identical floor plan and lesser interior finish sold for 176k two weeks later. Their appraisal came back in the 180's.

This is the cost of borrowing money. You'd better get used to if if you want to keep taking out loans.

 

[riptides]

I had to go through three (3) appraisers for a mortgage. The banks are just playing hardball. The spred on the appraisals was over 150k and in the end all three missed an 8 acre parcel I own, adjoining my "house" lot.

These were FHA loans, so if you know about them, your asking yourself, how could he get three appraisals done?

Well, refer to the hardball statement.