Julia asked me to take a look at the report and provide some suggestions for a course of action. After identification of some problems with the appraisal report, Julia shifted into high gear. The sale closed April 8, 2010 at $375,000. Financing was 80% of the purchase price. How did this happen? Susan Taylor Martin explains in the St. Petersburg Times.
A year ago, the nation's housing industry adopted new rules aimed at preventing the kind of appraisal-related fraud that helped drive home prices to ridiculous — and unsustainable — heights.
Now, many Tampa Bay real estate agents say the appraisal rules are a good idea gone bad, delaying and threatening sales as the market struggles to recover.
Take the case of Luke Nuemann, who was planning a move from Tampa to Pinellas County.
In February, Neumann found his dream home: a lovingly restored, 1936 traditional with garage apartment in St. Petersburg's desirable Woodlawn area. He signed a contract for $375,000, and the lender ordered an appraisal.
The results flabbergasted everyone.
A Tampa appraiser unfamiliar with Woodlawn valued the property at $315,000 — $60,000 less than the amount the buyer and seller agreed was a fair price. Even the normally conservative property appraiser's office showed the house to be worth $331,000.
Read the whole story HERE.
There were quite a few problems with the appraisal; more than described in the story. Among the most disturbing were internal inconsistencies. This included a description of the neighborhood price trend as "declining" when the appraiser's own data in the report and addenda revealed it to be "stable". Erroneously stating there was a lack of vacant land sales, and pulling a land value estimate of $115,000 out of thin air was another problem. A quick search of data sources revealed four vacant land sales ranging in price from $120,000 - $237,500.
It remains to be seen if this report will find it's way to the Florida Real Estate Appraisal Board.
UPDATE 4/29/2010
Bill Cobb, over at Real Estate Appraiser Tips, linked to this post. He tells a story of a similar situation in his neck of the woods. Unfortunately, it has not turned out so well.
Cruise on over and READ his tale.
UPDATE 5/2/2010
The Business Section of today's St. Petersburg Times publishes three Letters to the Editor about Susan Martin's story. Here are some highlights.
Lizabeth Cantos, from Tampa, says:
I, too, was shocked at the way appraisers now appraise homes. They seem to be scared to death to place a "true value" on homes.
Last August, I started getting our home appraised. Four appraisers came out, not any of them were close to each other in our home's value. The ranged from a high of $745,000 to a low of $470,000.
Karen C. Willis, a St. Petersburg, Florida State-Certified Appraiser offers these comments:
However, I take offense at the comment that appraisers drove home prices to ridiculous and unsustainable heights. Bad appraisers are not the only reason we are in this housing mess. Realtors who had overpriced the market, unscrupulous lenders and homeowners who used their home equity as a line of credit are also to blame.
There are severe flaws in the Home Valuation Code of Conduct. I received an order from an appraisal management company recently. It was for $135. For the same report one year ago, I would have made $350. Now I have to "share" my fee with the "management company," but not the liability. It doesn't pay for my errors and omissions insurance, continued education, software, car maintenance, office space, computers, etc.
Now a college education is required (to become a state-certified appraiser), and for what, to make $135 an appraisal? Forget it. Who will want to work for that?
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