Skip to content
BOL Conferences Top Gun 23
Thread Options
#2217603 - 07/15/19 02:16 PM Appraisal Rules
KTMiteComply Offline
Power Poster
KTMiteComply
Joined: Jul 2007
Posts: 3,298
only if I want to....
I have read these Appraisal rules and I have a situation I do not understand. Will you please review and advise if I have any regulatory issues.

We ordered an appraisal and it came in extremely low. After we received the Appraisal, the Seller's Realtor contacted the appraiser directly giving them Comps and telling her she knew it was worth more b/c this used to be her grandfather's land. The Appraiser reviewed the information and increased the appraisal a couple thousand dollars and included the Sellers Realtors email in his updated appraisal. I am seeing red flags everywhere. I thought the Realtor couldn't contact the appraiser after the appraisal was received.

In addition, the Seller wants to pay for a new appraisal. I told them that only the Borrower could request and pay for a new appraisal. The Loan Originator told me that we could use the "Sellers" check to pay for the Old Appraisal that we are not going to use.

Maybe it's just me not understanding the changes in the Appraisal rules....? I just didn't think the Seller and/or the Sellers RE Agent could be involved anywhere in this loan after the Appraisal has been completed?

Thanks for helping me understand.
_________________________
Trust in the Lord with ALL your heart...Prov 3:5-6

Return to Top
Lending Compliance
#2217612 - 07/15/19 02:42 PM Re: Appraisal Rules KTMiteComply
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I agree with you...that is a conflict of interest. Also, 'shopping' appraisals is also a 'no go'.

If the lender's review finds errors, the lender's appraisal contact can discuss with the appraiser and then the appraisal can review their work for mathematical or whatever issues. Beyond that...is should be 'hands off'.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2217624 - 07/15/19 03:00 PM Re: Appraisal Rules KTMiteComply
KTMiteComply Offline
Power Poster
KTMiteComply
Joined: Jul 2007
Posts: 3,298
only if I want to....
Thanks Joker for your input.

Do you think it's acceptable for us to use the Sellers Check to pay for the old appraisal if the Borrower is going to pay for a new appraisal? The MLO says that it is acceptable that it wouldn't be any concern to anybody who pays for an old appraisal b/c it will not be on anything who is paying for it.

I am in complete disagreement, but I am getting overridden on the issue...and maybe I am overthinking this?
_________________________
Trust in the Lord with ALL your heart...Prov 3:5-6

Return to Top
#2217628 - 07/15/19 03:19 PM Re: Appraisal Rules KTMiteComply
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
Unless your institution has rejected the original appraisal for cause, you can't get another appraisal. If you reject the original appraisal for cause, why would anyone pay for it?

You need to report this appraiser to your State appraisal board for these actions and it is probably a borderline SAR situation also.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2217672 - 07/15/19 06:52 PM Re: Appraisal Rules KTMiteComply
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
In addition to what Randy has stated, which is the real MEAT to this entire discussion, I do want to point out that this statement is false.

The MLO says that it is acceptable that it wouldn't be any concern to anybody who pays for an old appraisal b/c it will not be on anything who is paying for it.

No, it doesn't matter who pays for the appraisal, but it WOULD be reflected on a CD if it ever went that far. The fact remains, you can't shop values so technically, barring a completely inept appraisal worthy of rejection...either the seller will come down on the price OR the buyer will up the downpayment OR the sale will fall through due to value.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2217676 - 07/15/19 06:59 PM Re: Appraisal Rules KTMiteComply
KTMiteComply Offline
Power Poster
KTMiteComply
Joined: Jul 2007
Posts: 3,298
only if I want to....
Thank you guys both so much for your confirmation of what steps I need to take.
_________________________
Trust in the Lord with ALL your heart...Prov 3:5-6

Return to Top
#2218205 - 07/23/19 03:46 PM Re: Appraisal Rules KTMiteComply
SMali Offline
Member
Joined: Jan 2014
Posts: 73
We are dealing with a very similar situation right now and unfortunately its not the first time. Both times we've had this happen, the realtor is representing both the seller and the buyer. Luckily, our appraiser would absolutely not change the value or his comps when contacted by the realtor. However, the realtor has put a lot of pressure on the buyer to come up with the difference even though the clause in the contract allows the buyer to re-negotiate the sale price or exit the contract. We would have not ordered a new appraisal in this scenario. As much as we don't want to lose the loan we are hoping the buyer realizes their options and pays a fair price for the property.

I do have a question though... in the past we've had refinance transactions where the value comes in less than expected. Again, we are lucky to have reputable appraisers on our list that would not change the value. We have allowed the borrower to order a new appraisal but it must be ordered at random, off our approved list, and we warn them that the last appraisal ordered must be used in conjunction with the loan so they risk it coming in less. We have had customers choose to order another appraisal and pay for both, using the most recent appraisal as our value. (They typically come in very close to one another). But as I write this I wonder … should we really allow this in a refinance transaction? If so, should we allow it in the purchase situation if the borrower insists? I've worked for two organizations where we've been able to do this on refinance transactions.

Return to Top
#2218210 - 07/23/19 04:15 PM Re: Appraisal Rules KTMiteComply
Skittles Offline
10K Club
Skittles
Joined: Sep 2002
Posts: 13,964
TN
Are you allowing the borrower to order a new appraisal?
_________________________
My Opinions Only

Return to Top
#2218220 - 07/23/19 04:51 PM Re: Appraisal Rules KTMiteComply
SMali Offline
Member
Joined: Jan 2014
Posts: 73
No, the appraisal is ordered via our institution. I should have clarified that. So that's where I feel like we're "shopping" appraisals by allowing a second appraisal to be ordered because the borrower rejects the first appraisal. Once we order the second appraisal we must use that appraisal, the most recent. So if it comes in less, that's the value we use.

Return to Top
#2218223 - 07/23/19 05:38 PM Re: Appraisal Rules KTMiteComply
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
That means the borrower is influencing the appraised value. Only the bank gets to accept or reject an appraisal. You are violating the independence rules.

Also, say the second appraisal comes in $50,00 more than the first one. One of your appraisers is then wrong and what corrective action do you plan to take on the one that is? Is it the first one or the second one? You can't continue to do business with the one that delivered an unacceptable appraisal.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2218237 - 07/23/19 06:58 PM Re: Appraisal Rules KTMiteComply
SMali Offline
Member
Joined: Jan 2014
Posts: 73
I agree and appreciate the responses.

Return to Top

Moderator:  Andy_Z