Let me begin by saying we’re newbs at the whole buying a home thing. When we put a contract on the homestead, our friend promised to walk us through every step, and boy has he had to do a lot of hand holding. We couldn’t do this without him. Second, when your appraisal comes back low, your option for getting a second appraisal isn’t what you think it is. So all of this nonsense was new to me…
The Appraiser Works for the Bank
This we knew. And it makes total sense. The bank needs to be protected. It is the appraiser’s job to tell the bank if it is worth what the buyer wants to borrow. His job isn’t terribly complicated, but it does take time to gather the information needed, and to run the calculations.
When our local bank sent out an appraiser we were hopeful. I mean, the place is a foreclosure. It was listed for less then some small 3-bedroom homes on less than half an acre. Our agent assured us this home was worth nearly double the foreclosure price, and quite a bit more than our agreed final price. So, when the appraiser said the house was less than our friend was asking, and much less than we’d all expected, we were stunned. After looking over the appraisal report we all felt there were three major red-flags:
- The square footage on the report was 3/4 of what the real estate agent listed. Now, this could be a mistake on either party’s side, so we asked for a remeasure. Simple.
- The appraiser gave the home an estimated age of 49 years. Granted, there was an old frame house, around that age, on the property when the previous owner purchased it. They tore it down to the studs, replaced some floor joists, then rebuilt and added on, doubling the size of the home. The house was built in 2009. Now it’s been empty a while, and the kitchen needs updating, but 49 years old? No.
- The comps used were nowhere near the neighborhood, and a quick look around, even from newbs like us, showed laziness on the appraiser’s part. These comps were not ideal, not local enough, and honestly, not comparable homes.
We consulted with another realtor. We talked to several people who buy and sell homes. We prayed about it. And we decided to ask the bank about getting a second appraisal.
A Second Appraisal Does Not Mean a Second Appraiser
This is the part we didn’t understand. You see, I had mentioned more than once to our loan officer that I felt like we needed a second opinion. The same appraiser was sent back out to remeasure. He was sent out a third time to meet me and discuss the renovations we’d asked for a repair loan for. And still he came back very very low.
So when I asked for a second opinion from another appraiser, I wasn’t expecting to be told “No.” No one had told me before that wasn’t an option, even tho I’d mentioned it three times.
At this point we had three options: forget it altogether, talk the seller down tens of thousands of dollars or find another lender.
We chose option number three. We were confident the home was worth a great deal more than the appraiser reported, and we were willing to fight for it. So, we extended the contract and started over with another local bank which came highly recommended by several people.
Why A Bank May Refuse a Second Appraisal
It wasn’t until we were quite far along with bank number two that the president of bank number one called to discuss our experience and I learned the truth.
Every transaction a bank processes is audited. If a bank hires a second appraiser, they have to explain why the first guy’s report wasn’t good enough, and then they (the bank) are under scrutiny for possibly trying to make a deal go through, that really shouldn’t have. And, they have to explain to the board overseeing appraisers, why they didn’t accept the first appraiser’s report.
Basically, the bank would have to admit they felt the appraiser was incompetent and unable to conduct fair appraisals, which would mean the bank couldn’t use him again, and the appraiser could lose his license.
Since this bank uses this appraiser all the time, and since they have no other recorded complaints, they were not willing to throw him under the bus, even after he admitted to the bank president, the bank’s appraisal review board, and our agent, that he had been lazy and based his appraisal value on things he shouldn’t have.
Now, I can understand not wanting to lose an appraiser or ruin a man’s career. And I certainly wouldn’t want to be the one to make that call, but from a buyer’s perspective it was hard to swallow. We felt we had no other option but to leave this bank and go elsewhere.
And yes, we had to pay the $600 appraiser number one charged the bank, since we withdrew our application.
When Getting a Second Appraisal Isn’t an Option
With less than a week left on our contract we hurried to file a loan application at a different local bank. We immediately filed for an extension on our contract and hoped for the best.
The extension was granted and the bank got started. We noted that we had a conflict of interest with appraiser number one and the bank agreed to use someone else. Everything ran smoothly and quickly until an appraisal was ordered.
Two and a half weeks went by before we heard from appraiser number two. By this time, we had to file a second extension on the contract. The appraisal report came back positive – a $60,000 difference from appraisal number one. The house was worth what we all thought it was and we breathed a sigh of relief.
But, we were running out of time. Again.
The realtor, the title company, and the bank all put their heads together and agreed to put a rush on things. They set a closing date, and pleaded with the VA for one more extension.
Yes. Extension number three was granted and the closing date set.
We’re finally getting somewhere and it feels good!