Contesting an Appraisal?

That article is spin control crap from brokers. Notice the critics of the new law are mostly brokers ( both real estate and mortgage ). They used to have the ability to pick their own appraisers who would play ball with them and hit values that they needed, so they could collect their fat commission checks. These brokers have now lost their ability to strong arm appraisers as easily as before. Now, FHA loans do not fall under these guidelines, and this type of loan is called the ” new subprime “. These brokers are strong arming appraisers as they have in the past.

Trust me, some appraisers out there are idiots. But send a good appraiser to anywhere USA, and all they need to do is have access to public records, a local MLS system, Trulia or Zillow. Then, call a couple of local realtors, give then the street name of the subject property, and ask them what the market boundaries are. Not rocket science, as all of the jerks in the NYT article will have you believe. Location, style, lot size, quality, condition, bedroom and bath count are all dominant features that appraisers use to match up the subject with comparable sales.

Typical complaints ( the real deal )

BOO-HOO!!!! I need my house to be worth X so I can go buy myself something in a nicer town!!

BOO-HOO!!! I need the subject to be worth $500k because the loan amount of my customer is $400k. I stand to make 4 points on this deal dammitt. Make it happen, and I will send tons of deals your way. The bank won’t close if the house is worth less than $500k. Therefore, it has to be worth $500k , because I have a commission riding on it. ”

Definition of market value-
the definition of market value provided by USPAP is:
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
buyer and seller are typically motivated;
both parties are well informed or well advised, and acting in what they consider their best interests;
a reasonable time is allowed for exposure in the open market;
payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and
the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1

I rent in Bushwick and have been in the market for property there and in Ridgewood and Bed Stuy for two years.

What I see is that short sales, foreclosure and REOs were almost 100 percent of the for-sale market (for small residential properties) in Bushwick in 2007 and 2008. All of them were purchased in 2005/2006 (in other words, subprime and ARM.) Some were fraud. Now those properties are clearing out, they are selling to speculative developers for very low prices — below $200 a square foot.

There is virtually NOTHING available for sale at the moment. NO inventory. People who bought before the subprime bubble continue to live happily in their homes and do not have the slightest interest in selling or moving.

Over in Bed Stuy, you also have this, but less of it. You have more nice property and regular sales. You also have slightly more buildings that have been in families for years, with unclear ownership, squatters, unpaid liens, and so on. Speculative developers continue to buy distressed properties for all cash and flip them.

There is far more on the market over in Bed Stuy — largely because it has more small buildings to start with.

Prices on houses in Bushwick have dropped 40 percent since peak in 2006. Those are all short sales. Prices in Bed Stuy of regular, not distressed sales, seem to have dropped about 20 percent. Houses that were $600,000 are going for about $500,000. The uninhabitable properties go for much less — around $300,000.

It’s very confusing when you have three apparently identical properties within a 15-block radius going for $300,000, $480,000, and $600,000, as I have seen recently. My explanation is the first is a foreclosure and doesn’t qualify for a mortgage, the second is an ordinary two-family frame home, and the third was a real brownstone with original details and the sale was not a distressed one.

when an ARM refinances….it automatically resets to the current interest rates which are at historic lows, so in most cases the new interest rate should be pretty low. If the ARM is maturing and must be paid off that is a different issue. Either the person will refinance, sell the house or surrender it to the lender(or have it foreclosed on). If they can’t refinance/sell at the face value of the loan, the lender will either write the loan down or foreclose. Most lenders(but not all) will do anything NOT to have to foreclose in the current market. Some have already purchased the mortgage at a decreased price and want to foreclose or have the property surrendered.

Spring,

That’s for the insight. It’s rare that somebody with any expertise of any kind comments on this website.

My own knowledge is much more limited than yours, but unlike most of the folks on this site, I firmly believe that what goes up, most certainly can fall back down.

Just six or seven years ago, I remember checking out buildings for sale in Bed Stuy for a small fraction of what folks are asking now. It’s as if sellers think Bed Stuy has gone from ghetto to paradise over night.

It’s certainly a bit safer and has a few more restaurants, but nothing I’ve seen on the streets justifies the crazy run up in prices seen over the last several years, and you don’t have to be a “certified NYC appraiser” to know that.