We had an appraisal come in at $559,000 yesterday, a mere $2,000 below the purchase price of $561,000. It was the “2nd appraisal” for a transaction requiring two appraisals. We were confident about value, so we drew loan documents based on the first appraisal. In addition, the borrower had signed and we were ready to fund, pending the 2nd appraisal.
Coming in at $559,000 is irrational and ridiculous for many reasons. First, estimating values to the nearest $1,000 increment implies a level of accuracy that no appraiser can ever achieve at this price level. Second, the $2,000 spread below the contract price is less than 1/2 of one percent of the value – a statistically insignificant variance if there ever was one. And third, there are many comparable sales that clearly support the contract price.
In any case, because the appraiser came in $2,000 lower than the contract price, we had to extend the lock at great cost, re-disclose, re-draw loan documents, the borrowers had to bring in an extra $2,000 to close, and the borrowers had to re-sign during their vacation. The total number of man-hours expended by us, the lender, the buyers and escrow b/c of the appraiser is probably in the 40 to 50 hour range.
The above is just one of hundreds of appraiser horror stories we have lived through. We often wonder if appraisers have any idea of the overall harm they cause when they fail to put in a bit of extra effort.
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