By Benny L. Kass
Saturday, May 24, 2008

Q: I applied to refinance my mortgage and was told that I would have to have a current appraisal. The lender contacted an appraiser to schedule a time. I paid the lender $349 upfront, which was charged to my credit card.

The appraiser arrived as scheduled but asked no questions during his visit. I thought this was odd. When I received a copy of the appraisal, I noted several glaring discrepancies. For instance, it said "no carport" when there is one and "only room for two cars to park" when there is designated RV parking and space for a car and a boat in the carport, and still room for three other vehicles. It also neglected to point out that an addition was built in 2004.

The appraisal value was about $40,000 less than I thought it should be. What legal recourse do I have? I have contacted the lender by telephone and e-mail, outlining in greater detail my concerns, but have not received even a phone call.

Appraising real estate is not a science; at best, it is an inexact art. But isn't it strange that all too often, the appraisal just happens to be for exactly the number that makes a deal work?

The appraisal community is taking a lot of heat from many sources. Recently, the Mortgage Bankers Association released a study that showed that in 2007, appraisals contributed to approximately 16 percent of U.S. mortgage-fraud cases.

In March, New York Attorney General Andrew M. Cuomo negotiated a settlement in which Fannie Mae and Freddie Mac committed that, effective Jan. 1, they would buy mortgages only from lenders that used independent appraisers.

Many appraisers are being accused of providing valuations as directed by the mortgage lender out of fear that they will no longer get business if they do not cooperate and produce an appraisal consistent with the amount that makes a loan possible.

There are, of course, many honest, hardworking appraisers, and I am not suggesting that yours was engaged in fraud.

But appraisers are human and can make mistakes, especially when they face deadline pressure. Typical errors include failure to consider the impact of the applicable zoning, extensive use of boilerplate statements that contradict facts included elsewhere in the report, use of nonrelevant comparables and, as happened in your situation, erroneous information about the property.

I was curious about how state governments handle complaints about appraisers and found an interesting Web site from the California Office of Real Estate Appraisers. The agency reports that, based on complaints from lenders, typical concerns include:

· Untimely delivery or nondelivery of the report.

· Unwillingness to correct errors in the report.

· An altered appraisal license.

· Failure to return phone calls.

Although you would like your loan as soon as possible, you at least are fortunate in that the erroneous appraisal will affect only a refinancing. How would you feel if you were trying to sell your house only to find out that your buyer's lender would not make a loan based on this appraisal, costing you the sale?

What should you do? Although the appraiser will take the position that his report was for the exclusive benefit of the lender, and not for you, you should immediately contact the appraiser. Advise him of the mistakes and invite him back to the property. If he refuses, explain that you plan to file a complaint with the state agency that regulates appraisers.

You should also send a certified letter (return receipt requested) to your lender, with a copy to your state attorney general's office, demanding that the lender return your calls and have the appraisal corrected.

If all else fails, I suggest that you consider another lender. If you have to pay for another appraisal, you may want to sue in your local small-claims court for a refund.

I continue to wonder why some lenders refuse to respond to consumer phone calls. Aside from any legal obligation, returning calls is just good public relations.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site,http://www.kmklawyers.com.