Q. I am refinancing my home to replace a poor adjustable-rate mortgage with a good fixed-rate loan, and to take out some needed equity. The appraisal came in low and, when I received a copy from the mortgage company, I noticed many errors, some of which are significant. .
For example, the appraisal states that my house is stone and frame instead of stone and brick. It also omits a finished bedroom in the basement and a porch. The appraiser is reluctant to make the adjustments, and the loan officer does not seem to care.
Discussing the potential adjustments with an independent appraiser leads me to conclude that the errors could add an additional $10,000 to the appraisal, and, thus, $8,000 in cash to me. Should I have my home reappraised? Should I contact a corporate officer of the mortgage company? Should I consider any legal action?
.A I certainly cannot recommend that you consider legal action. Not every wrong that occurs should be taken to court. Usually, the courts want a plaintiff to demonstrate that he or she has exhausted all other remedies before filing suit. And indeed, to prove the measure of your damages (if any) in court, you would need to obtain another appraisal anyway, so that you could demonstrate the original appraiser's error.
I am a believer in going to the top when necessary. You write that the mortgage company's loan officer does not seem to care about any apparent error. I suspect that the loan officer's boss -- or the president of the mortgage company -- would care. People in business usually are concerned about staying in business, and reputation and word of mouth are a very important aspect of business growth.
Thus, I would try to meet with the president of the mortgage company, or at least someone in a supervisory position above the loan officer, to discuss your situation. It very well may be that the lender will put pressure on the appraiser to reassess the situation. I have heard of numerous instances where appraisers have made mistakes, but have been honest enough to go back to the house with a view toward correcting the original appraisal.
It should be kept in mind that the appraisal business is not scientific, but at best is a sophisticated art. While appraisers certainly use such benchmarks as comparable sales in the area, square footage, replacement value and other similar concepts, the bottom line, in my opinion, is that appraising a house is a very subjective exercise.
The best test of market value still is what a ready, willing and able buyer will pay a ready, willing and able seller. The price sets the market value. All of the other factors are significant, but not necessarily critical to a determination of price.
If your mortgage lender is reluctant to reassess the situation and to put pressure on the appraiser to go back to the house, then I suggest it is time for you to find a new lender. You probably will have to pay another application fee. While it is recommended that you contact the original lender and ask for a refund of the money you already have paid, I seriously doubt that the original lender will give back your money without a fight. And, as I said earlier, the fight may not be worth the costs and your time.
When you go to the new lender, however, describe the background of your earlier application. It is possible that a new lender will be able to use some of the information already obtained from the previous lender, thereby saving you some money and possibly speeding the loan process.