Q. I am refinancing my home to replace an 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 the 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 just does not seem to care.
Discussing the potential adjustments with an independent appraiser leaves me to conclude that the errors could add an additional $10,000 to the appraisal, and thus about $8,000 more in cash to me.
Should I have my home reappraised? Should I contact the 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.
To prove the measure of your damages -- if any -- in court, you would need to obtain another appraisal, so that you can demonstrate the error of the original appraiser.
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 -- 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 supervisor position above the loan officer, to discuss your situation.
The lender may put pressure on the appraiser to reappraise your house. 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.
You should note that the appraisal business is not scientific, but at best it is a sophisticated art. While appraisers certainly usesuch 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 that it may be 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 for the money you have already paid, I seriously doubt that the original lender would give you back your money without a fight. And, as I said earlier, the fight may not be worth the cost or 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.
It is a good time for many people who have adjustable-rate mortgages or high fixed-rate loans to give serious thought to refinancing now, while interest rates are still at reasonable levels. No one can predict what will happen to interest rates if we solve our budget crisis and our problems in the Middle East, or if those problems are not solved.
In my column titled "Selling Techniques In a Buyer's Market" published Oct. 13, there was an error. The statement dealt with leasing a house with an option to buy and said, "If you use the lease-with-an-option approach, however, you must consider the taxable consequences. If, for example, you buy a new house this year, and cannot sell your old house within three more years, you will lose your rollover tax benefits." This should have read "Two years." The rollover benefits afforded by the tax laws require that no more than two years elapse between the time you buy and sell a principal residence.
You can sell your principal residence first and within two years buy another one. Alternatively, you can buy your principal residence now but you still have only two years to sell your old house to take advantage of the rollover benefits.
Benny L. Kass is a Washington attorney. 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, Suite 1100, 1060 17th St. NW, Washington, D.C. 20036. Readers also may send questions to him at that address.