When the bank references an appraisal as too high

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Approximately the end of October I started a request for a HELOC with a major US bank. I don’t want to identify them, however, they own my first mortgage.
The nearest branch is about an hour and 15 minutes from my home. I called the 800 number from years of mailed fliers. Went thru a pre-approval process over the phone. Within an hour the representative called back approving me for this initial step and set me up with a contact. I was told by her what I needed to take with me (or mail). I contacted that person and decided to personally deliver what was requested. Following this meeting they wanted more information. I provided all the information within 7 to 10 days of my initial visit. I was told a complete appraisal may or may not be required.
Near the end of November the branch informed me a full appraisal needed to be done and I would be contacted. I prepared the house and property and the appraiser came on December 10th. This past Thursday Dec. 19th the appraiser contacted me at work to tell me the bank had returned the appraisal. They stated the reason the bank returned the appraisal was the value was too HIGH. The bank was requesting the appraiser contact me and obtain a list of home-improvements I had done. They also requested I provide a list of improvements the previous owner(s) had done to the best of my knowledge. After 2 months this request/delay/stall just flew-all-over-me. The loan would make my life easier but not a must. My first mortgage plus this request would total approximately ½ the value of the initial appraisal. Clearly the request is a moot point. What is the end result of doing what was asked? It just doesn’t matter in my case. I felt like the bank was potentially framing the note(s) in a way that could be detrimental to me and delaying the process. I told the appraiser I would not comply and I was stopping the request.
I’m still fuming over this. I feel like the bank is tampering with their chosen professional appraiser’s valuation OR the appraiser is not competent. The property is worth what it’s worth regardless of what I’ve done. It just seems amateurish. Had the appraisal been low would they “hint, hint, wink, wink, nudge, nudge” raise the value? I think not! Did I over react and make a mistake? I realize I’m taking the moral high- ground but this really upset me! Should I write my congressman?


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I want to take time to thank you guys for answering my question. My response to Mr. Simon above sums up my situation…as I’ve had time to think about it. I bought in the pits of a mortgage crisis and stock market free-fall. A desperate seller sold it at less than half what they were asking a year prior. My wife and I saw the home about 2 years before we bought it, at the time it was out of our range, it was always our favorite. Desperate at the time the owners realtor called us saying what they would take if we were interested … and we were.

We have done lots of small things but nothing that can explain the value increase of our home. I knew that when I talked to the appraiser. I can’t explain it anymore than the bank can explain the value of their stock in January of 2008 and now. It’s up 250%. If you bought their stock at that time, you’ve done well. Agreed? The market sets the price at any given time and there are no guarantees. I’m not really asking a question here but how can I explain that as the person requesting the loan. Regardless, if I considered a modest 15% gain in the homes value over these past 4 years, the first mortgage plus the additional request the total, remained below 75% LTV. The bank, in my opinion, was looking at what I paid for the home and land and what the appraiser valued it at. I bought what I wanted and I looked for 4 years before I bought. I love it more now than I did the first time I saw it. I receive compliments on it regularly. I’ve even had people knock at the front door and ask to look around and offers to buy. It’s unique and in a beautiful setting. I would not consider selling at this time in my life. It no doubt showed well to an appraiser.

Thanks again for your time and considerate responses. Best wishes for 2014.

updated 4 months ago
Eli Stein
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Answered 4 months ago
Eli Stein
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You’ve hit a nerve with many borrowers, appraisers, and loan officers here. Sounds like the appraiser really liked your house, and probably gave it a higher value due to his estimate of the condition, but then didn’t fully document the reason for his view. In MOST cases, underwriters defer to appraisers' judgment (after all, they are the professionals licensed to determine home values), but occasionally they ask appraisers for additional details on homes. Usually not that big of a thing, and seldom arise two months into the process. Clearly, you’ve seen some very inefficient to inept customer service here. I wouldn’t write my congressman, I would simply find another home for my second (and perhaps even first) mortgage. Having too much equity is an issue most lenders love their borrowers to have. Sorry it was a problem in your case.

Answered 4 months ago
Ted Rood
1093 6

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Loan officers can rarely think outside of the box. The box they live in is dictated by 80% LTV, troubles finding equity, borrowers who want to max out the value of their home and the desire to have low appraisals regardless of accuracy.

  • If a borrower has too much equity, they get nervous.
  • If a buyer found a great deal and bought into instant equity, they get panicky.
  • If an appraiser acknowledges the existence of this equity gain without 10 pages of explanatory addendums, they freak out.

It does not mean that you are being thrown under the bus or dragged over the coals but that the little minion wants all the numbers to fit into their computerized lending criteria. I bet if you would have provided your appraiser with the numbers, he or she could have created the sufficiently detailed addendum to make this work – with another 30 day delay, no doubt.

Answered 4 months ago
4 months ago Eli Stein said:
 

How does the bank explain the value of their stock today vs 2008?


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