Bad appraisal for VA loan - complaint filed/restitution

[CS1983]

Pardon my ignorance, but how would you have lost money paying less tax on capital gains you didn't' receive?

Knowing a little about your history, I assume you didn't meet the criteria of living in the residence for two of the last five years.

I was probably unclear in phrasing on that. What I mean is that we lost money due to improvements cost but are subject to capital gains tax. If the valuation had been properly done on the original purchase, the house/property, with improvements and market conditions at the time, would have still been worth the price at which we sold. So we not only lost potential gains, but have to pay capital gains on which is actually a loss due to the cost of improvements we made to bring the residence and property to that value.

So, at the time of our selling the house to move back, we had done improvements which brought it up to +39k over original sale price. However, we also put somewhere around 25-30k into improvements[perimeter chainlink fence, new flooring, paint, remodeled two bathrooms, other property improvements on the outbuildings, etc.] (I'd need to go back and calculate all actual costs based on what receipts I have left). After closing costs, etc., we received a check for around 13k. So, from the government's perspective we "made" money. In fact, we lost not only real money but also the potential money which would have been made with a proper valuation.

I'd have had to pay capital gains, yes. But I wouldn't have had to pay "gains" on what was actually loss.

[CS1983]

Finally got a hold of a human being at the VA to see if we could even interact with the guy outside of their process.

Denver Regional Loan Center said this is simply a civil issue, and then we talked a bunch about the way the VA views this sort of issue: not favorably, at all. And, they stated that if they kick this appraiser out of their program, it could also impact his ability to appraise for FHA, HUD, etc. In Oklahoma that's a darn big deal. He could be stuck with Conventional loans only, or, if the Appraiser's board takes that away, he's basically looking for a job.

If defaulted, this would have been a major liability to VA who would have removed their guarantee and lender would have had to eat the whole thing. Would not have been my fault as regards the upside down valuation, and I would have suffered no loss of VA benefits in this regard, so that's good.

Then he asked if I wanted to be transferred to/talk with Houston whose answering party promptly deflected to "I cannot give legal advice." Um, lady, I am not asking for legal advice. I'm asking if the VA cares if I talk to the guy outside of your complaint process. Nope. Mum's the word. "Legal" advice. So I'm going to call the guy today and just feel him out for what's what. Denver said we could have the other appraiser do a retroactive appraisal to account for the actual market value at the time of the original appraisal, for presentation to the E&O insurance company/Appraiser.

However, I also just got a reply from the VA Houston office via email, in response to my original question about dealing with the appraiser, post-appraiser call:

Mr. XXXXXXXX, first, thank you for contacting the VA Houston office and thank you for your service.

I suspect the appraiser contacted you because we contacted him regarding what has transpired. If the appraiser is willing to make amends, offered to make restitution, in some fashion, then if I were the homeowner, I’d be inclined to entertain the offer. In answer to your question, No, we don’t need to be involved in that process, and No, there would be no VA backlash.

I would be interested in how the appraiser intends to resolve the issue, though, and would respectfully request you keep us informed as things progress.

Hope that helps. Any questions, let me know.

[REDACTED]

[Martinjmpr]

Denver Regional Loan Center said this is simply a civil issue, and then we talked a bunch about the way the VA views this sort of issue: not favorably, at all. And, they stated that if they kick this appraiser out of their program, it could also impact his ability to appraise for FHA, HUD, etc. In Oklahoma that's a darn big deal. He could be stuck with Conventional loans only, or, if the Appraiser's board takes that away, he's basically looking for a job.

Appraiser may be contacting you in hopes that if he comes to a settlement with you, you won't report him to the appraiser's board in that state which could cost him his license (or whatever he has to have to be an appraiser in that state.) You may also be able to file a claim with the appraiser's board to see if they will offer restitution. Colorado has a program like that for attorneys, basically there is a fund that is managed by the attorney registration office of the State Supreme Court so that if people are defrauded or otherwise financially harmed by their attorneys they can be at least partially compensated through this fund. There may be something similar for appraisers in OK.

[CS1983]

Right, but just because the buyer pays the appraiser, that doesn't mean the appraisal is for the benefit of the buyer.

The purpose of the appraisal is to protect the LENDER, not the buyer.

Think about it: If you are buying with cash, do you even NEED an appraisal? Why would you?

The appraisal is paid for by the buyer because getting an appraisal is one of the conditions for the lender loaning the money to the buyer.

Lender says "you want to borrow my money to buy a house? Then YOU pay for an appraisal to make sure I don't end up with a $100,000 house as collateral on a $200,000 loan."

Based on that, I'm not sure the buyer of the house has recourse against the appraiser. Certainly the lender might have had recourse, for example, the buyer defaulted and the lender foreclosed and only afterward found out that the house is worth a lot less than they thought it was.

But if the house has been sold and the lender has been paid back, then from the lender's viewpoint, it's no harm, no foul.

So once again, it goes back to this: Does the appraiser owe a legally enforceable duty to the buyer? And is the buyer entitled to rely on the representations of the appraiser who is there to protect, not the buyer's interest, but the lender'?

As I said above, that may be determined by what is stated in the contract, or by statute or by case law in that state.

The VA has specific conditions to protect both the buyer and the VA as the guarantor. They are the guarantor, not the lender, and the lender defers to them on the loan, simply. The specific purpose of the VA Home Loan program is to ensure not only that veterans have access to home loans, but that they are not taken advantage of.

A conventional loan is apples and oranges for particular requirements, and regardless you seem to be ignoring the reality of a serious mistake in GLA, a basic appraisal function. It would be akin to a paramedic not assessing a patient before beginning treatment or a cop not frisking someone before they put them in their car. Again, it wasn't like he mistakenly added $3k of value for granite counter tops when they're actually formica. He effectively added an entire studio apartment's worth of non-existent GLA, and that because he didn't do a basic function of his job: measure the GLA.

The VA appraisal establishes the fair market value of a home being purchased or refinanced with a VA loan. VA appraisals are a key part of VA loan approval and are required by the Department of Veterans Affairs for VA purchase and cash-out refinance loans.

The VA appraisal process isn't intended to unreasonably raise the bar when it comes to quality in a new or existing house; instead it's designed to protect the borrower, ensuring the home is safe, sanitary and fairly priced.

https://www.valoans.com/articles/va-appraisals/

In short, the home was not fairly priced.

[CS1983]

Appraiser may be contacting you in hopes that if he comes to a settlement with you, you won't report him to the appraiser's board in that state which could cost him his license (or whatever he has to have to be an appraiser in that state.) You may also be able to file a claim with the appraiser's board to see if they will offer restitution. Colorado has a program like that for attorneys, basically there is a fund that is managed by the attorney registration office of the State Supreme Court so that if people are defrauded or otherwise financially harmed by their attorneys they can be at least partially compensated through this fund. There may be something similar for appraisers in OK.

That ship already sailed. He was reported to both the Oklahoma Appraiser's Board (paper packet) and the VA (email duplicate of the OK paper packet).

If he wishes to truly settle, and God willing without involving a lawyer on either side, I'd be happy to argue on behalf of him to both the VA and the OK board that he did what was right upon his mistake being brought to light. If he's had no other complaints, that should be taken into account as well.

But, as my very first Platoon Sergeant used to say: you can have a thousand atta-boy's, but all it takes is one ah'shit.

Just want this made right.

[Martinjmpr]

A conventional loan is apples and oranges for particular requirements, and regardless you seem to be ignoring the reality of a serious mistake in GLA, a basic appraisal function. It would be akin to a paramedic not assessing a patient before beginning treatment or a cop not frisking someone before they put them in their car. Again, it wasn't like he mistakenly added $3k of value for granite counter tops when they're actually formica. He effectively added an entire studio apartment's worth of non-existent GLA, and that because he didn't do a basic function of his job: measure the GLA.

No, I'm not ignoring that at all. I agree 100% that the appraiser was negligent.

What I think you may be ignoring is that merely being negligent is not enough for YOU to have a claim against the appraiser. Because a claim of negligence can only be filed by someone who is owed a legal duty of non-negligence.

There are 4 elements of a negligence tort:

1. The Defendant owed a DUTY to the Plaintiff
2. The Defendant BREACHED that duty
3. The Plaintiff was harmed
4. The proximate (closest in time and place) cause of the Plaintiff's harm was the Defendants' breach of his duty.

All 4 have to be proven in order to have a claim of negligence.

Clearly the appraiser owed a duty to somebody. But the question is, did he owe a duty to YOU?

https://www.valoans.com/articles/va-appraisals/

In short, the home was not fairly priced.

But who's responsibility is it to ensure that a home is "fairly priced?" Is it the appraiser's, or is it the VA's? It may be that the appraiser only owed a duty to the VA. If that's the case, then you would have to file a claim against the VA because their agent, the appraiser, was derelict in his duty and did not accurately appraise the home, and you suffered damage as a result.

But that, of course, opens up a whole other set of issues and problems because once you start dealing with a government agency, a lot of the rules of common law don't apply.

[Bailey Guns]

Right, but just because the buyer pays the appraiser, that doesn't mean the appraisal is for the benefit of the buyer.

The purpose of the appraisal is to protect the LENDER, not the buyer.

Think about it: If you are buying with cash, do you even NEED an appraisal? Why would you?

The appraisal is paid for by the buyer because getting an appraisal is one of the conditions for the lender loaning the money to the buyer.

Lender says "you want to borrow my money to buy a house? Then YOU pay for an appraisal to make sure I don't end up with a $100,000 house as collateral on a $200,000 loan."

Based on that, I'm not sure the buyer of the house has recourse against the appraiser. Certainly the lender might have had recourse, for example, the buyer defaulted and the lender foreclosed and only afterward found out that the house is worth a lot less than they thought it was.

But if the house has been sold and the lender has been paid back, then from the lender's viewpoint, it's no harm, no foul.

So once again, it goes back to this: Does the appraiser owe a legally enforceable duty to the buyer? And is the buyer entitled to rely on the representations of the appraiser who is there to protect, not the buyer's interest, but the lender'?

As I said above, that may be determined by what is stated in the contract, or by statute or by case law in that state.

I understand all that. My only additional comment is the appraiser really doesn't work for anyone. In my experience, a lender has a list of appraisers in a particular area. They need an appraisal they start to work their way down the list. An appraiser should remain a "free agent" to avoid conflict of interest. You obviously don't want a lender "owning" an appraiser who might compromise home appraisals in favor of a lender. Same way a buyer can't say to the lender, "Yeah...my Uncle Fred's an appraiser and he'll cut me a deal on the fee. Let's just use him."

And I would also say their job is to protect everyone in the transaction...not just the lender.

One thing I've noticed after buying or refinancing numerous houses is the appraisal almost always comes in right where it needs to be on transactions where the estimated value of the home and the requested loan amount are close. Coincidence? If you (in general) say so.