Loan Underwriter Uses Zillow To Determine/Justify Value Cut from a desk chair 3000 miles from the subject property – crashes real estate transaction
With SHOCK and AWE, Barry Owen A local Nashville REALTOR quips:
“This Practice of Internet Valuation has gone from the sublime to the ridiculous. For a couple of years, I’ve had a recurring nightmare of an out of area Lender Underwriter arbitrarily “adjusting” the appraised value of a house DOWN based on information from ZILLOW just days before closing, and that dream has come TRUE. This is simply unconscionable.”
Yes . . . Unbelievably So, this just happened.
An underwriting “Reviewer” in California mysteriously cut the value a LOCAL FHA Certified appraiser determined from $305,000 to $280,000 48 hours before the contractual closing date. This resulted in the need for a 10 day contract extension during which Mr. Owen provided DETAILED proximate sales closed within the prior 6 months that more than justified the contract (and appraised) price with an extensive narrative of Market Conditions in the area. Barry says: “I ran comps and feel the $305K is a below market price . . . They used Zillow as an argument. I did NOT make this scenario up. I’m not that smart.”
Mr. Owen provided the following from an excerpt he wrote to the Loan Processor in California.
The 10 days passed with daily attempts from Owen for up-dates . . . He says: “All of my communications were going into a “Black Hole” with nothing coming back.”
5 days later, the email came with the final determination that the Underwriter would not accept the Appraised value and would only allow a $280,000 value . . . An Excerpt from that email is here:
“The crux of this value cut is that all comps used by the appraiser to bracket the $303k purchase price were over 2 miles away in Nolensville. Our review appraiser used more proximate and recent comps from the same neighborhood (Smyrna) that adjust to $280k on the high end. Zillow shows Nolensville to be a more desirable and affluent area – the median sales price in Nolensville is $245k, while it’s only $148k in Smyrna. The appraiser has made no adjustment for market appeal. Absent an actual field review, the review appraiser’s value cut appears well supported.
On the surface (Other than the reference to perceived credibility of a ZILLOW market comparison), this appears to be a sound argument . . . the issue Owen has with it is that it is fraught with inaccuracies to the degree that Owen says: “It’s Statistical Fiction!”
That transaction failed . . . The Buyer will buy a different house and use a different (LOCAL) lender . . . and the seller will likely sell the house for MORE than $302,500 and close within the next 30 days.
That’s a level of thinking and action for a lender that I believe is irresponsible and unconscionable.
There is a HUGE “Paradigm Shift” in the making WRT to Real estate and the internet . . . Stay tuned.
What relevant stories do YOU have?
How do you think this will play out?
Stay tuned in!
I’m listening . . .