Hopefully you can give me some proper advice here. I am a home buyer and I am currently in the process of purchasing a home. This is a FHA loan and we already have a signed contract with the buyer. I am having a very difficult time with the listing agent securing an appraisal and I am almost positive what he is doing is bordering on breaking some laws. I know there have been some new rules put in place by the government to limit the communication and selection of appraisal companies by lenders and brokers by forcing the larger banks to use appraisal management companies. Here is basically where we are at currently.

From the start he had contingencies in the contract to have the appraisal completed and reviewed in 14 days which my agent thought was very unusual but I contacted by lender and he said no problem. We signed at the end of last month and I had a preapproval letter from WF which should have made it very clear who we were going to use for an appraisal as well. 1 week after we signed the appraiser attempted to contact his group to setup the schedule. It was then determined that he didn't like the appraisal selection because it was through a management company and wasn’t local and essentially denied the appraisal and asked me to use a local bank and recommended chase. An addendum was signed stating that we would use a local bank.

I contacted a LOCAL chase branch based on his recommendation and explained the situation and instructed them to contact the listing agent to verify that they would be approved for the appraisal before we initiate any loan documentation. I received confirmation from my agent that they “blessed” the bank and I started the loan process.

As of about 15 minutes ago I discovered through my agent that appraiser attempted to contact the listing agent on Friday and setup an appointment. My agent spoke to the listing agent’s assistant and told her that he discovered that the appraisal management company was based in another state and the listing agent was not happy about that. We do not have a date set yet on the appraisal and there were discussions with my agent about the possibilities of going with yet another bank that uses local appraisers.

Please let me know what you think about this process. I am pulling my hair out trying to get this thing to go through and in the back of my mind thinking that there is no way that this is legal.
Thanks,
Ryan

It almost sounds like you're trying to obtain an Appraisal prior to getting a formal loan application submitted to a bank . . . . any bank.

The Lender will choose the Appraiser . . . . NOT you; NOT the Seller; NOT your Agent; and certainly NOT the Listing Agent.If you're the Buyer, then you probably mean you have a signed Contract with the Seller.

There are no special individual handling circumstances with these Loans, and there shouldn't be. Expecting special treatment will only result in disappointment.

I'd try to avoid micro-managing what has been pretty much a standard procedure, or sequence of events, for many years. Good Luck.

It doesn't matter in which state the appraisal management company is in, they will direct a local or nearby appraiser to do the appraisal. The listing agent has no say in who to use for the appraisal.
Your agent needs to get more involved and protect your interests and the whole process. If s/he can't, involve the managing broker.

Lenders go through AMCs that may be in another state or locale; however, the appraiser should be an area appraiser. Choosing a local bank makes no difference. They, too, go through an AMC. Using WF as your lender has nothing to do with who actually does the appraisal, only who orders the appraisal, which is your lender. Who shows up to do the actual appraisal is anyone's guess.

You, your agent, and the listing agent, kind of need to know that the purpose of an appraisal is *not* for a buyer, seller, or real estate agents. It's for the bank, not to over-lend on a home. The bank is the client, and the bank gets to choose who performs it.

I also don't know how you can "make" someone use a certain bank. Metaphorically, are they holding a gun to your head, or something ? If there's a better rate some place else, that'd be pretty upsetting.

Thanks everyone. Yes that was a typo. I am the buyer and have a signed contract with the seller.

You are also correct in the fact that I did not get my formal loan application submitted to WF. The appraisal was ordered first due to the contract requirement stating that it had to be done in 14 days. The listing agent has no clue where I am at in my loan process so that shouldn't be a concern here. The listing agent is actually verbally denying the appraisal appointment and recommending the bank to choose. The last thing I want is to micro-manage this but with the strict dates he requested, I was forced to stay on top of my bank to get a status of the appraisal and push them to try and hit the dates they stated they could.

When I spoke to Chase they informed me that they also use an AMC and this is why I requested that Chase call the listing agent to get approval before the loan process goes through. I agree with everything everyone is saying. It looks like the path I need to take if they actually reject the appraisal from Chase due to the AMC is to contact the managing broker and tell my agent that I am not switching banks again. But the original question still exists, is this legal?

Thanks!

You must be a First-Time Home Buyer.

As such, your Real Estate Agent (is s/he YOUR Agent? meaning a Buyer Broker) should be providing you better guidance of what the "usual and customary" process is.

It is expected that you WILL first, submit a Complete and Accurate Application for Financing to a Lender of your choosing. That Application will typically include an "Application Fee" which will be used to cover the cost of your Appraisal PLUS your Credit Check and Employment Verification, et cetera . . . . regardless of who performs the Appraisal. This assures that the Appraiser will be compensated for his/her work, regardless of whether the loan goes through or not.

The Appraisal will not actually be ordered unless the Credit Check bears fruit and the Employment Verification confirms other detail of the Applicants background as presented on the Application as submitted. Only after that does the Appraiser become involved in the matter. Often, Loan Applications never get to the Appraisal stage, and that part of the Fee is refunded.

Sometimes Buyers pay for an extra Appraisal BEFORE or during price negotiations; but that does not appear to be your motivation here. You state that the Appraisal was ordered:

Was it paid for?

By who?

If you haven't yet even settled on a Lending Institution to submit an Application to, it defies my imagination that someone would have already ordered an Appraisal !

Again, who ordered it?

Appraisers DO NOT work for free.

Regarding the legality or illegality of what you are alluding to, I can't clearly see anything here except some gross mis-understanding of this whole FHA Loan Process . . . and by more than one party.

Right now, I'm thinking someone has mis-interpreted some wording in the Contract for the deadline for Application Submission to mean the actual completion of the Appraisal and Loan Approval . . . . but we would have to read the specific Contract verbiage rather than rely on anyone else's synopsis.

I suggest that someone in Florida tell us how the relevant paragraphs in your standard P&S flow . . . . and where some novice Listing Agents and Selling Agents may be getting tripped up and mis-reading the wording to make it sound so overly severe. Sounds like a bunch of Eager Beavers.

"The appraisal was ordered first due to the contract requirement stating that it had to be done in 14 days."
14 days is not long enough, extend it to 14 days prior to closing or about the same time as loan approval.

The agent is not party to the contract, only the seller and you. Make sure the agent is only conveying the seller's wishes and not injecting his own ideas. The listing agent can't deny your appraiser to do what is contractual between you and the seller. That's not legal.

"The listing agent is actually verbally denying the appraisal appointment and recommending the bank to choose."


In my opinion the listing agent has no right to do that, but only an attorney can advise you on the actual legality of the listing agent's actions. you may need to deal directly with the seller, and make it clear that if they do not cooperate, the deal will fall through. your agent should advise you on these matters. you/your agent can deliver a "notice to perform" to the seller/listing agent, regarding the appraisal and its contingency. also, the appraisal contingency time period can be extended by mutual agreement.

Hi Vermont,

not a first time home buyer but the first one was built so I didn't have to deal with a seller agent.

Yes, all paperwork was submitted and credit check verified per WF / Chase standard operating procedures. The appraisal was purchased and order after these items were completed and credit check verified. Once the appraisal is completed then the bank would then be able to take my existing application and the appraisal and submit to underwriting. Sorry I misinterpreted your formal application term as final documents submitted to underwriting. Please excuse my lack of knowledge on the process as this is not something I do everyday which is exactly why I am here asking for help. I have not tried to go outside of any normal process and have went fully on the requirements of both banks.

I personally do not believe I have any misinterpreted the contract. I am looking at it now and it clearly states on the appraisal contingency “ a copy of the appraisal is to be delivered to the seller on or before 14 days of effective date. “ With the effective date being the date the contract was signed. There is also another addendum requiring me to provide a commitment to loan letter from the bank within 21 days of the effective date. Since he refused the first appraiser from WF and we told him we would go with chase, a contract addendum was signed to extend the appraisal, bank commitment and closing date.

The story behind this is that he got burned on a listing a couple of months ago from a bad appraisal and due to the new FHA laws, the appraisal sticks with the house for 6 months. Apparently he has some issues trying to sell the house after that because nobody would touch it for what they were asking for. So he is attempting to be very selective on who he lets appraise his listings.

I guess I am really not trying to determine if this is legal or not as much as I am trying to get advice on how to move forward. If the listing agent comes back and refuses to accept the appraisal because he is under the impression that just because an AMC is out of state the appraisers will be as well then what would be the best action to take without spoiling the deal. My family really wants this house but then again I am tired of bending over backwards for this listing agent.

Then it may be time to have a brief consultation with a Florida Real Estate Attorney. Others have suggested above that you, or your Agent (is it a true Buyer Broker ?) discuss this matter with the Listing Agent's Principal Broker promptly, and don't hesitate to then insinuate that you'll be going on to involve the Florida Real Estate Commission, unless you receive some level of satisfaction, that the Listing Agency is currently acting to facilitate your Sale, and NOT to sabotage it.

I doubt too that the Federal Housing Authority would tolerate anyone interferring with the Appraisal process as it pertains to any of the loans that it guarantees . . . . but the involvement of any of these outside parties will surely cost you in time; and probably jeopardize your transaction for the resultant delays.

In the end, discussing the matter with an Attorney will not be pre-mature, and money well spent (if you even receive a charge for a such a preliminary discussion).

You probably retained Counsel when making your prior purchase; I'd use the same Esquire . . . . and they'll appreciate being consulted early on instead of waiting until everything has fallen apart at crisis stage.

Now, if you made a previous purchase, are you also engaged in selling a Florida property? . . . . simultaneously ?

Thank you everyone for great advice. I am really glad I found this forum so easily and that everyone was so helpful. I will find out tomorrow if the listing agent actually requests I use a different appraisal / mortgage company. If so then I have already decided that I am not going to make any change and discuss it with my agent and the listing agent broker. I am traveling until next week but will attempt to locate some council before it’s too late as well. On my existing property, I am actually going to rent it in the next couple of months. The rental market is actually pretty strong where I live as it is fairly close to a military base.

Regardless of the outcome of tomorrow I am determined to contact the proper agencies and hopefully save the next person that buys a house from this agent from going through the same. Of course I will wait until I am closed if we can start making some progress.

Thanks again everyone! I feel much better about how to proceed.

Ryan

"The story behind this is that he got burned on a listing a couple of months ago from a bad appraisal and due to the new FHA laws, the appraisal sticks with the house for 6 months."
That has changed:
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-30ml.doc

September 18, 2009
MORTGAGEE LETTER 2009-30

TO: ALL APPROVED MORTGAGEES
ALL FHA ROSTER APPRAISERS

SUBJECT: Appraisal Validity Periods

This mortgagee letter announces a change to the validity period for appraisals used for FHA-insured mortgages.

Effective for all case numbers assigned on or after January 1, 2010, the validity period for all appraisals on existing and proposed and under construction properties will be 120 days. This change aligns FHA’s requirements pertaining to the validity of an appraisal with current industry practices.

This is a change from the current validity periods of six months for an appraisal of an existing property that is complete, and 12 months for proposed and under construction properties.

If you should have any questions concerning this Mortgagee Letter, call 1-800-CALLFHA. Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483)


Sincerely,

David H. Stevens
Assistant Secretary for Housing-
Federal Housing Commissioner

Around here there is no way to get a loan commitment letter in 21 days.

Isn't it a RESPA violation when a seller representative demands that a buyer use a preferred lender? Even the reos only make buyers get pre-qualified at their bank but then let the buyer pick their lender.

Does this agent get a kick back from your overpriced loan?

"The story behind this is that he got burned on a listing a couple of months ago from a bad appraisal and due to the new FHA laws, the appraisal sticks with the house for 6 months."

What on earth? Anyone here ever have a contingency that the seller must receive an appraisal from a buyer's lender that he can approve or disapprove of? I guess the OP did agree to those terms, and they are what they are. But, the terms probably didn't come from the seller, but were insinuated into the contract by the LA. But whatever, the terms are there.

Notwithstanding, the LA can't bar access to the buyer's appraiser, or in any way be involved in the selection of an AMC, the appraiser, OR the buyer's choice of a lender. What such action(s) of the LA constitute, what standards/guidelines they've violated, I really don't know.

With respect to the now 120-day FHA appraisal follow, to me, it's immaterial whether the seller approves or disapproves of an appraisal. The appraisal, IMO, "good" or "bad", when completed, still attaches to the property, doesn't it?

Where AMC company is located is irrelevant.

Listing and Selling agent may ask appraiser if appraiser has geographical competence. Appropriate to ask if appraiser has appraised in neighborhood, how many appraisals and when appraisal last appraised in subject neighborhood. Accordingly, LA/SA may deny access and contact loan agent with request for new appraiser on grounds of geographical incompetence.

LA/SA can provide/email good comps, upgrades (updated property and views) etc before appraisal report is sent to bank. Once report is sent to lender there can be no more communication.

If appraisal comes in low, agents can try to provide good comps, different from what appraiser used. Also, they can point out if there are views and remodeling not added in appraisal report.

Low appraisal, gives Buyer another opportunity to renegotiate price. All of us have been there. Most of the time, Buyer will renegotiate, walk or meet Seller half way.

California purchase contract are straight forward. 17 days contingencies for inspections and loan/appraisal. If Buyer does not remove contingencies, Seller has to send "Notice to Buyer to perform". Or SA asks for extension.

Purchasing has changed. Low appraisals happens all the time. Sometimes justified. Seller may have over priced home. Hope your agent is standing by you and that your transaction will have a happy ending!