Appraising the Vue Charlotte is a Crapshoot

In looking up the definition of crapshoot, I found this: “a risky and uncertain venture.” I think crapshoot is an appropriate term to use when talking about appraising the Vue Charlotte project.

Before going into a specific case, I want to re-visit the process of appraising. Some buyers have elected to go with a private appraisal because they “don’t trust” the appraisers of the Preferred lenders. Buyers feel the appraisers may be in the back pocket of either the bank or of MCL. From all the research I have done, I am convinced there is no way this could be the case.

The appraisal process is this at the bank. The lender needs an appraiser, so the next appraiser in-line to go that is picked from a round robin pool of appraisers is chosen. MCL can’t pick the appraiser out of this pool; neither can the bank. The appraisal is done at arm’s length. In other words, it is not corrupt.

Here is what one broker shared with me on appraisers:

 If anything, banks are putting pressure on appraisers to be more conservative than in the past.  Appraisers are not going to risk their license for inflating values, especially in such a visible situation as The Vue.  Besides, most of the preferred lenders sell or secure their loans through Fannie Mae and are no longer allowed to choose their appraisers.  

The link below was also provided to me: http://www.fhfa.gov/webfiles/277/HVCC122308.pdf?elqIsAgent=True

So until I hear anything different, I am not going to spend my own money on an independent appraiser. I fully trust the appraisal system that all banks have in place.

That’s the good news. The bad news is I personally don’t have much confidence in appraisals that come in close to contract price because I believe the market has declined signficantly over the years. I don’t believe they are “corrupt” appraisals. I just believe they are “dead wrong” appraisals. I do not believe that the VUE Charlotte in this market is appraisable to any reliable degree. This may be a bit of an extreme statement, because having seen the Trademark I would say that building is a decently close comp. So we may look at that in detail in a later post. But for now I am going to go with the statement that it is extremely difficult to appraise the VUE.

What makes it difficult beyond the fact that it is indeed a unique building in Uptown Charlotte? My answer would be all the uncertainty surrounding it. The uncertainty of a probable huge fallout in unit closings: the uncertainty of the financing behind the HOA if there is indeed a huge fallout; the uncertainty of legal actions of the Developer against his customers; and so on.

Now, as I am not a professional appraiser, I don’t know if these “uncertainties” even come into play when valuing a unit. I have tried to talk to appraisers to get answers and so far each one has declined to even go on record anonymously. So unfortunately all I have to rely on is my common sense and the data that I have been supplied in email.

Remember appraiser after appraiser comment by the Developer? Well, if you are the Developer and if you are a buyer who wants in to their unit, then you want the appraisal as close to contract as you can get. If an appraiser comes back with a number that you feel is wrong, you have every right to appeal, and should! Then, the next appraiser from the pool is sent out, knowing nothing about the first appraisal, and it is done again. I don’t know if you can appeal a 3rd time if you don’t like the 2nd one.

This brings me to a buyer recently who left a comment but I pulled it because I wanted to put it in this post. Here is the comment verbatim:

i had two appraisals done

1st by preferred lender – it came in 20% below contract. Like most, I don’t have any funds to cover the large gap.

In exploring my options ->
the second by a non preferred lender – it came in >40% below contract and they want nothing to do with it.

Guess I am in a pickle :{

Think about this. The same unit, 2 appraisers, one coming in at 20% less than contract price, the second coming in at over 40% less than contract price.

I go back to the beginning of my post. Neither appraiser is corrupt. Both are professionals who apply their skills and produce an appraisal. Because this is not an exact science, and because of the uniqueness of the VUE Charlotte, we get wildly different answers. I truly believe that if we sent another appraiser out to evaluate the unit that I published recently that came in at 18% off contract price, we would see another large variation. Appraising the VUE Charlotte is as the title says, a crapshoot.

Have feedback? Please supply a comment or send email to Vuebuyer10@yahoo.com!

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