How do appraisers get selected by banks in NYC?

[showtime]

Banks apparently don't have a choice post the Great Financial Crisis of 2007 and 2008 in who the appraiser is. When they order an appraisal on behalf of a buyer who is financing a purchase, apparently the appraisal specialist is randomly selected by the government. We have seen this result in appraisers from out of the city coming in to appraise NYC coops and condos of which they are completely unfamiliar with. This can result in totally off or low appraised values which can really hurt a deal. Does anyone have more color on this and whether you can appeal an appraised value that comes in low because of this?

[mike]

Appraiser here for over 10 years in the city. Here's what I know about how it works.

There are three different levels of appraisers.

The first level works directly in-house at a bank. You can tell these are bank appraisers by their corporate email addresses. If a bank is keeping a loan in house, perhaps because it’s a jumbo loan not eligible for securitization, they may use their own appraiser. They will also use their in-house appraisers to review loans and appraised values.

The second level are appraisals that are employed at appraisal management companies. These companies employ large rosters of appraisers and are assigned jobs from banks and GSEs like Fannie Mae. If a loan is convention / conforming, the bank will reach out to Fannie Maie who will send the job to an appraisal management company. The company will then give the job to whoever has expertise in the area. The staff at these appraisal management companies will usually only cover certain areas. For example I only cover 59^th Street and below in Manhattan. Some of my colleagues only cover the UES and others only the UWS.

The third level are appraisers that are independent contractors. You can usually tell from their personal email addresses. These guys will get the leftovers from whatever the appraisal management company can’t handle in house with its own staff. These appraisal contractors will usually work with a few different appraisal management companies, and may cover wide areas from upstate all the way out to Suffolk. An independent contractor appraiser therefore might not have local expertise for NYC.

[mike]

Sorry, realized you also asked about the appeal process. Not sure if you're an agent, but word of advice. Definitely don't ask the appraiser first thing where he's from and where is company is headquartered.

I work for a pretty large appraisal management company and they're based in Missouri. I live in Connecticut. The moment some real estate agents in NYC hear this they go nuts on me. It's super annoying. Obviously my company works all over the country and I'm highly specialized in Manhattan. Also, as I described in my post above, there's a major different between a member of the staff at an appraisal management company vs a contractor. A staff appraiser will always have specialized local knowledge for NYC.

I would recommend not asking too many questions. Let the appraisal do their job and finish their appraisal report before trying to appeal. You never know whether they'll appraise high or low.

But the short answer is yes you can appeal an appraised value that you find too low. Sometimes we appraisers may miss one or two comps, and if you can find it and the comps support a higher value, then we will fix it if it's obvious. However, I'm pretty thorough and I'd say that less than 1% of my appraised values are changed. So it's a pretty low hit rate to get an appeal and a different appraised price.

Also, if you challenge an appraised value with your bank, they will follow up with us. If the dispute isn't resolved, banks sometimes will send a second appraiser to the property. This second appraiser may be their own in-house appraiser or from an appraisal management company. It won't be a contractor.

So there you have it, everything you need to know about how appraisals work in New York City. Hope this helps!

[lower_nyc]

It sounds like the only way you can dispute an appraisal is if there is a factual error in the report. A few good examples of factual errors include:

1. Appraiser overstates the number of beds / baths in a comparable property
2. Appraiser lists the wrong floor of the subject unit/property
3. Appraiser appraises the wrong apartment (I've heard stories of this actually happening in the past. The appraiser simply collects the wrong apartment key from the doorman!)

More subjective would be something like this: the comp you used, although just 2 blocks away from the subject property, is in a different and more valuable 'neighborhood' in NYC