Today, I was to appraise a home in the City of San Fernando. The subject is a very nice 2500 sq.ft two story home built in 2003. The problem is, most of the homes on the street and around the neighborhood were built in the 1940’s and 50’s. This means the subject does not conform to the neighborhood. YIKES! I talked about this issue in my Dec. 11th story on Conformity! Conformity! Conformity! However, this is a minor problem compared to what happened today.
First off, the house was not advertised on the MLS. It was a FSBO (For Sale By Owner). I noticed that the purchase contract is for the amount of $620,000. But when I met with the seller at the house, he tells me that there is another purchase contract floating around somewhere for the amount of $680,000. Because the seller is also the listing agent, I ask him for a copy of the new contract reflecting the $680,000 price. He said, he did not have it and I should get it from the loan broker at the Bank. Now I am getting suspicious. I asked him, in this market, how did he get from $620,000 to $680,000? Did the buyer agree to this increase and is the contract fully executed (meaning has it been signed by both buyer and seller)? He then told me his loan broker determined the new price and needed the value to be increased to make this deal work. At this point, I knew this deal was not going to fly. I have appraised FSBOs before and they are fine, but this deal did not look like an ‘arms-length transaction’ to me. I got the feeling the loan broker increased the value of the purchase to give the buyer some cash out.
The seller was getting very nervous because I was asking questions he did not want to answer, like, “…. as a listing agent, why would you not want to list your home on the MLS?”
Because there was so much confusion, I pulled out my cell phone to call the loan origination manager at my office with the hopes to clear up some of these questions. He reached over and yanked the phone out of my hand and said to me, “I don’t want the appraisal anymore. You can go.”
You would think that someone who works in the real estate biz would know better that these kinds of deals don’t fly anymore. Mortgage lending has become much tighter and wants answers to all the questions I asked. Many times, an underwriter will call me up and ask further questions before he/she signs off on a loan.
In conclusion, this deal died. This seller/ agent will more than likely try another bank to sell it to. Banks beware!