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After reading a few alarming tales of drive-by appraisals in New York City, we asked Manhattan appraisal guru Jonathan Miller for a reality check.
Here's what he said:
1. Your paranoia is completely justified: Very likely, your appraiser has no idea what your place is worth.
The appraisal process quality has gotten much worse since the credit crunch began. National retail banks are nearly wholly dependent on appraisal management companies (AMCs) to handle the appraisal process, because banks closed their in-house appraisal departments as "cost centers" during the boom.
AMC's enable banks to call an 800 number and hire appraisers in any part of the country. AMC appraisers work for half price (they split their fee with AMC) and have 24-48 hours to complete their assignment.
Also, New York appraisers are often allowed to work in the entire state. Picture caravans of appraisers driving from places like Albany and Rochester to crank out a dozen Manhattan reports in 48 hours because they were the low bidder. Most don't know the market as well as the local appraisers, and banks like their low bias in valuations.
2. You have virtually no chance of getting a flawed appraisal reversed.
In the current environment, lenders need very little reason to avoid issuing a mortgage.
Moreover, the bank usually has no ability to review the report even if wanted to.
You can try passing comps to the bank, who will pass it to the AMC, who will pass it to the appraiser. Maybe. But remember the AMC has a vested interest in fighting to prove that the appraiser was right.
Best advice: Find a new lender and start over.
3. Your best defense is to assume the appraiser knows nothing
Gather comps on previous sales and competing properties from sites like StreetEasy, Property Shark and Trulia. Hand these to the appraiser yourself if you're refinancing. If you're buying an apartment, make sure the listing broker is planning (and prepared) to educate the appraiser.