Did Bad Assessor Data Cost you your Mortgage Loan?

In my last post I mentioned that I have recently appraised houses where the County Assessor’s information was incorrect regarding the property. The two houses were in completely different Counties but were both built in the mid-1990s.

Things were booming around here at that time and I assume most of the misinformation is a result of builders reporting the wrong information to the Assessor and Assessor offices being too short-handed to properly follow-up.

Either way, the information is wrong and the wrong information can cost you in another way (besides paying too much in property tax). It can actually cost you the chance to get a loan.

For Example:

Recently I appraised a house that was listed in the County records as a Bi-level. The house was actually a 2-Story style property, with a basement.

If you have read my book “Buying The Recession-Proof House”  you know that Bi-Level style homes are typically the least desirable of the five main styles of houses. You would also know that there are exceptions to the rule but we’ll leave that for another time.

The big issue here is with Automated Valuation Models (AVM) that mortgage lenders now use to estimate value before sending out an appraiser for a more-accurate valuation analysis – if you get that far in the process based on the numbers from the AVM.

The most commonly known AVM is Zillow.

AVMs compile County Assessor data (public records) to estimate the value of a home… big computers “crunch the numbers” and spit-out a value based on the data. They look mostly at the style and size of the home separating Above Grade square feet from Basement square feet.

The house I appraised had actual Above Grade square footage of 1,324 and basement square footage of 644 for a total of 1968 square feet. I know because I measured it myself.

The County Assessor showed Above Grade square footage of 1,324 (the same) and Basement square footage of 653 (slightly more) but reported an erroneous total of 2,338 square feet for the property (despite the fact that 1324+653=1997). So 341 square feet larger than the actual sum of the component square footages – from their own data! (and 370 sq ft larger based on my measurements)

So this house’s data has 2 Big Problems:

  1. It’s listed as a Bi-Level rather than a 2-story – which will hurt its value with AVMs
  2. It appears to have a “phantom” 370 square feet that screws up the automated or casual-observer’s valuation of it

Hint: This why it is so important that houses be measured before putting them up for sale.

So How does this Impact Me as a Buyer?

So, if you were trying to buy this home, the potential lender might take a look at this erroneous AVM-based data and judge the home to be out of your price range (based on your income and credit) due to incorrectly-large square footage reporting from the Assessor’s office.

As we explain in our educational materials – it’s not just the price that a buyer and seller agree to for a house that a lender considers in their lending decisions (i.e., “underwriting”) – they are also reaching their own independent valuation in the process as well.

You could be shut-down as a borrower in the lending process long before anyone even realizes that there is simply bad data recorded and relied upon.


 

To learn more about factors that affect the value of homes and impact the home-buying process, check-out REOT’s eBook “Buying The Recession-Proof House.”

Get other valuable information about selling your home, or buying one, in our book “The 3 Words Real Estate Agents Won’t Tell You” – just request it on the top, right of this page!

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