August 2nd, 2004

Complaint / Real Estate Appraiser

Filed against Stacy McDonald

Board of Real Estate Appraisers
1900 Grant St, #600
Denver, CO 80203
Attn: Enforcement

This is a complaint filed against appraiser Stacy McDonald, Colorado license number AL40022342.

Subject Property: 411 Harlan St, Lakewood, CO 80226

In support of the complaint, I state as follows:

I am a real estate appraiser. On 12/30/03 I received an order to do an FHA appraisal on the property at 411 Harlan St, Lakewood, for a purchase mortgage. FHA case number = 052-3278426. I inspected the property on 1/1/04 (New Years Day). The property was vacant, the electricity was on, the water was shut off.

The subject property was listed in MLS on 11/10/03 with an asking price of $250,000. In my file is a copy of a contract which indicates FHA financing and includes a provision that the seller will pay $14,000 to the Neighborhood Gold Program “for the buyer's down payment”. The contract price is $264,000, which is $14,000 higher than the asking price. The contract is dated 12/18/03.

On 1/7/04 I submitted my appraisal report to my client, Mortgage Solutions Network. My invoice was timely paid, they do not owe me any money for this assignment. My appraised value was $250,000, equal to the “asking” price but not enough to cover the $14,000 seller concession. Later that day (1/7/04), I received a telephone call from a woman who identified herself as the listing agent. She asked me to not turn in the appraisal report so she could find another appraiser who would appraise the property for $264,000. I responded that I could not discuss the matter because she was not my client. I believe that my client, Mortgage Solutions Network chose to disregard my appraisal because they did not like my appraised value of $250,000. They re-assigned the job to an appraiser who was willing to “hit the number” needed to make the deal work. Stacy McDonald did just that – hit the number.

My specific complaints with the appraisal report done by Stacy K McDonald:

Comp #2 is reported in MLS to be a “horse property” on 1 acre. I observed goats grazing on the property when I looked at it. In my opinion, comp #2 should not have been used in the report because the subject property has no room for a horse (not even close). In any event, a $5,000 downward adjustment is inadequate.

Under USPAP Standards Rule 1-5(a) the Appraiser has a duty to analyze the contract and listing, and as stated in the comment section of USPAP Standards Rule 2-2(a)(ix), the Appraiser has a duty to disclose the summary of the results of this analysis. Page #1 of the appraisal report - in the box for “Description and $ amount of loan charges/concessions to be paid by seller” – the report contains the word “See”. On page #2, the appraisal states “Contract provisions are typical, with no unusual financing. See contract for seller concessions”. Did the appraiser review the contract? The report does not say. The appraisal report does not disclose that the contract price is $14,000 above the asking price and does not disclose the contract provision for the seller to pay $14,000 “to the Neighborhood Gold Program for the buyer's down payment”. The disclosure is inadequate, misleading, and/or just plain wrong.

Page #1 & #2 of the report shows 1 upstairs bath and .75 bath downstairs. There are 2 bathrooms upstairs. Downstairs, there is a rough-in bath with high quality marble tile installed, however, in the downstairs bath, there are no fixtures, just duct tape over holes in the wall and floor. At the bottom of page 1 of the report – it states “Basement bath has two headed granite tile shower and granite tile floor”, which is misleading because it fails to mention that there are no fixtures. See photo(s).

At the bottom of page 1 of the report, it states “No deferred maintenance”. This is misleading – there is deferred maintenance that should have been disclosed. See photos of upstairs bath and upstairs bedroom.

This appraisal rates the condition of the subject as “Avg+/Good”. There are $17,500 upward adjustments for condition on comp #1 and comp #3, no condition adjustment for comp #2. The adjustments are $10,000 on the condition line, and then $2,500 and $5,000 for “BA” and “K.E.” at the bottom of the sales grid.

The report states:

"the subject “property is one of the best and newest in the area”.

I do not dispute that the subject is “newer” than most everything in the neighborhood. I was unable to find any comparable sales of nearby homes with similar age. However, I submit that it is not really “age” that drives market value – it is “condition” that drives market value. While age does matter, condition matters more. In this appraisal report, the treatment of “condition” is misleading. There is improper (misleading) disclosure and the treatment on the sales grid is biased in favor of a pre-determined target.

Stacy McDonald appraised the property at the value needed to make the deal work. As a result – the loan amount ($260,373) is 104% of the collateral. The seller agreed to accept $250,000 for the house, and the buyer(s) walked away from the closing table with $10,373 cash in their pocket, minus the “fees” charged by Neighborhood Gold and the loan company(s) – Mortgage Solutions Network and Security National Mortgage. This goes beyond “nothing down”, this is a negative down payment.

Based on comments made to me by the listing agent – I believe that the subject property was in substantially the same condition on January 8th as it was on January 1st when I inspected.

I believe that the appraisal order was placed with Stacy McDonald on January 7th, 2004. The inspection and report were completed on January 8th, 2004. This would have been a difficult assignment to do in 1 day.

Sincerely

Philip G Rice
11267 E Linvale Dr
Aurora, CO 80014
phil.rice@comcast.net
(720-282-3376)

Attachments:

Detailed Comments on Subject Condition – (see below) 2 pages
10 High Resolution Color Photographs with comments on back – 5 pages
Stacy McDonald Appraisal Report including VC and Invoice – 10 pages
Subject MLS Listing and Listing History – 2 pages
Subject County Records – 1 page
Comp #1 MLS listing – 1 page
Comp #2 MLS listing – 1 page
Comp #3 MLS listing – 1 page

Detailed Comments on 411 Harlan ("subject") Condition:

Note: These comments are based on my inspection dated 01/01/04 (New Years Day). The McDonald appraisal is dated 01/08/04 - 1 week later.

Electrical: Several light switch and other "boxes" are lacking a cover. This is mostly cosmetic. In the living room there is a hole in the drywall and an extension cord that sticks out (see photo). I do not know where the other end of the extension cord is. At a minimum, it is a hole in the dry wall that creates a "below average" appearance. The ceiling fan in the dining area makes a bad noise. Based on the sound, it is my opinion that this ceiling fan should be repaired or removed. There are several light fixtures that are missing the bulb cover. I could not make the kitchen fluorescent light work (could be operator error). There is one smoke detector in place (I did not test), and at least 2 places where smoke detectors used to be are now empty (see photo).

Exterior: The roof is avg quality comp shingles in good cond. Gutters are good cond, but there are 2 missing down spouts. Windows are double pane, good quality in good condition. Siding is brick on the front, painted lap on sides and rear. Siding is good quality in good condition. Exterior paint is good condition. 11 x 39 wood deck is high quality design and materials, partial cover (see photo) with gas log fire pit (see photo). There is a high quality hot tub enclosed in a 13 x 13 room (see photo) with skylight. The hot tub may or may not be working. There are security bars that cover most (but not all) of the windows and doors. There is some debris on the north side of the garage (see photo).

Interior: On the day of inspection, the subject property was vacant. First floor walls and ceiling are mostly average condition. I noted small holes in the drywall in the living room and kitchen. One bedroom has paint and drywall in below average condition. First floor carpet has a few stains, shows some wear, and is slightly below average condition. The door to the master bedroom is missing trim.

Kitchen: Below average size (see photo). Cabinets, sink and stove are good quality and good condition. Refrigerator is average quality and dirty on the inside. Dishwasher is average quality and average condition. Kitchen floor is vinyl in below average condition.

Main Bath: Average quality fixtures in average condition. Floor is vinyl. Floor and ceiling exhibit deferred maintenance (see photo) with $2,000 estimated cost to cure.

Master Bath: Overall average quality and average condition. Light fixture is missing 3 of 6 bulb covers (see photo).

Basement: 3 bedrooms with walk-in closet. Finish about 95% complete. Excellent quality materials and condition, noticeably superior to the main floor. Bathroom with excellent quality marble tile in new condition, rough in plumbing but no fixtures installed (see photo).

Garage: The garage door opener did nothing when I pushed the button. The garage is about half filled with "stuff" that includes a motorcycle and a toilet (see photo).

Overall Condition: When comparing the subject to other properties in this market area, the exterior condition is in the top quartile (i.e., above average) and the interior condition is in the bottom quartile (below average). Interior condition issues are mostly cosmetic in nature. Subject is rated overall average condition.

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