appraiser's comps, determination?

kirkhallMay 25, 2012

Hi all, I realize this may be a little out of place, but am hoping to find some appraisers on this board.

We are trying to refinance to take advantage of lower rates and do some work on our house (so a cash out refi). We had our appraisal done, and it came back shockingly low. This wasn't because our values have declined that much... but due to a relatively low number of comparables.

So, he picked 4 comps, all smaller than ours, and 2 additional ones that are listed on sites as shortsales or bank owned. The 2 listed in other places as shortsales he acknowledged in the report as "being listed as fixer uppers on the MLS" but he didn't say they were actually shortsales. And, 2 of the 6 total were only pending sales, not solds.

So, because of size, our house is more closely valued at the fixer/shortsale value per square foot (but I am told appraisers don't look at that value).

So, is it routine for appraisers to use short sales in their comp data without adjusting for it (he adjusted slimly for changes in sq ftage for example; and # of bathrooms. Is there not a similar adjustment for short sales)?

Our area isn't laden with short sales. It is a fairly stable neighborhood where houses are selling, though not many are for sale. So, there is a paucity of comps.

What can I do to "fight" the appraisal? Does that actually work?

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jane__ny

What area/State are you in? We've been shopping for a house in Florida which has a lot of short-sales/foreclosures. We've had 2 appraisals done and neither used short sales nor foreclosures. We objected to one appraisal which included an active listing (made no sense to me) but we didn't follow through because we had other problems with the property.

I suppose you could pay for another appraisal or complain to the bank.

Sorry, couldn't be more helpful,
Jane

    Bookmark   May 25, 2012 at 11:54PM
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kirkhall

We are in Washington, near Seattle.

    Bookmark   May 26, 2012 at 12:09AM
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live_wire_oak

Short sales and bank owned properties ARE your comps. They are the "solds" that establish the overall values. You cannot say that your home is "worth" more than what is selling, even if there is not much for sale. There is no "fighting" a bank about an appraisal. They cannot cherry pick an appraiser to bring them back a certain number anymore. All appraisals must be at "arms length".

This isn't the smart time to do a cash out refi for any home project. If the house needs work, it should be done on a cash purchase basis with the savings that you will realize from the lower mortgage rate. Accept the appraisal for the refi, get the lower note, and move on. There are only two appraisals that really matter in the life of your home. One has to do with the taxes you are assessed, and the other has to do when you go to sell the home.

    Bookmark   May 26, 2012 at 11:23AM
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kirkhall

We have 400 sq feet of unfinished true second story space to finish out. When we are finished, we will have increased our square footage by 30%. For us, it makes sense to do the cash out, even if for the average homeowner it might not (I could see not taking cash out for improvements without additional square feet. This is an addition to the house that is already here, just needs to be finished).

We would rather take the cash out now, and use it to refinish (at this nice low rate) than to pay cash for it, and refi at the end when the rates might be higher. Though, I am not sure they will actually go up that much in the next year...

Thoughts?

    Bookmark   May 26, 2012 at 12:55PM
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chispa

The problem with these "arms length" appraisers is that they now get selected from a "random" pool of appraisers, many of which come from areas that are pretty far away from the subject property. They don't know the towns and why one street is worth more than others. We recently refinanced and if we decided to sell today and price the house at the appraisers number we would be giving away about $500K. We went from one bad appraisal system to another with its own flaws.

    Bookmark   May 26, 2012 at 1:09PM
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c9pilot

Don't even get me started on appraisers.
Here in FL, distressed sales are not supposed to be used as comps. Because of the very low number of recent sales, our latest appraisal last year, did list a few extra homes, including distressed, in the appraisal package; they just weren't used for the comp. She also threw out a normal sale for a normal home that sold for quite a bit above the norm ($460K - quite a bit less than 2008 prices - vice average prob $350K). There was no justification for throwing out this sale, the latest one, just an arbitrary throw-out. Also one of the short sales would have helped our appraisal because it was about $30K higher, but couldn't be used.

    Bookmark   May 29, 2012 at 3:37PM
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kirkhall

He just did an awful job of actually doing his job. He didn't look into anything. And, now, I get to do his work for him. I will only hope that my comps are reasonable enough for him to "admit he was wrong" and adjust the appraisal. I think I will be really lucky though to get this "Ken" to accept he was extremely low. (I am calling him Ken because he looked just like Ken of Ken/Barbie... that is what I am up against.)

    Bookmark   May 29, 2012 at 5:26PM
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jane__ny

Good luck, never got either of them to admit a mistake. Somehow, they justify their numbers with a lot of other numbers. Its really a 'crap-shoot.'

Jane

    Bookmark   May 29, 2012 at 10:29PM
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kirkhall

Literally the house behind or next to the house he used which is really bringing down our numbers sold for 100K more just a month previous. I don't know why he didn't use THAT one (or why it was omitted). It is the exact floor plan, in reverse. But, it wasn't a "hoarder's house painted green and red with red shag carpet that smelled and with pictures glued to walls and appliances." (That is what the listing agent said about the low ball house). He took every low house he could find, including 2 pendings instead of actual solds.
Grr.

    Bookmark   May 29, 2012 at 11:31PM
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brickeyee

If there are a lot of foreclosure in the area the bank is NOT going to get as good a price it they foreclose on you.

The bank wants to know what THEY are going to get if they foreclose.

    Bookmark   May 30, 2012 at 10:55AM
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kirkhall

from his appraisal:
REO are not � a driving force in value for the subject�s neighborhood.

    Bookmark   May 30, 2012 at 12:20PM
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kirkhall

We had nothing to lose (no out of pocket costs or anything) to have the bank request a review of the appraisal.

We had to provide the bank with at least 3 additional comps in our neighborhood that sold in the last 6 months, ideally 3 months (I provided 5 or 6). We had to include in our letter, as completely as possible, any errors we found.

Well, our appraisal evaluation came back (took about 1 month instead of the 3 days the first one took). He raised our valuation by 40,000. Which puts it to within 5000 of what I had told the bank I thought it was worth based on an appraisal from 2009.

I am shocked, but very thankful. We will sign all our documents in the next week.

    Bookmark   June 27, 2012 at 4:05PM
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jane__ny

Wow, good job!

Jane

    Bookmark   June 28, 2012 at 12:07AM
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