Appraisal came in 1542 sq ft short!

joannacaOctober 28, 2009

What the heck?! Our bank did the appraisal last week and we just got the results. The house we put an offer on is 3162 square feet. The appraisal says it's 1620 sq ft.

We have 2 days left on our 10 day 'inspection period' before we lose our $10,000 earnest money. The bank has promised to get back to me today about the discrepancy. The only possiblity I can come up with is that for some reason the appraiser didn't include the basement in the square footage. The basement is heated, and covered in linoleum. There is a bedroom and bathroom down there but neither is included in the appraisal. Any clues?

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susana_2006

I've heard that in many localities, the basement (even a finished basement) is not included in the square footage.
My home has a walkout basement and I'm not sure that it was included. Sometimes I've seen basements with bedrooms described as "non-conforming" bedrooms. Was the square footage listed in the contract. You can call the city/county assessor and ask for the official square footage.

I'd get the earnest money back first & have the realtor say that you may need to renegotiated the purchase contract.
Good luck
Susan

    Bookmark   October 28, 2009 at 5:37PM
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artemis78

Where are you located? In some areas (e.g., many California cities) basements or additions without permits aren't counted as livable space for various reasons, and thus might not be included in the square footage. I'd guess that they're not including the basement rooms; the key is to find out why not, if you can change that, and if it matters as far as closing on your loan. (If it doesn't, then I wouldn't worry about it; you know the space is there, and so will the next buyer. If it's unpermitted, though, you could potentially adjust your offer, since in some areas you may be required to correct any code issues, etc. with the space if you do future work on the home or if the city/county becomes aware of it.)

    Bookmark   October 28, 2009 at 5:37PM
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joannaca

Good idea about calling the City. I'll do that tomorrow. They're closed for the day already. The house was listed with 3162 sq ft and that is part of the contract.

What complicates things is that the house had scads of buyers interested in it and we only got it because the first buyer dropped out. It was on the market all of 2 weeks. I'm pretty sure the seller won't be too motivated to renegotiate with us. I'm more concerned about code violations or something that could cost us a huge amount of money to fix.

    Bookmark   October 28, 2009 at 5:49PM
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susana_2006

Did the bank appraisal come in at the same price as your purchase offer? That's the big question, because using basement square footage is really local custom. But if the bank won't loan you the amount you need for the house, then you need to get the earnest money back. Usually when a home is listed, there is some disclaimer about buyer verifying official dimensions because the information is deemed reliable, but not guaranteed.
Good luck
Susan

    Bookmark   October 28, 2009 at 6:06PM
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calliope

I've had some big surprises with supposedly appraised or title searched homes where the entities involved didn't do their job from square one and just depended on what they saw written on a former deed or description. I got out of one contract when something about it just kept nibbling at me. Drove over to the property and crunched some numbers and determined the house they were selling didn't sit on the property they owned. roflmao. Then went knocking on doors on that road and found out the real estate had been in limbo for years. Had another home title seached and after the sale found out there was a small lien on it my attorney missed. And it was a lien by the same bank who held the original loan and whom I was mortagaging it through. The bank conveniently 'found' it after I closed. They ate it too. LOL.

If your state has an auditor's website do a property search, it'll give you the description of the house's footage and lot size. You can do that 24/7

    Bookmark   October 28, 2009 at 8:08PM
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brickeyee

"The house we put an offer on is 3162 square feet. The appraisal says it's 1620 sq ft. "

You need to see the appraisal to determine where the discrepancy is.

With the tightening of appraisal standards, below grade square footage is rarely counted (local custom or not, the feds set the standards for conforming mortgages).

What is even more important is the value assigned by the appraiser.
If the valuation is enough for the bank to approve the note, you do not really care what the square footage is.

I just had a refinance appraisal come in more than $60,000 under the house next door that sold less than 4 months ago.

Out of town appraiser under the new 'arms length' rules that did not do their job.

Since the value was still more than needed for the refinance it was fine.

    Bookmark   October 28, 2009 at 8:55PM
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cordovamom

I've lived in and purchased homes in several states...none of those states counted below grade space in the square footage of the home, whether finished or unfinished basement space. The important question is did the house appraise for what you're paying for it? If it didn't then you certainly have room for renegotiating. If it did appraise then maybe not. I've looked at many homes that I felt were misrepresented by including basement square footage in the listing. There's a big difference,almost 1600 square feet, in your instance, we're not talking a 100 sq feet or so. This is something your realtor should have alerted you to, the fact that the seller was including below grade space in the square footage.

    Bookmark   October 28, 2009 at 9:36PM
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dave777_2009

The majority of homes which are sold by RE A; (and not FSBO) - obtain the square footage of the listing - by use of the County Tax Records.

It is highly doubtful, and would be extremely unusual - if the RE A had gone thru the house measuring - and then put that sq footage into the listing. Or used the sq footage which the seller is saying: "I think its this..."

It is much less time - to just list what the COUNTY states the square footage is. Then - that sq footage - also includes the disclaimer that any potential buyer should verify.

And the reason for the above is to protect all parties involved; and keeps the RE A; from increased liability. The county is supposed to have the official records.

    Bookmark   October 29, 2009 at 11:53AM
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joannaca

The bank's appraisal came in at exactly our purchase price. I called the county tax assessor and they have the house recorded at 3162 sq. ft.
So, I guess we don't have anything to worry about?

    Bookmark   October 29, 2009 at 12:57PM
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pamghatten

Correct, you have nothing to worry about. Mortgage appraisals do not consider basements as living areas to include in the square footage.

Too bad the county does, that probably just increases the taxes you have to pay.

    Bookmark   October 29, 2009 at 2:20PM
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joannaca

The appraiser finally called back and confirmed everything said here. I never heard of this, but apparently it is part of the federal regulations that were written back when Fannie Mae was created so all houses would be appraised using the same criteria. Below grade sq footage is not considered living area, although it contributes to the home's value.

Now, why didn't our realtor know any of this?

    Bookmark   October 29, 2009 at 3:13PM
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ncrealestateguy

dave777,
Your generalization that most agents do not measure thier listings is just not correct... at least here in Charlotte, NC. As a matter of fact, it is against regulations to take measurements from the tax records. I find discrepancies all of the time form comparing my measurements to what is in the tax records.
And guys, again, you are also generalizing that all areas do not count basements as living space. As long as the space is finished to the same quality as the rest of the home, it is given the same value. We have many lakefront homes here, built on slopes with full walkout basements. These basements are still counted as sq. ftg. living areas in the appraisals.

    Bookmark   October 29, 2009 at 7:47PM
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creek_side

These basements are still counted as sq. ftg. living areas in the appraisals.

And by the tax man.

    Bookmark   October 29, 2009 at 8:16PM
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ncrealestateguy

Per the other poster, even in areas that do not count basements as HLA in appraisals, the county still does.

    Bookmark   October 30, 2009 at 7:05AM
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logic

"As long as the space is finished to the same quality as the rest of the home, it is given the same value."

Not in New Jersey, unless it is a walkout basement....and except for tax purposes.

    Bookmark   November 1, 2009 at 3:30PM
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chrisk327

In NY although it adds to taxes, certianly not 1:1 with the rest of the house.

Generally when selling a house in lower NY, the basement is kind of like a bonus. Definatley not valued the same way as the rest of the house.

    Bookmark   November 2, 2009 at 2:22PM
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brickeyee

Tax assessments have a very limited relationship to loan assessments.

The rules for conforming mortgages are set by the feds, the rules for tax assessments are set by the community.

They may or may not agree.

    Bookmark   November 3, 2009 at 9:50AM
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loves2read

and you could certainly still be buying a home that has issues with renovations done w/o required permits...
hope you had a quality home inspection in addition to the appraisal for mortgage purpose

    Bookmark   November 4, 2009 at 12:39PM
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graciebear34_aol_com

1542 square feet of the home is definitely part of the basement (considered below grade and should be listed on appraisal-however on a seperate line right below above grade and will contribute to value).

    Bookmark   March 24, 2011 at 2:07PM
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Dragontree

Scads of interested buyers or not, you made a mistake putting down that much earnest money. I have seen $500,000 homes where the buyer put down $1000. Hopefully your money is not tied up too long, but it could be.

I think you've gotten good advice. I routinely see ads for homes that advertise "3000 feet of living space" - these usually include finished basements, unrecorded bonus rooms, etc. Frequently, they are NOT considered living space by appraisers.

You should definitely call the city or county to see what their records state.

    Bookmark   March 25, 2011 at 7:47PM
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badgergrrl

I hope the money's not still tied up - the original post is almost a year and a half old....

    Bookmark   March 25, 2011 at 11:17PM
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