Obviously there is an error somewhere. You won't know what is until you see the appraisal. It could be as simple a missed decimal point somewhere or it could be as dispute as to what qualifies as a "comp." In the meantime, you probably want to call the lender and find out what there process is for disputing it.

Just my thought, it could also be that since the first appraisal the comps went down because a neighbor of few lost their home?

What your neighbors do affects the value of your home. Our home lost $20,000 in value in the last 3 months because two homes in our neighborhood went into foreclosure.

Also, maybe that 1000 square feet... it is rare that being the owner of the biggest house on the block is a good thing for the owner until the neighbors catch up.

My appraisal is down about $200k from two years ago! It may be that your first appraisal was done at a time when we were at the top of the housing bubble, and the new one reflects the harsh reality of today's market. Have you looked at what the appraised value is according to the locality that assesses your property values? Or have you looked at what the market value is for it according to zillow.com?

well, we got the appraisal back and what the appraiser did was use five comps, all ranging from between 1,000 square feet and 1,500 square feet smaller than our house, then he used a cost adjustment factor of only $10 per square foot for the difference in size. The comps were valued at between 95 and 135 dollars per square foot so I don't how how he came up with $10 per square foot but it really screwed us over. The comps were similar in construction to our house.

Our area hasn't been affected by the housing bubble as bad as many other areas and it actually said that in the appraisal, that REO properties have not negatively impacted our market.

My thinking is that he simply needed to use larger comps if he was going to only use $10 per square foot for the difference. There were bigger comps available, not quite as big as our house but within a couple hundred square feet.

It's just nuts to say that a 3200 square foot home is only worth $15,000 more than a similarly built 1700 square foot home on similar acreage. Know what I mean?

smr1-
With those additional facts, I think you have good reason to be annoyed. There is no way he can call those other houses "comps" even with his adjustment factor. They're not just smaller: when the difference in size is that great, they're different types of houses. That's like saying you can estimate the value of a Cadillac by pricing an Edsel and scaling it up by 10%.

I had a unique, 3400 square foot home that was difficult to compare to other homes in the area, but our appraiser managed to come up with 4 comps that were within about 100 sq ft of the size of our house and whose characteristics were such that I felt the comparison was fair.

I'd insist the appraisal be re-done with appropriate comps. I don't believe what he did is consistent with professional appraisal practice. He sounds lazy and incompetent to me.

My friend in Real Estate says that she often has to ask the bank for permission to use a larger area for comps, because we are semi-rural and there have not been a lot of sales. So if you're in such an area, the appraiser may have used just too small an area to look for comps. In our area, the comps are for very similar houses in similar neighborhoods, but it's probably a 10 mile-radius she can use. If you were in the city, you'd be far more limited to a small neighborhood.

You need to call the bank and find out more about how to get a second opinion, at least that is what I would be doing.

Is it possible, as someone suggested, that they missed a decimal and should be using $100/sq foot?

Good luck!

thanks for the input everyone, I'm just happy you all didn't tell me I'm crazy for being upset! My husband called the appraiser and he (appraiser) got sort of defensive but couldn't really justify the $10/ft. We are in a very rural area so maybe he should have looked further for comps.

And kudzu9, that is EXACTLY what I was thinking, the houses aren't even the same. So what happens if a 5,000 square foot house is being appraised? Are they going to say the first 2,000 square feet are worth $200,000 and the rest is worth 10/foot? So $230,000?

Or what if a 5,000 square foot house sells for $500,000? Does that mean we can just subtract $10/foot for the difference to comp it to my house? LOL!!! So mine is worth $500,000 minus $18,000? $482,000? Good grief...

This formula might be okay for houses close in size, but when there is a big size difference coming into play, it just doesn't even make sense. My husband tried to argue that with the appraiser but he couldn't even argue with him.

The bank is reviewing it, I hope that they can see our point!!!

smr1-
As a veteran of dealing with bureaucracies, I suggest that you and your husband consider drafting a short, polite letter pointing out the defects of the appraisal, and hand deliver it to the bank. Close the letter with an action-forcing statement, such as: "We look forward to hearing from you at your earliest convenience on what steps will be done to ensure that the appraisal is based on more valid comparison houses so that it reflects the true value of our home." By staying polite, but putting it in writing, it makes it more difficult for the bank to avoid dealing with it. It also sounds like it would be best to lay the problem directly on the bank, because the appraiser may be feeling embarassed and you probably won't get cooperation out of him by direct contact. Good luck.

Just so you know you aren't the only one.....

We are refinancing now since the rates are so low. We just got the appraisal back. The comps they used had a price per square foot ranging from $189 to $247.

Want to guess what their appraisal came in at for us? $144.

On our 2,400 sq ft house, that is over 100k difference to the low end and almost 250k to the high end. Fortunately we have enough equity in the house that this won't effect the refinance, but if I was trying to sell right now, I would be hopping mad.

That stinks.... we are hopping mad too. I called a friend yesterday who worked for a large builder and asked her what she thought my house was worth and she right off the bat she said $350k. How can these appraisals be so far off?

In our case, the appraiser told my husband that since the comps were all 1800 to 2200 square feet, that our house is overimproved for our area and the extra 1200 square feet is basically worthless (thus the $10 per square foot number). But then another appraiser told me that since there are several much larger houses (similar in age) in our immediate area, our house is NOT overimproved. Just because none of them have sold recently doesn't create an overimprovement problem for our house and the appraiser should have looked further than 10 miles or further back than six months for comps and adjusted accordingly.

Unfortunately for us, our appraisal was $10,000 too low for us to refinance, we got the letter yesterday that we have "insufficient collateral". We are just beyond angry.

To catch the dropping rate, we refinanced our mortgage twice since last year. We had on-site appraisals done by two "good, experienced" appraisers.

The first report said that we had a 4500 sq. ft house. In fact, it is below 3000 sq.ft. The 2nd report said that our lot was 1/4 acre; in fact it is 2/3 acre. The comps they used were not even close (distance wise) to our neighborhood.

Since our loan to value ratio is very small, we got the loan with the rate we wanted. But it made us wonder how much we can trust the two "good, experienced" appraisers if they cannot even do basic measurement.

Why not apply to another bank that uses different appraisers? They may come up with a completly different number. You are not beholden to refinance with the bank that holds your original mortgage.

Having just gone thru an appraisal 2 weeks ago for a refi, i can tell you that sometimes the appraisers are incompetent...I asked him what he had as comps, and he said he was using homes 1 mile away!!! I said what about the homes that sold in MY neighborhood in the last year(some as recent as 1 month ago)..He replied he hadn't seen those!!!
He was measuring the size of my home with a tape measure that was eyeballed from about 20 ft from the house, while one end of the tape measure was held down with a screw driver..
I also mentioned the size of the lot, which he had wrong..
So, while he was doing his "job", i logged on the web, and downloaded the actual plot plan/home plan from the builder's website..I made him a copy of my survey, and handed him the comps of 3 homes that sold recently AND the listing from a home currently on the market for more then i thought our home would conservatively appraise at..

When we 1st spoke about the current appraised value of my home i gae him a figure and he was of the opinion it would be difficult to get there!!! After all the data i provided, my appraisal came back HIGHER then what i thought it was...

appraisal, isn't there a way to challenge it? what does the law say?
this is such a scam, we refi'd and the bank sent an appraiser, she came in through the front door and took one photo of the kitchen then went out and looked at the back and DONE, 450$, sheesh I wish I made that kinda money.
the # came back 9k below zillow.

Just a sampling of the craziness from my appraisal....

The only comparably sized home they used in the appraisal sold for +$170k more than they valued our home at. To justify the difference, they listed a ($150k) difference for land value. Their lot is a whopping +0.02 acres larger than ours. That works out to $7.5 million per acre. I wish!

This happened to me 20 years ago, but I was trying to refin then (to get out of my adj. rate mortgage which was up to 11%!!) to the current fixed rate of 7.5%--but I was turned down because the appraiser said that I was in a "manufactured" home and the bank wouldn't 1) give a mortgage on a "manufactured" home and 2) wouldn't listen to my true assertion that it was NOT a manufactured home and the appraiser was way wrong!

It was an old place on a pile/post foundation, and roughly the shape of a mobile home--but it had been created out of 2 old marine barracks (I didn't tell the bank that part!)

Just a follow up....

My lender didn't accept the first appraisal. They said the comps used weren't actually comps and ordered a second appraisal. This pushed back my refi a week.

The second appraisal was moderately higher than the first, but the bank has accepted it. The appraiser couldn't decide what some of my rooms were and told me he was going to pull some comps and then label the rooms to match what was more common in the area. Depending on what he found, my house would have 4-6 bedrooms with the 2 questionable "bedrooms" being an office and a second living room. What??? The comps he used were at least closer in size to mine, but the geography was really questionable. I live right downtown in medium sized city. Some of the comps were over a mile away. That is fine in the suburbs, but in an urban area, that is nuts. A mile and a half could be the distance from a million dollar high-rise condo to a run down shack in the "wrong part of town."