Low Ball Appraisals

[WingZero94]

Anybody here sold their home for a perfectly legitimate price, only to have the bank come in and appraise the house low? Personally I think it is a crock of shit.

For instance my house is 3 bed 2 bath. They compared it with a 2 bed 1 bath and didn't even add extra for me having another bath - because it's in the basement. Also, quality in our house is very high. We've gutted the place and built it back up from scratch. All that hard work tossed in a one hour 'viewing' and opinion of your house.

Pisses me off.

I'm gonna appeal, but i'm not sure how yet. Anybody ran into this situation?

 

[QED]

Originally posted by: WingZero94
Anybody here sold their home for a perfectly legitimate price, only to have the bank come in and appraise the house low? Personally I think it is a crock of shit.

For instance my house is 3 bed 2 bath. They compared it with a 2 bed 1 bath and didn't even add extra for me having another bath - because it's in the basement. Also, quality in our house is very high. We've gutted the place and built it back up from scratch. All that hard work tossed in a one hour 'viewing' and opinion of your house.

Pisses me off.

I'm gonna appeal, but i'm not sure how yet. Anybody ran into this situation?

The buyer's bank? That's not uncommon anymore, and they are totally within their right.
And no, you cannot appeal-- that would be the buyer's responsibility if they were so inclined. I feel for you though...

It's also not uncommon to not include bedrooms/bathrooms/square footage in a finished basement when finding comps-- although you should get a positive adjustment over an otherwise similiar home with an unfinished basement.

Also, most appraisers (in my experience, anyways) don't give two cents about something as subjective as "build quality"-- they are there to objectively evaluate the value of your home, not do a thorough home inspection. A lot of upgrades people think should cause their home to appraise more for (such as extra nice flooring like marble or exotic hardwood, inground swimming pool, newer cabinetry, etc) don't do much, if anything at all, to increase your home's appraisal.

 

[amdskip]

When I bought my house the appraiser valued it at exactly the selling price. Sometimes you wonder if they really know what they are doing.

 

[WingZero94]

Well it's bullshit in my book now. Bunch of shit that i'm losing money because of this subjective opinion - plus the fact that they didn't even visit the other houses. WTF? We put honest work and money into something and they fuck it up because the bank got screwed on subprimes, or the appraiser is being 'objective'. This is the last time I allow a FHA loan to purchase my house. Next time they'll need at least 10% down.

 

[Slew Foot]

Ummm, unless the dude's paying 100% cash, youre going to need an appraisal one way or another.
The bank just trying to make sure some dumbass isnt paying more than what they think the house is really worth, they got burned hard before, they dont want it to happen again.

Think of it this way, if you were loaning out a pile of money to someone, would you want to make sure they were using it responsibly? Of course. Most "improvements" arent worth jack, the bank doesnt care about your new cabinets or crown moudlings or whatever.

 

[HannibalX]

I helped sell some friends home in 2007. When the property appraiser came out she was there literally all of ten minutes.

Later a home inspector came out who also does appraisals. His inspection took about an hour and he spent about 15 minutes with the buyer going over things. I talked to him about what the appraiser lady and he says she undervalued the house (he had a copy of her report).

 

[JoeyM]

The bank appraisal is based upon what other, similar houses in the neighborhood have sold for. It is a comparison of only the most basic similarities (size and neighborhood). My house, with a great property and loads of upgrades, will be compared to a house in my neighborhood that sold for a lowball price, on a terrible lot (down a cliff!), with just the basic necessities. It's not really fair but that's the way it is. It's in the banks interest to error on the low side with the economy the way it is now.

Joe M.

 

[spacejamz]

I wouldn't get too worried about appraisal values since they just guidelines anyway...

It is a matter of what prosective buyers who actually come out to view your house and other similar properties in the area think to make sure your asking price is in line. If they think your upgrades and build quality is higher, they will speak with their wallets.

BTW, how much difference is there between your appraised value and your assesed value? or how about the difference between that and zillow.com?

 

[WingZero94]

well i'm about zillow by about 12k (appraised). I just think that this is why people put crap upgrades and cut corners on their houses. Because some shithole down the street sells low and then it's used for a basis of comparison to yours. Yours has a kitchen and so does theirs. It doesn't matter if they are cheap 1940's cabinets and avacado appliances.... What a bunch of shit.

We are appealing today and hopefully will get an increased value.

 

[alkemyst]

Originally posted by: WingZero94
Well it's bullshit in my book now. Bunch of shit that i'm losing money because of this subjective opinion - plus the fact that they didn't even visit the other houses. WTF? We put honest work and money into something and they fuck it up because the bank got screwed on subprimes, or the appraiser is being 'objective'. This is the last time I allow a FHA loan to purchase my house. Next time they'll need at least 10% down.

unfortunately many are thinking their homes are worth much more than they are right now.

What was the value of your home in 2003-04? How long have you lived there? what is the average home in your neighborhood worth?

My brother's home in Louisiana was priced out of the market. It was custom built in a nice gated community there. Average home was about $200k at the time (3-4br/3-4bth/2-3 gargage)...his was easily valued at $300k+...most it could muster was $215-225k appraised. It was only about 2 years old when he sold it. The fence alone was $20k.

 

[WingZero94]

Originally posted by: alkemyst

Originally posted by: WingZero94
Well it's bullshit in my book now. Bunch of shit that i'm losing money because of this subjective opinion - plus the fact that they didn't even visit the other houses. WTF? We put honest work and money into something and they fuck it up because the bank got screwed on subprimes, or the appraiser is being 'objective'. This is the last time I allow a FHA loan to purchase my house. Next time they'll need at least 10% down.

unfortunately many are thinking their homes are worth much more than they are right now.

What was the value of your home in 2003-04? How long have you lived there? what is the average home in your neighborhood worth?

My brother's home in Louisiana was priced out of the market. It was custom built in a nice gated community there. Average home was about $200k at the time (3-4br/3-4bth/2-3 gargage)...his was easily valued at $300k+...most it could muster was $215-225k appraised. It was only about 2 years old when he sold it. The fence alone was $20k.

Well that's good to hear that i'm not alone. The house was in disrepair 2 years ago when we purchased it. Lawn was toast, house had never been updated and it was in bad condition. We spent the better part of 2 months gutting it and replacing EVERYTHING. The area is nice - in fact the house next to me sold for about 35k more than my asking price.

Apparently the appraiser is willing to look at additional comps and perhaps revise the number. We will see today hopefully.

 

[alkemyst]

when did that house sell?

Also just because a home sold for X dollars even in the same neighborhood doesn't make it a comparable necessarily.

 

[Homerboy]

Originally posted by: WingZero94
well i'm about zillow by about 12k (appraised). I just think that this is why people put crap upgrades and cut corners on their houses. Because some shithole down the street sells low and then it's used for a basis of comparison to yours. Yours has a kitchen and so does theirs. It doesn't matter if they are cheap 1940's cabinets and avacado appliances.... What a bunch of shit.

We are appealing today and hopefully will get an increased value.

Funny those 1940s cabinets are likely better than anything you can buy today
If that's what their bank appraised it for then find some new buyers. Welcome to today's market.

 

[WingZero94]

Originally posted by: alkemyst
when did that house sell?

Also just because a home sold for X dollars even in the same neighborhood doesn't make it a comparable necessarily.

House sold about 6 months ago. It too has 3 bed 2 bath. It has 1.5 garage where I have 1. But they compared me to a 2 bed 1 bath with 2 car garage....

 

[WingZero94]

Originally posted by: Homerboy

Originally posted by: WingZero94
well i'm about zillow by about 12k (appraised). I just think that this is why people put crap upgrades and cut corners on their houses. Because some shithole down the street sells low and then it's used for a basis of comparison to yours. Yours has a kitchen and so does theirs. It doesn't matter if they are cheap 1940's cabinets and avacado appliances.... What a bunch of shit.

We are appealing today and hopefully will get an increased value.

Funny those 1940s cabinets are likely better than anything you can buy today
If that's what their bank appraised it for then find some new buyers. Welcome to today's market.

Well we have custom built birch cabinets. My brother in law owns a cabinet shop her in town. They are much better than anything we've seen in the price range.

 

[Exterous]

Originally posted by: Homerboy

Originally posted by: WingZero94
well i'm about zillow by about 12k (appraised). I just think that this is why people put crap upgrades and cut corners on their houses. Because some shithole down the street sells low and then it's used for a basis of comparison to yours. Yours has a kitchen and so does theirs. It doesn't matter if they are cheap 1940's cabinets and avacado appliances.... What a bunch of shit.

We are appealing today and hopefully will get an increased value.

Funny those 1940s cabinets are likely better than anything you can buy today
If that's what their bank appraised it for then find some new buyers. Welcome to today's market.

Might be a bit tough in this market. My wife and I are currently looking for our first house and - in our area- its insane. Of the 13 houses we've looked at only 1 has had any offer placed on it in the last 2 months

 

[Vic]

The buyer's bank's appraiser works for the buyer's bank. His appraisal is for their purposes of making a loan. You don't like it, tell your buyer to find a new bank or to come up with the difference in his own cash, or you find a new buyer. The seller has ZERO rights to appeal, especially in this market. From the bank's and the government's perspective, you'd be trying to screw the buyer with an above-market price. I'm just telling it like it is.

And a couple of my own remarks about some comments in this thread:
- Below grade (basement) improvements do not have the same value as above grade improvements. Rule of thumb is 50%. From the OP's description that 1/1 of his 3/2 are below-grade, it would be a standard requirement for the appraiser to use at least one 2/1 comp in order to properly bracket value.
- Quality is factored into the equation, but there is a limit to adjustments and if you're overbuilt for your area, then you're overbuilt. Simple as that. Sorry, you're not going to get value for your gold-plated cabinets if you're the only one in your area who has them.
- An RE appraiser is NOT an inspector. That is not his job. His walk-through of the house is solely to take measurements and look for noticeable deficiencies that could effect market value. The majority of his work occurs away from your house, researching sales records, driving out to the comparables, and preparing the report.
- Appraisal values are professional opinions, yes, but they are NOT 'guidelines' for the lender's purposes. Except that subsequent underwriting review might question the appraisers' work and his value and make it even lower (but never higher), that number is otherwise fixed in stone for the lenders' purposes.
- Zillow is worthless.

 

[spidey07]

You can't really count the bed/bath in the basement unless very specifics are followed - like windows in the bedroom, walkout, etc.

Whoops, vic already covered this.

 

[Vic]

Originally posted by: amdskip
When I bought my house the appraiser valued it at exactly the selling price. Sometimes you wonder if they really know what they are doing.

The appraiser was, by law, provided with a copy of the sales agreement by the lender when they ordered the appraisal. Provided that everything was in order, and the sales price was supported by the comps, then it only makes sense that his value and the sales price would be the same. Think about it for a moment before you criticize, eh?

 

[WingZero94]

Originally posted by: Vic
The buyer's bank's appraiser works for the buyer's bank. His appraisal is for their purposes of making a loan. You don't like it, tell your buyer to find a new bank or to come up with the difference in his own cash, or you find a new buyer. The seller has ZERO rights to appeal, especially in this market. From the bank's and the government's perspective, you'd be trying to screw the buyer with an above-market price. I'm just telling it like it is.

And a couple of my own remarks about some comments in this thread:
- Below grade (basement) improvements do not have the same value as above grade improvements. Rule of thumb is 50%. From the OP's description that 1/1 of his 3/2 are below-grade, it would be a standard requirement for the appraiser to use at least one 2/1 comp in order to properly bracket value.
- Quality is factored into the equation, but there is a limit to adjustments and if you're overbuilt for your area, then you're overbuilt. Simple as that. Sorry, you're not going to get value for your gold-plated cabinets if you're the only one in your area who has them.
- An RE appraiser is NOT an inspector. That is not his job. His walk-through of the house is solely to take measurements and look for noticeable deficiencies that could effect market value. The majority of his work occurs away from your house, researching sales records, driving out to the comparables, and preparing the report.
- Appraisal values are professional opinions, yes, but they are NOT 'guidelines' for the lender's purposes. Except that subsequent underwriting review might question the appraisers' work and his value and make it even lower (but never higher), that number is otherwise fixed in stone for the lenders' purposes.
- Zillow is worthless.

All good points Vic.

We asked the appraiser to have a look at a few different comps in the area. For example:

2/1 that sold 6 months ago for 125k. $156 sq ft. (Actually backs onto my property). Condition was good - notably not as nice as ours.

He has us down for $132 sq ft and didn't use that comp (probably because it was not in the MLS as it was FSBO).

So naturally I asked him to use that one as we have 200+ more square feet, one extra bedroom and bathroom and a covered porch. Not to mention the higher quality.

Hopefully he'll be willing to up the price. I know he doesn't have to, but heres to hoping. He seemed willing to have a look at them, so we'll see.

 

[squirrel dog]

Pay for your own independant appraisal .

 

[WingZero94]

Originally posted by: squirrel dog
Pay for your own independant appraisal .

I'd be willing to do that, but i've heard that the bank won't take them.

 

[SpiderWiz]

Originally posted by: amdskip
When I bought my house the appraiser valued it at exactly the selling price. Sometimes you wonder if they really know what they are doing.

Same here.

 

[squirrel dog]

I'd be sure and check that out as it varies from area to area . I sold my home as a fsbo in 1994 (Louisiana)and the biggest mistake I made was not getting it appraised . I left it to others out of ignorance and me being cheap . A low appraisal would be a staring point for me,not an end point , if you understand.

 

[Vic]

Originally posted by: WingZero94
All good points Vic.

We asked the appraiser to have a look at a few different comps in the area. For example:

2/1 that sold 6 months ago for 125k. $156 sq ft. (Actually backs onto my property). Condition was good - notably not as nice as ours.

He has us down for $132 sq ft and didn't use that comp (probably because it was not in the MLS as it was FSBO).

So naturally I asked him to use that one as we have 200+ more square feet, one extra bedroom and bathroom and a covered porch. Not to mention the higher quality.

Hopefully he'll be willing to up the price. I know he doesn't have to, but heres to hoping. He seemed willing to have a look at them, so we'll see.

Well, it sounds like he's a decent appraiser at least. Nobody likes a low-ball appraisal, trust me on this. Your buyer's loan officer is probably just as upset as you are about this. The worst are what I call a "hit-and-run," where the appraiser comes back with an obviously bad value (and unsupported too high is worse than a lowball even, because underwriters just throw those right in the proverbial trash can) and then you're lucky if he returns your calls, much less does anything about it.