Real Estate Appraisal Forum

appraisersforum.com logo
The Premiere Online Community for Real Estate Appraisers!
 Fastest Way to Find a Real Estate Appraiser Enter Zip Code:
 
 
Go Back   Appraisers Forum > Other Forums > Ask an Appraiser
Register Help Our Rules Calendar Archives Mark Forums Read


Closed Thread
 
Thread Tools
  #1  
Old 05-04-2012, 10:18 AM
lnhp1 lnhp1 is offline
 
Join Date: May 2012
State: New Jersey
Professional Status: General Public
Posts: 3
Default Question on how adjustments are determined on appraisal

Hello. We are in the process of doing a refinance and our appraisal just came back. It was much lower than expected and once I reviewed it there are items I can't reconcile. I got the lender as a recommendation from my neighbor who just refinanced, and their home appraised at 60K more than ours and ours is more updated than theirs - we have all new appliances, new hardwood floors, our basement is finished, and we have about 300 more sqft on first floor than them). Our home would not be considered over-improved for our area.

So my questions:

1) one home that was used as a comp is on a busy street - we are on a cul de sac and all homes are noted as Nres. I pulled up our original appraisal when we bought our home, and a similar home on a busy street was used as a comp, and they put in a 58K positive adjustment. My neighbor let me look at their appraisal, and their appraiser used the same comp as our appraiser did this go around - they got a 49K positive adjustment.

2) Surprisingly our area is not plagued by short sales/forclosures. One of the other comps was a short sale/foreclosure and no credit was given and it is noted as an arms length transaction. It was sold almost a year ago, and there are closer more recent comps than this that I think should have been used. I called the realtor that we initially used and she thinks it sold for about 70K less since it was not well maintained and a bank sale. The appraisal itself notes that foreclosures are not a factor in our area.

3) All homes have a negative adjustment for market timing. The report states that he did a lookback, and is stating that the prices have further dropped 25% in the past few months. The realtor gave me the list of sales for the past 6 months, and here is where I am stumpped. There were three high end homes sold in Nov (845K-1.2mill) and then a sampling of other homes. Then in Jan and Feb there were no homes over 700K sold, but two homes for 60K and 80K( super tiny camp homes) . If I take out the extremities from both times, I come up with average prices increasing 6%. So it seems that by having the higher end homes sell in one period and then having the two low end homes sell in the next period it is really throwing off the %. Our area has a few small lakes/ponds and on one there are older camp homes and trailers - and the rest of the town are typical homes, with pockets of high end homes mixed in. It is a smaller town, so there are not hundreds of sales each month.

The adjustments made to our home were in the range of a negative 20K-50K for market timing.

So my question is shouldn't the extremities be taken into account when calculating the sales trend? The realtor said that the home prices are generally stable for 3 to 4 bedroom homes. Only the higher end homes over 4000K sq feet are starting to decrease since a more just came on the market and there are generally not as many buyers for those.

The cost to build came up at 110K more than the appraised amount, and then it notes that the sales approach is the most reliable indicator.

My gut told me that the appraiser is not from the area - I looked him up and he is from 30 miles away - but I realize that does not necessarily mean that he is not qualified to appraise here since I don't know the markets he deals with.

The lender gave me a reconsideration of value form to fill out so any input you can provide would be appreciate.
Sponsored Links

  #2  
Old 05-04-2012, 03:40 PM
fritzvogel's Avatar
fritzvogel fritzvogel is offline
 
Join Date: Dec 2004
Location: Albany, NY
State: New York
Professional Status: Certified Residential Appraiser
Posts: 1,628
Default

A lot of questions on a Friday, answers for Free.....maybe a Fee
__________________
FHA-HUD-VA-USDA-ERC Trained & Approved
A professional in applicants mind until value comes in low.
  #3  
Old 05-05-2012, 04:23 AM
Koya Koya is offline
 
Join Date: Feb 2008
Location: Bay Area
State: California
Professional Status: Certified General Appraiser
Posts: 43
Default

Following are generic comments which might not be applicable if given more data:

1) A busy street vs cul-de-sac adjustment is usually real, but the quantity is variable depending on area. In my area, I might use $30-200K depending on specifics. Not using any is possibly supportable, though perhaps unusual.

2) If your area does not have a high percentage of distress sale situations, then it's possible it may not see much if any adjustment for those factors. A condition adjustment for the sale you mention might be more appropriate than any distress sale adjustment. In other words, distress sales might not affect your market enough to warrant a specific adjustment, but specific and quantifiable condition issues would generally do so. The problem here is that condition is arguably more subjective.

3) A 25% time adjustment over a few months is unusual and requires some real analysis. I can't say it's not possible, for example, let's say pre- and post-catastrophe, but it certainly deserves some analysis and narrative. Without significant events and with sparse sample populations, I would be skeptical that an appraiser had reasonably considered the underlying issues.

In your case, the typical recourse is to provide alternative comparables that better represent your subject within the current time period (3-6 months). If the comparables are sparse, extreme or atypical (e.g. high value in one period, and low value in another period with a handful of data points) then it will be hard to support as it comes down to a disagreement about statistical analysis when there is limited data.

If you believe there are better comps, provide those in your reconsideration input. It will be harder to challenge the appraisers adjustments though.
  #4  
Old 05-05-2012, 09:49 AM
Marion Rhodes's Avatar
Marion Rhodes Marion Rhodes is offline
 
Join Date: Feb 2006
Location: Poconos
State: Pennsylvania
Professional Status: Certified General Appraiser
Posts: 11,270
Default

Cost does not equal value. Are they building new homes by you? If not, it could be because it's much less expensive to buy a resale then to build one.

There are some very fine appraisers in NJ. Maybe instead of talking to a sales person, you should seek the advice of a local appraiser who has the training to determine these things, as salespeople are not trained in appraising.
  #5  
Old 05-05-2012, 12:50 PM
Webbed Feet's Avatar
Webbed Feet Webbed Feet is offline
 
Join Date: Feb 2005
Location: City of Free Speech
State: Other Non-US
Professional Status: Certified Residential Appraiser
Posts: 12,190
Default

Quote:
Originally Posted by lnhp1 View Post
Hello. We are in the process of doing a refinance and our appraisal just came back. It was much lower than expected and once I reviewed it there are items I can't reconcile. I got the lender as a recommendation from my neighbor who just refinanced, and their home appraised at 60K more than ours and ours is more updated than theirs - we have all new appliances, new hardwood floors, our basement is finished, and we have about 300 more sqft on first floor than them). Our home would not be considered over-improved for our area.

Not remotely enough information about your property versus your neighbors to be meaningful to us. I doubt you could provide enough to do so. However, what makes you think the appraisal value on your neighbor's house is not a piece of garbage disguised as something meaningful?

So my questions:

1) one home that was used as a comp is on a busy street - we are on a cul de sac and all homes are noted as Nres. I pulled up our original appraisal when we bought our home, and a similar home on a busy street was used as a comp, and they put in a 58K positive adjustment. My neighbor let me look at their appraisal, and their appraiser used the same comp as our appraiser did this go around - they got a 49K positive adjustment.

You left out your question. But guessing what it is, we cannot answer. It is for those appraisers to defend their work.

2) Surprisingly our area is not plagued by short sales/forclosures. One of the other comps was a short sale/foreclosure and no credit was given and it is noted as an arms length transaction. It was sold almost a year ago, and there are closer more recent comps than this that I think should have been used. I called the realtor that we initially used and she thinks it sold for about 70K less since it was not well maintained and a bank sale. The appraisal itself notes that foreclosures are not a factor in our area.

The transaction on the comp cannot be a short sale and foreclosure both, they are one or the other. The very nature of a of "short sale" is that the property was not foreclosed.

So many working in the real estate trades, appraisers too, just cannot get the meaning of "Arms Length" correct. A transaction "not arms-length" means "Duress" as in to put a gun to someone's head, or that the parties of the transaction were in some way related such as a mother and son or two business partners. A short sale is "distressed" but could be arms length as the transaction would not necessarily involve relatives, business partners, etc. or be "Duress" such as a party forced to sell against their will by an act of physical force, etc.

A foreclosed property placed on the market by a bank may fail, like a short sale, to meet the definition of market value used for mortgage based appraisal reports. As the motivations of the banks are not necessarily market driven (as the "market" is a single family residential market not a business market), but rather are driven by business concerns. Also, many banks demand non-market typical contracts and cause buyers excessive waiting periods and uncertainty. There may be real increased risks for buyers as the foreclosed prior owners may have redemption periods or other legal rights to obtain the property back. However, a bank seller is not related to the buyer or the bank and buyer do not have guns to each others heads, right? Clearly, as banks are holding thousands of foreclosed properties off the markets, the banks don't seem very much under "Duress." So, this can be arms length, but due to the adverse factors for buyers and atypical motivations for a SFR market the bank is an atypical seller, generally this should be classed a "Distressed" sale due to all the non-market aspects involved. Perhaps the Realty trades should simply say "Non-Market" transaction referring to "REO" resales.

Again, you did not ask a question. However, the lack of recent sale date, the inferior condition, and the non-market aspects of the sale should have all been considered by the appraiser.


3) All homes have a negative adjustment for market timing. The report states that he did a lookback, and is stating that the prices have further dropped 25% in the past few months. The realtor gave me the list of sales for the past 6 months, and here is where I am stumpped. There were three high end homes sold in Nov (845K-1.2mill) and then a sampling of other homes. Then in Jan and Feb there were no homes over 700K sold, but two homes for 60K and 80K( super tiny camp homes) . If I take out the extremities from both times, I come up with average prices increasing 6%.

I suspect your data array is vastly too small to be attempting an assumption of a time adjustment.

So it seems that by having the higher end homes sell in one period and then having the two low end homes sell in the next period it is really throwing off the %.

You did not post the appraiser went into that kind of detail. So I must take it you are assuming the above instead of knowing it.

Our area has a few small lakes/ponds and on one there are older camp homes and trailers - and the rest of the town are typical homes, with pockets of high end homes mixed in. It is a smaller town, so there are not hundreds of sales each month.

Just my point.

The adjustments made to our home were in the range of a negative 20K-50K for market timing.

So my question is shouldn't the extremities be taken into account when calculating the sales trend?

You are trying to "play appraiser." We cannot answer you as appraising is market driven by specific markets when it comes to such things. Only the real estate professionals local to your market can answer you.

The realtor said that the home prices are generally stable for 3 to 4 bedroom homes. Only the higher end homes over 4000K sq feet are starting to decrease since a more just came on the market and there are generally not as many buyers for those.

Many people say many things.

The cost to build came up at 110K more than the appraised amount, and then it notes that the sales approach is the most reliable indicator.

Got a question?

My gut told me that the appraiser is not from the area - I looked him up and he is from 30 miles away - but I realize that does not necessarily mean that he is not qualified to appraise here since I don't know the markets he deals with.

The lender gave me a reconsideration of value form to fill out so any input you can provide would be appreciate.
Absolutely, fill it out and ask the involved appraiser your questions. Then when the involved appraiser defends everything to the death and you don't get anywhere, demand the lender use the same appraiser your neighbor got for a reappraisal. Then have both appraisals professional reviewed. After determining which appraiser is incompetent, file a state board complaint against that one. Of course, if you sway like most of the public and commissioned real estate folks, only the appraiser with the lower value is ever "incompetent" because everyone likes high values better.

Good Luck to You

Last edited by Webbed Feet : 05-06-2012 at 10:07 AM.
  #6  
Old 05-05-2012, 09:07 PM
Learner Learner is offline
 
Join Date: Apr 2012
State: New Mexico
Professional Status: General Public
Posts: 73
Default A question that might help

Hi,

i am not an appraiser, know little to nothing about appraising, and am here to ask and learn.

But I am curious about the Federal Housing Finance Administration's (FHFA) Housing Price Index (HPI) based on same house sales of homes financed through Fannie Mae or Freddie Mac. (Note to others: Please correct anything that is wrong.)

It is not available for your neighborhood, but probably is for your market area.

Question for appraisers: House relevant is the index to a neighborhood? Does it depend on circumstances?

Thanks for any assistance.
  #7  
Old 05-06-2012, 08:51 PM
lnhp1 lnhp1 is offline
 
Join Date: May 2012
State: New Jersey
Professional Status: General Public
Posts: 3
Default

Thanks to those that provided meaningful comments.

I get that the homeowners that come on this site are mostly going to be complaints/or “why is my appraisal so low” but my concerns are valid.



I am not sure what value I would gain to pay for another $500 appraisal out of my own pocket if there is nothing that the bank can do with it - it would make more sense to go with another mortgage company and pay another $500 for their appraisal since that can actually be used towards a refinance.

The distressed home was a forclosure. The realtor got more info and they are putting on their letterhead so I can pick it up tomorrow and send to the lender. There was water damage so the “finished basement” - it had no sheet rock, carpets were torn up etc. so not a finished basement other than maybe the ceiling and they still need to remediate some issues. Portions of first floor need to be torn up due to pet urine damage and the former owners were also nice enough to literally rip out the kitchen sink - I thought that was a joke and so did she, but nope, she has a picture of the missing sink to include. And there was NO condition adjustment or foreclosure adjustment made from that home to ours, just a significant negative timing adjustment


I took the sales from the realtor and calculated the % change - I get a 24% decrease. If I take out the two highest the one month and two lowest the other I actually get a 6% increase in sales price. If I just look at 3-4 bedroom homes, I get a 8% increase, so I don't think the realtor is just saying things. Since it is a smaller community, I would expect the appraiser to know have looked at the prior sales.

There were not many land sales - only one last year and two "psuedo" land sales prior year where they torn down a smaller home and rebuilt. The area is surrounded by a lot of protected lands, so not a lot of land left to build on. Just seems like a difference of over 100K between cost versus sales approach is pretty high when it is not a million $ home.

The lender called me back later on Friday and said their reviewer had Fannie run through a check at 80K over the appraised value and it checked out just to get a better sense of things. He said he could not give me specifics but said there were a few other things that were suspect and that this may be a rare case where they will be able to order a new appraisal and they added on an additional 14 days to the rate lock until they get this sorted out.
  #8  
Old 05-09-2012, 12:13 PM
DMZwerg's Avatar
DMZwerg DMZwerg is offline
 
Join Date: Mar 2009
State: Wisconsin
Professional Status: Certified Residential Appraiser
Posts: 4,485
Default

Quote:
Originally Posted by lnhp1 View Post
1) one home that was used as a comp is on a busy street - we are on a cul de sac and all homes are noted as Nres. I pulled up our original appraisal when we bought our home, and a similar home on a busy street was used as a comp, and they put in a 58K positive adjustment. My neighbor let me look at their appraisal, and their appraiser used the same comp as our appraiser did this go around - they got a 49K positive adjustment.
If a comp receives a positive adjustment it means that the appraiser feels the inferiority of the comp in that circumstance needs an adjustment. If you are correct then both appraisers felt the busy street was a negative influence on value and made adjustments. If you are saying that the most recent appraisal did not adjust and the other two did then you may want to consider hiring a local appraiser to review the appraisal as we can not analyze such things remotely and as professionals do not work for free (doctors and lawyers are also professionals).

Quote:
Originally Posted by lnhp1 View Post
2) Surprisingly our area is not plagued by short sales/forclosures. One of the other comps was a short sale/foreclosure and no credit was given and it is noted as an arms length transaction. It was sold almost a year ago, and there are closer more recent comps than this that I think should have been used. I called the realtor that we initially used and she thinks it sold for about 70K less since it was not well maintained and a bank sale. The appraisal itself notes that foreclosures are not a factor in our area.
Again, to analyze a report you need to hire a local expert.

Given you already talked to one type of local expert (aka, your Realtor) you do have courses of action you can take. If you think there were more comparable sales the appraiser should have considered then you may want to bring them to the attention of your lender to submit to the appraiser for consideration. If you think there was a factual error (indicating the same condition if there was indeed a difference) then that is another thing to bring up. A third is for clarification on why that property was used and adjustments or lack there of were not sufficiently discussed in the report.

Reference "Dodd-Frank" Sec.1472. Appraisal Independence Requirements,
§ 129E. Appraisal independence requirements, (c) Exception (1)(2) & (3)


Quote:
Originally Posted by lnhp1 View Post
The lender gave me a reconsideration of value form to fill out so any input you can provide would be appreciate.
See above, as that is all the "help" I can give you. If you need more look up the reference in Dodd-Frank and see if your local Realtor can help you out some more.
__________________
- D. M. Zwerg

Being a fee appraiser is like being unemployed and constantly looking for work.
  #9  
Old 05-17-2012, 08:36 AM
lnhp1 lnhp1 is offline
 
Join Date: May 2012
State: New Jersey
Professional Status: General Public
Posts: 3
Default

The information from the realtor was sent and an internal review was done at the lender. They set up to have another appraiser come out at no cost to us last week and the appraised value came in at 77K higher than the first. This appraiser specifically stated that they did not include the bank home due the condition and the unknowns and therefore was not a comparable. The house on the main street was included, and a positive 43K adjustment applied towards our home.

I think the initial appraisal is going to some appraisal board - it seems that the only way they could have another appraisal performed on our home was if there were gross errors or neglect. Our loan officer said that this was only the second time he has seen an second appraisal being performed, so my suspicions that the first had a lot of inaccuracies were correct.
Sponsored Links

Closed Thread


Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Forum Jump




Copyright © 2000-, AppraisersForum.com, All Rights Reserved
     Terms of Use  Privacy Policy
AppraisersForum.com is proudly hosted by the folks at AppraiserSites.com

Fastest Way to Find a Real Estate Appraiser Enter Zip Code:
Partner Sites:
AppraiserUSA.com - National Appraiser Directory AllDomainsUSA.com - Domain Name Registration
DeadbeatListings.com - Deadbeat ListingsAppraiserSites.com - Web Hosting for the Professional Real Estate Appraiser
Find FHA Appraisers - FHA Appraiser Search Commercial Appraisers - Commercial Appraiser Search
Relocation Appraisal - Find Relocation Appraisers Domain Reseller - Business Opportunity
Home Security Buzz - Home Security Info Radon Testing - Radon Gas Info
My Medicare Forum - Medicare Info Stop Smoking Help - Help Quitting Smoking
CordlessPhoneStore.com - Great Cordless Phones AndroidTabletCity.com - Android Tablet Computers

Follow AppraisersForum.com:          Find us on Facebook            Follow us on Twitter


All times are GMT -5. The time now is 04:17 PM.

SiteMap: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93