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  #1  
Old 07-25-2009, 05:30 AM
Rhonda Rhonda is offline
 
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Default Appraisal Error- how do we appeal

We recently had our house appraised and it was much lower than the price that the buyer agreed to. The bank of course will not finance above the appraisal, and the deal has fallen through.

When we got the appraisal- we have a ranch style house that has a lower level that is partially underground- but there is a "legal bedroom" on the lower level with both a means of egress and a closet. It would add a bedroom to the appraisal that is currently not listed- and over 1000 sqft to the overall size of the house.

In the appraisal the lower level is listed as a partially finished basement- First it is completely finished and as I said above- one of the rooms is a legal bedroom- we have it in the town C of O.

Is there a formal way to dispute this. Do I email the appraiser directly and inform them of their error in fact. Do we tell the buyers to approach the bank with this information?

Any suggestions are appreciated. We only have until Monday to change this.

Thanks....
Rhonda
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  #2  
Old 07-25-2009, 05:59 AM
Mike Kennedy's Avatar
Mike Kennedy Mike Kennedy is online now
 
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FANNIE MAE GUIDELINES 2009 - GLA

Evaluating Above-Grade Room Count
The most common comparison for one-unit properties is the above-grade gross living area.

Appraisers must be consistent when calculating and reporting finished above-grade room count and square footage for the gross living area above-grade.

A level is considered below-grade if any portion of it is below-grade—regardless of the quality of its finish or the window area of any room. A walk-out basement with finished rooms would not be included in the above-grade room count.

For units in condo or co-op projects, the appraiser must use interior perimeter unit dimensions to calculate the gross living area. In all other instances, the appraiser must use the exterior building dimensions per floor to calculate the above-grade gross living area of a property.

The following must be observed when calculating and reporting above-grade room count and square footage for the gross living area:

• Only finished above-grade areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area.

• Garages and basements, including those that are partially above-grade, must not be included in the above-grade room count.
Below-Grade Areas

Rooms that are not included in the above-grade room count may add substantially to the value of a property—particularly when the quality of the finish is high.

The appraiser must report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the “basement and finished areas below-grade” line in the “sales comparison analysis” grid.
Appropriate Above-Grade and Below-Grade Comparisons

To ensure consistency in the sales comparison analysis, appraisers must compare above-grade areas to above-grade areas and below-grade areas to below-grade areas.

Appraisers may deviate from this approach if the style of the subject property or any of the comparables does not lend itself to such comparisons.
However, in such instances, the appraiser must explain the reason for the deviation and clearly describe the comparisons that were made.

Part B, Origination Through Closing
Subpart 4, Underwriting Property

Chapter 1, Appraisal Guidelines, Appraisal Report Assessment
April 1, 2009
Printed copies may not be the most current version. For the most current version, go to the online version at
http://www.efanniemae.com/sf/guides/ssg/. 473



ALSO REFER TO PRIOR THREAD >> http://appraisersforum.com/showpost....88&postcount=5
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Last edited by Mike Kennedy : 07-25-2009 at 08:22 AM.
  #3  
Old 07-25-2009, 07:14 AM
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David Wimpelberg David Wimpelberg is offline
 
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The standard, as noted in the prior post, is that above-grade area is counted as living area, and below grade area is not. There are exceptions, typically dealing with the design of the home; i.e., earth sheltered homes, partially earth sheltered homes where essentially parts of the residence are located below grade, etc.

That doesn't mean that an item that is not above-grade doesn't have contributory value, it's just accounted for differently. And, FWIW, the market typically views it this way. This can be readily observed by, say, comparing split-level homes or high ranches with colonials. It's actually one of the first things I discovered in the market when I started appraising.
  #4  
Old 07-25-2009, 01:05 PM
Rhonda Rhonda is offline
 
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Default Split Level vs Ranch vs Colonial Lower Level Bedrooms

Our home is listed as a contemporary ranch. Previously, we had been compared to bi-levels: Our home resembles a bilevel more so than a colonial, so we've agree with this. The bi-levels in our county have lower levels, most with a family room and another room either identified as 'additional room' or 'bedroom.' As long as a room had egress and a closet, it was designated a bedroom. These bedrooms have small windows - any amount above ground that could accommodate a window - note - these are rooms mostly below grade level - yet they are completely accepted as bedrooms. This is where we contest the appraisal. Our C of O accepted our lower level room as a bedroom - though it is not listed on our real estate tax role as a fifth bedroom. We had never felt the need to apply for such, not having an appraisal in mind.
  #5  
Old 07-25-2009, 01:10 PM
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DMZwerg DMZwerg is offline
 
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Quote:
Originally Posted by Rhonda View Post
In the appraisal the lower level is listed as a partially finished basement- First it is completely finished and as I said above- one of the rooms is a legal bedroom- we have it in the town C of O.
Unless your basement does not have a furnace or water heater and does not include any furnace/mechanical rooms or unfinished storage rooms then it is partially finished. I have seen basements that have only a small closet area (with furnace & inline electric water heater) that is "unfinished" but these are rare. What you should look at is are any of the comparables indicated and adjusted as more finished and what basement adjustments were used.

Another factor ... does yours have a full walk-out basement with full-sized windows (and by "full walk-out" I mean a patio door in the basement leading to a patio or a door at basement floor level leading down (not up) to the yard ... I cringe when a garage or storm cellar access is equated to full walk-out basements). If so, was this covered in the report and do the comparables meet the same criteria as per the report?

Basically there are a number of factors that could indicate a lower than deserved value but unless it is very obvious (like comparables getting adjusted for walk-out basements when the subject has the same feature but it has been neglected in the report) there is very little advice we can give you as to contacting the bank with this additional information.
As stated above it may not be the appraiser missed or misrepresented anything but rather he followed the guidelines mentioned above. We don't have access to the report, you do, so if you still believe it is incorrect on that point after reading here then do contact whomever sent you a copy of the report with your concerns and let them handle it.



If, after everything is said and done, you still believe the property was appraised too low and have a number of points you feel were misrepresented you could try to hire a competent local review appraiser to review the appraisal. These ten to cost more than the initial report. If a review reveals significant problems then the original appraisal should be turned in to the state appraisal review board.

Hopefully all this helps some.
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  #6  
Old 07-25-2009, 01:38 PM
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Mike Kennedy Mike Kennedy is online now
 
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Rhonda;1849035]Our home is listed as a contemporary ranch. Previously, we had been compared to bi-levels: which may, or may not, have been credible. Prior opinions have no bearing on a current opinion.

MLS listings often double GLA and List Price per SF by including finished partial or full basements resulting inflated prices. That opinion is the Listing Agents' which has no bearing on the Appraiser. The Market dictates Buyers' perception i.e. the MOST similar sales which MUST be included in an appraisal report to reliably support such inclusion. (see below as well)

Our home resembles a bilevel more so than a colonial, so we've agree with this. The bi-levels in our county have lower levels, most with a family room and another room either identified as 'additional room' or 'bedroom''. As long as a room had egress and a closet, it was designated a bedroom. These bedrooms have small windows - any amount above ground that could accommodate a window - note - these are rooms mostly below grade level - yet they are completely accepted as bedrooms. True "Bi-Levels" (TWO LEVELS ON GRADE) have all 4 walls above grade and a slab - no basement at all. Your description above indicates a Raised Ranch i.e. 1 Story above either a half basement and basement garage, or a full basement.

Photos speak louder than words.

This is where we contest the appraisal. Our C of O accepted our lower level room as a bedroom - though it is not listed on our real estate tax role as a fifth bedroom. We had never felt the need to apply for such, not having an appraisal in mind.

Suggest reviewing the C.O. carefully most likely stating "finished basement and rooms". Tax Assessment Records (as you state) often do NOT include finished bedrooms below grade in the ABOVE GRADE Bedroom Count - why?
They are below grade.

Having said that - pls refer to the blue link I posted above and this extraction >

"In other words as demonstrated by the comparables utilized in the report which demonstrate LOCAL buyer reaction to finished partially above grade basements.

Depending on the quality of the finish, there is no reason finished basements cannot be adjusted at similar or the same $dollar adjustment factor when segregated from Above Grade ........but..........ONLY when the Market (sales utilized) INDICATES it."

It may very well be that as of the Effective Date of Appraisal the market indicated your basement is perceived as a basement, the 1000sf +/- you mention as basement area.

It may also be that the market characteristically pays equivalent dollars for finished basement space when it is finished to a similar quality as the Above Grade GLA. In that event, the Appraiser stated his/her Opinion based on an Opinion of which recent, proximate, and similar sales from the pool available WERE actually comparable to your property and extracted any Contributory Value from them. It may also be the Appraiser was selected by the Lender or the Lenders' Agent (AMC), was not local, and had absolutely no clue nor local geo-competency upon which to render ANY opinion of value.

Review of that report, by a qualified, ethical, competent, experienced, LOCAL Appraiser can assist you come to a solid conclusion as to the above possibilities. I would add that given your first post comment regarding VALUE - odds are 1 "bedroom" is not the issue.

OP: " much lower than the price that the buyer agreed to.


p.s. WHICH COUNTY?
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Last edited by Mike Kennedy : 07-25-2009 at 05:20 PM.
  #7  
Old 07-25-2009, 01:51 PM
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Lobo Fan Lobo Fan is offline
 
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Your first question is do your buyers still want to proceed? The appraisal was performed for their lender and it was determined that there was not enough collteral to support the contract. If your buyers still want to procedd the course of action is to request a reconsideration of value. That request would include any errors of fact. Lot size, room counts, heating source, landscaping, fireplaces, those sort of things.

Your below grade area is technically basement. The room counts in the form are to only include above grade rooms. Basements and any rooms below grade are addressed separately.

What you really need to find are similar closed sales of similar floor plan houses of a similar age and condition that support the purchase price. MLS numbers and addresses would be best.

It may be that the appraisal is correct and your market has tanked.
  #8  
Old 07-25-2009, 02:25 PM
Walter Kirk Walter Kirk is offline
 
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Invest $300 to $400 for an appraisal of your property. Hire an experienced local appraiser to do the analysis and explain it to you. If your property is in fact worth what you think it is you can use that appraisal as a sales tool.
  #9  
Old 07-25-2009, 04:24 PM
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Terrel L. Shields Terrel L. Shields is online now
 
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Quote:
This is where we contest the appraisal
The fannie mae rules are fairly inflexible. It is not a call made by the appraiser, but rather by Fannie mae. The appraiser cannot change it without risking their license and they certainly would be pounded with a review otherwise. I am not saying that it is right, I am saying that it is fannie mae and since they write the rules for virtually all of the secondary market and virtually everyone finances thru secondary market....well, it is what it is.
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