Help with my appraisal dispute

[savageinvestor]

Man, that is a big bite from the Tootsie Roll, but what do I know as a CA booboo? I used to tackle 1,000 sf to 1,900 sf, admittedly as a one-man operation, but 9,000? With a hard-money loan? Do you have a crew, and most importantly, from my viewpoint, have you done this a couple of times already?

I’m a builder. I have everyone I need. Thank you for the concern though.

 

[savageinvestor]

Makes no difference. The lender is the client of the appraiser and the lender is your lender. You need to address these issues through your lender. The lender will address your concerns with the appraiser.

The lender just said to write an email. That’s what I’m doing. The reason for the post was to ask how to approach there email and whether my concerns spied even be brought up. I’m not an appraiser, I don’t know how you guys work. I’m a builder. I know what it costs to build a house and what they sell for in the areas I build in and I build to suit comps.

Same with this house. I know what other houses in the area sell for and what this house will sell for. I know what it will cost me to remodel the entire thing. It’s easy to see that recently remodeled homes in the area that are comparable sell for a lot more than 1.4 million.

 

[savageinvestor]

The lender just said to write an email. That’s what I’m doing. The reason for the post was to ask how to approach there email and whether my concerns spied even be brought up. I’m not an appraiser, I don’t know how you guys work. I’m a builder. I know what it costs to build a house and what they sell for in the areas I build in and I build to suit comps.

Same with this house. I know what other houses in the area sell for and what this house will sell for. I know what it will cost me to remodel the entire thing. It’s easy to see that recently remodeled homes in the area that are comparable sell for a lot more than 1.4 million.

Their *

 

[savageinvestor]

I don't know the scope of the renovation or the location differences in that market, but what is obvious to me is that comparable two is a better condition house than comparables one and three. Comparable two looks like it was probably remodeled less than five years ago and comparable one looks like it was last remodeled 20+ years ago.

I don't know what the $510k location adjustment to comparable two is for, but that is a big adjustment when the value of the subject site is $190,000. That adjustment would imply that the value of the lot for comparable two is $700k based on the subject's site

Sales comparison approach is used on a form 1004 to value the property. Not sure why you have questions about the cost approach. Also, I'm not sure why you put basement in quotes as it clearly is in the basement based on the photos. Appraisers separate the basement and above grade square footage. The pool/sauna room is on the sales grid and it appears to be bracketed by the comps. The pool room was probably subtracted from the square footage because the appraiser didn't want to double dip the adjustment. The garage appraised higher, what do you mean by that? This is a complex assignment, if you have nothing else to use your gonna use older comps. Also, the adjusted value range is around 50k between all the comps, which is a tight spread for properties of that price. And it’s not the purpose of the appraisal to hit value

Appraised as is or "as proposed"? I work the NE OK area. Assuming a finished basement, perhaps it is low, maybe not. I can readily say that the issue I see is the AGE. It was built in 1977. So, costs seem to be in line with what I have got for Grand Lake houses. Without actually valuing the property myself, I'd be reluctant to contest the appraisers opinion.

finished with the same finishes as the rest of the house. It’s built in a hill so it’s hardly below grade. 90% of it is above grade. There’s windows at standard heights and access to the back yard. It has a bathroom, full size wet bar, storage room, garage access, a theater room a spare room, closet, and fireplace.

 

[savageinvestor]

if all comparables have finished basements...the difference is minimal

Minimal? How is $195/sqft vs $305 sqft minimal?

 

[Joe Flacco]

Just pick out the comps that are renovated like what you are proposing and give it to the bank. That is about all you can do. And then the bank will decide what to do.

 

[Elliott]

Asked AI: What is the fallacy of relying on sales price per square foot in valuing residential real estate of very large houses, such as 5,000 square feet and up?

Relying on sales price per square foot as the primary method to value very large residential homes (such as those 5,000 square feet and up) is fundamentally flawed due to several key reasons:

1. Diminishing Marginal Value of Additional Space
As homes get larger, the price per square foot typically decreases. This is because adding more square footage does not proportionally increase the total value. The additional space is often less valuable on a per-foot basis, particularly since the core functional areas (kitchen, bathrooms, living spaces) dictate most of a home’s utility and value, while “extra” bonus rooms or oversized spaces contribute less to overall market appeal.

2. Economies of Scale and Fixed Costs
Larger homes benefit from economies of scale in construction: fixed costs like land acquisition, permitting, and foundational work are spread over more square footage, lowering the average building cost per square foot. However, buyers do not necessarily attribute the same per-foot value to every square foot, especially when the home exceeds what is typical or practical for the area.

3. Land Value Disparity
Land value is essentially fixed, regardless of house size: a bigger house on the same lot dilutes the influence of land cost per square foot. A small house and a large house with identical lots will both reflect the same land value, but the per-square-foot price of the larger home will appear significantly lower, giving a misleading impression of lower quality or desirability when in fact it is just a mathematical artifact.

4. Non-Linear Pricing
Price per square foot is not a linear metric—meaning a 2,500sqft home might sell for $400/sqft, but a 5,000sqft home nearby with similar style and finishes will likely sell for much less than $400/sqft, even after accounting for differences in quality or upgrades. This non-linear relationship is a well-documented phenomenon in residential real estate markets.

5. Quality, Layout, and Usability
The price per square foot fails to account for critical qualitative factors such as layout efficiency, ceiling height, views, architectural appeal, and the proportion of “expensive” areas (like kitchens and bathrooms) relative to the whole. In very large homes, additional square footage may end up being comprised of lower-value space like extra corridors, oversized secondary bedrooms, or bonus rooms, none of which command a high per-square-foot price in the eyes of buyers.

6. Market Appeal and Buyer Pool
Larger homes appeal to a smaller buyer pool due to higher total cost. The law of supply and demand suggests that reducing the number of potential buyers means sellers must price large homes more competitively, further depressing the per-square-foot figure versus more moderately sized properties.

7. Appraisal and Transaction Errors
If you use average neighborhood price per square foot to estimate the value of a particularly large home, you are likely to overestimate its value—sometimes dramatically. Appraisers typically apply much lower adjustments for square footage when comparing larger homes to their smaller peers because the market does not reward bulk space at a constant premium.

Conclusion
Using sales price per square foot as a simplistic value shortcut fails to recognize the nuances of how value is attributed in residential real estate, particularly with very large properties. Accurate valuation requires considering size in conjunction with quality, amenities, layout, land value, location, and current market conditions, ideally by comparing to similar-sized homes rather than just applying a straight multipler.

....................
I think they taught us this in Appraising 101.

 

[Surf Cat]

Appraised as is or "as proposed"?

Right? It better be proposed. There's no way that's a C3 as it stands. The subject needs a lot of work.

 

[sputnam]

No one in this forum can help you in getting a $150K higher appraised value. The Lender can reject the appraisal and get another one (the new appraisal could be even lower). The Lender can request a Reconsideration of Value from the appraiser. A reconsideration request must include additional sales data that should have been used and/or a listing of mistakes made by the appraiser. Can't just tell the appraiser 'the value is too low'. You can walk your loan application to a different lender and hope that the appraiser they engage finds a higher value. You can come up with the additional $150K.

 

[J Grant]

I can't form an opinion over the internet, but imo, the appraisal of the subject to remodeling looks pretty good. Did the lender order an "AS IS" value as well? Usually they do- if not, wow - the property per the photos is a POS , really run down. Looks like a candidate for a teardown in fact. Lucky you, the appraiser did not recommend bulldozing it and claiming HBU vacant land over an acre site. Which might be the case - idk, but assuming there is demand for remodeled properties of that large size in that area, you might want to accept it as a realistic market value and trim your costs.

One of the exhibits showed comps for the subject in "as is" depreciated condition, and it is scary to see three recent sales of very run-down houses of that large size in what looks like an executive McMansion neighborhood. Usually, one sees that in declining and/or REO-dominated markets.
The subject prior sale around six months ago was $480,000, now the contract price is $590,000, is property flipping going on there?
IDK what is going on but something feels ": off". ( I used to review appraisals and did numerous field reviews post-crash so I think that way sometimes when analyzing a market )

All you can do as a buyer is submit an ROV to the Eldner with a list of comps or issues, the lender can respond to it or reject it, and the appraiser is stuck responding to it if the lender passes it along to them. It looks like the amount you think is "low" is for a construction loan value, not a sale price issue? If you are buying it for 590k.