Reconsideration of value declined

[Zoe]

Many times on a townhouse/townhome, if you have an HOA, the HOA will take care of maintenance on the exterior and homeowner is only responsible for interior and the yard.

Some HOA's don't allow rentals.

 

[sputnam]

I’m currently in the process of refinancing my rental property (ZIP code 76011), and I’ve run into issues with the appraisal that I’d like some input on.

The property is located in an entertainment district where short-term rentals are legally permitted, which creates a unique buyer pool and limited inventory. Although it’s legally classified as a single-family home, it’s actually an attached townhome and is relatively new (less than 5 years old).

Before the appraisal, I worked with a realtor to analyze comps. Based on nearby sales—including older homes from the 1960s selling for $235+ per sq ft—we estimated a reasonable range of $220–$240 per sq ft. The lender agreed with this range and provided pricing accordingly.

However, when the appraisal came back, the appraiser did not use any comparable properties from within my ZIP code. One of the comps was located more than five miles away, and the resulting valuation came in at under $190 per sq ft.

I submitted a reconsideration of value (ROV) with better comps from within the ZIP code. The appraiser increased the value by $10K, but still did not use any local comps and instead added a rental analysis that didn’t seem relevant. No location-based premium was applied.

I requested a second ROV. This time, I provided seven strong comps within 0.5–2 miles of my property—all townhomes, condos, or similar SFHs sold within six months, most within 30 days. I also specifically asked why no local comps were being used and why no location adjustments were made.

The lender has now informed me that the second ROV was declined.

At this point, I’m trying to understand my options. Has anyone dealt with a similar situation? What would you recommend as next steps?

Most RoV policies are one and done. If you are requesting an RoV you have to provide your best data and reasoning the 1st time. It's not a negotiation with the appraiser. There is no authority that can demand the appraiser change their opinion of value. Depending on the Lender... you may be able to have them get a field review of the appraisal that you don't like.... or a 2nd, fully independent appraisal. That will be up to the Lender's policies.

 

[Zoe]

I am still a little surprised based on income cap coming in higher than the sales comp approach. I am concerned the appraiser didn't choose the best comps in the resort area. It made me feel better the appraiser was only 20 miles away. I doubt the resort area stretches 20 miles. A closer appraiser probably could have done better by being more knowledgeable about the immediate area.

I am a little confused if the owner gave the lender rent comps or sales comps they thought were most similar.

I can even see a remodeled (updated) unit built in 1978 being a good sales comp because the owner was bragging about how much they were bringing.

 

[sputnam]

I am still a little surprised based on income cap coming in higher than the sales comp approach. I am concerned the appraiser didn't choose the best comps in the resort area. It made me feel better the appraiser was only 20 miles away. I doubt the resort area stretches 20 miles. A closer appraiser probably could have done better by being more knowledgeable about the immediate area.

I am a little confused if the owner gave the lender rent comps or sales comps they thought were most similar.

I can even see a remodeled (updated) unit built in 1978 being a good sales comp because the owner was bragging about how much they were bringing.

Pretty big assumption there. 1- You don't know why the appraiser selected the comparables used. 2- Someone else's opinion about which comparables are best isn't really relevant to the appraiser's opinion. You can certainly disagree with their selection. I don't think you've seen the appraisal report or reviewed the sales from the area. You are assuming that a non appraiser, involved in the transaction knows better than a credentialed appraiser.

There is no question that if an appraiser delivers a report and there are sales that appear to be more similar to the subject, the report danged well should include a thorough explanation.

 

[Zoe]

Pretty big assumption there. 1- You don't know why the appraiser selected the comparables used. 2- Someone else's opinion about which comparables are best isn't really relevant to the appraiser's opinion. You can certainly disagree with their selection. I don't think you've seen the appraisal report or reviewed the sales from the area. You are assuming that a non appraiser, involved in the transaction knows better than a credentialed appraiser.

There is no question that if an appraiser delivers a report and there are sales that appear to be more similar to the subject, the report danged well should include a thorough explanation.

The owner didn't answer how they even rent the subject or the occupancy/vacancy rate. But he did raise the value based on rental on the ROV. Nothing wrong with changing value on ROV.

All the info I have is coming from the owner.

 

[sputnam]

The owner didn't answer how they even rent the subject or the occupancy/vacancy rate.

You seemed to have missed the point. No one in this forum knows anything about the situation or the appraisal report beyond what the OP claimed. How many times in your career have you had a homeowner or borrower or Realtor or Lender disagree with your opinion of value or your comp selection? If you have had a long career, probably a lot. So? When did it become part of the appraiser's job to care about making the deal work?

 

[Zoe]

You seemed to have missed the point. No one in this forum knows anything about the situation or the appraisal report beyond what the OP claimed. How many times in your career have you had a homeowner or borrower or Realtor or Lender disagree with your opinion of value or your comp selection? If you have had a long career, probably a lot. So? When did it become part of the appraiser's job to care about making the deal work?

I totally agree. I always ask owner what they would ask for their property if they were going to put it on the market. I am like a sponge. Sometimes I come in way over what owner thinks and sometimes I come in way under what owner thinks. I am more than willing to take any information the owner can give me.

If owner or agent or whoever says I have this and this and this. I say please send it to my client and let my client send it to me. Please provide reasoning and analysis with what you send my client.

I am not saying I never take info directly from an owner.

 

[Zoe]

An ROV is different before appraisal is completed.

 

[Zoe]

Just by asking what would you ask? You get all kinds of answers. It is like an open end question. Many owners will say I don't have clue. Many owners will say I would ask between $X and $X and will share all kinds of information about the subject area and even give you a bunch of information about the subject and properties that have sold near them. Sometimes they will give you all kinds of information on all the improvements they have made.

A property under contract is different. On the front end, I will take any information anybody can give me. I rarely get to speak to owner. Usually an agent is representing the owner.

If owner has a copy of recent appraisal, I am more than happy to take a copy of the appraisal.

 

[sputnam]

Just by asking what would you ask? You get all kinds of answers. It is like an open end question. Many owners will say I don't have clue. Many owners will say I would ask between $X and $X and will share all kinds of information about the subject area and even give you a bunch of information about the subject and properties that have sold near them. Sometimes they will give you all kinds of information on all the improvements they have made.

A property under contract is different. On the front end, I will take any information anybody can give me. I rarely get to speak to owner. Usually an agent is representing the owner.

If owner has a copy of recent appraisal, I am more than happy to take a copy of the appraisal.

I have never asked a property owner what they think their property is worth or would sell for. I'll ask them if they know of any recent sales in their neighborhood. I ask about what changes they've made to the property since they bought it. I don't mind getting a copy of a previous appraisal... usually the only part of it I really look at is the building sketch.