Appraisal 70% Of Contract

[InANightmare]

I am selling a mountain home and the appraisal came back at 70% of the $860,000 contract price.

The house was on the market for 2 weeks when I got the offer at 95% of the list price. I see several things with the appraisal that look odd: 2 of 3 "comps" don't have basements, value of the finished multi-story basement added to the 2 comps without basements, square footage 10% below professional measurements buyer solicited from another appraiser, variance in cost per square foot between comps, and most importantly a deduct for "location."

The deduct for location is sizable $100,000 on $800,000 comp 2, $150,000 on $715,000 comp 3 for better lot location. My house over looks a shopping center, comp 2 has an office building and industrial area across the street in front of it, comp 3 is the largest house in a re-gentrified neighborhood with only on street parking. All comps are within 5 miles of each other. All lots are comparable in size. There is no explanation at how that amount was derived.

Any suggestions on how to fight such a low appraisal?

 

[residentialguy]

Sounds like a bogus joke of a report. Ask the bank for a new appraisal or you'll take this to the authorities.... or get a new bank involved.

 

[Gobears81]

Unless something fishy is going on, it is strange that the broker felt that asking price to be a suitable starting point and the buyer felt that a contract price near the asking was suitable also. I've been a decent amount off of the contract price before, but 70% is somewhat jarring. Even if the appraisal seems to hold up under scrutiny, which it may or may not, I'd suggest a second appraisal be done.

 

[Michigan CG]

Ask the bank to have the appraiser explain exactly how the adjustments were derived. Tell them USPAP 2014 stressed explanations in the reports.

 

[InANightmare]

Thanks for your replies. When we approached the realtor about pricing the house for market, I wanted to ask for more, he pointed out that as there is 1/4 of the livable area below grade, we were over pricing the home. We intended to price it to sell quickly, so I listened to the realtor and pleasantly accepted what I felt was a fair offer after a bit of negotiations.

The buyer's bank says they are not allowed to order a new appraisal automatically, but will accept a letter of argument as to why they should re-appraise.

I would love to walk away from this appraiser and this bank, but the buyer will not. I am afraid if I reject the buyer, I will just have the same problem with another buyer. Am I obligated to reveal the low appraisal?

I would love to sell my house, but not sure how to make this work--I can't drop the price that much.

 

[residentialguy]

NO, you are not obligated to show the old appraisal...in fact, the appraisal isn't yours. Get a good local Certified Residential or General Appraiser and have them do review on the appraisal (as well as have them give you a good independent appraisal - that would be the one I would share to a buyer)

 

[JTip]

Are there three nearby mountain homes that have sold in the $800k +/- price point over the past 12 months?

 

[Tim The Enchanter]

Are there sales more recent, closer to you, more similar to yours than the ones used in the appraisal?

 

[Mike Kennedy]

I am selling a mountain home and the appraisal came back at 70% of the $860,000 contract price.

The house was on the market for 2 weeks when I got the offer at 95% of the list price. I see several things with the appraisal that look odd: 2 of 3 "comps" don't have basements, value of the finished multi-story basement added to the 2 comps without basements, square footage 10% below professional measurements buyer solicited from another appraiser, variance in cost per square foot between comps, and most importantly a deduct for "location."

The deduct for location is sizable $100,000 on $800,000 comp 2, $150,000 on $715,000 comp 3 for better lot location. My house over looks a shopping center, comp 2 has an office building and industrial area across the street in front of it, comp 3 is the largest house in a re-gentrified neighborhood with only on street parking. All comps are within 5 miles of each other. All lots are comparable in size. There is no explanation at how that amount was derived.

Any suggestions on how to fight such a low appraisal?

What was the Effective Date of Appraisal and what was the Report Date (<near the Signature of the preparer).

 

[InANightmare]

What was the Effective Date of Appraisal and what was the Report Date (<near the Signature of the preparer).

The buyer didn't give me the full appraisal with the name of the appraiser and the report date. At the very bottom of page 2 of the form says the value is as of 4/4/16 which is the date of inspection and effective date of this appraisal.

My real estate agent is looking for more comps in the vicinity, there are newer comps that are more similar in square footage with finished basements, but if he deducts so hugely for location, it's still a problem.

The area has sales from $200k to $3 mil, so you can pretty much find a large variety of comps.