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Appraisal lower than selling price on VA loan

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bjrod

Freshman Member
Joined
Jun 26, 2008
Professional Status
General Public
State
Texas
When we put our house on the market we interviewd three realtors and chose the one we felt was the most professional and knowledgable. They all three pulled comps. from our neighborhood and their advice on the selling price was all similar. In fact two were the exact same. We wanted a fast sell and so did not price high, but average. We had 23 showings and had a contract in 23 days. Nine days before closing a VA aprraiser came to my house which is 3881 square feet. He was here maybe five minutes. Zoomed through my house and wrote nothing down. Four days before closing he sent in his appraisal at $68 a square foot. All involved were shocked. We had it priced at $73.50. The houses in our neighborhood over the last year have sold in the low 80's to low 70's per square foot range. When the appraiser left he said "You don't need to worry, you have a nice home." We have a lot of upgrades including Brazilian solid hard wood, electric gate, every door knob and light fixture etc. and I've been told several time my house is immaculate. The house down the street with the same floor pland sold in less than two weeks right after ours for $72.75. (They do not have the upgrades we do) The buyers really want our house. The mortgage broker and realtors are working with them, and they have been approved for another loan with 3% down. That was on Wednesday. Won't another lender allow a new appraisal? Apparently that's what we are waiting to hear.
 

SMF

Sophomore Member
Joined
Oct 11, 2007
Professional Status
Certified General Appraiser
State
Virginia
another lender will most certainly order another appraisal or at least they should as they were not the client or intended user of the first appraisal.
 

Lobo Fan

Elite Member
Joined
Nov 28, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
If you don't agree with an appraisal that does not make it wrong. There are two areas to take a look at. First would be errors of fact. That would include incorrect square footage, or lot size, or incorrect zoning. You may want to compare the comp data to the MLS data. Someone could have loaded in a sales price of $258,000 when it should have been $285,000 for example. Look for items that would make a dollar difference.

The next area would be in comp selection. Are there better comps? Keep in mind that many lenders are being very strict about comps that have closed in the last 90 days, and are in the same neighborhood.

If your Realtor can provide better comps, then ask for a value reconsideration based upon this new information. Send the request back through your buyer and the lender. Stay calm and professional. Try to criticize the report and not the appraiser. This is not personal, so don't make it personal.
 

rcsone

Senior Member
Joined
May 26, 2007
Professional Status
Certified Residential Appraiser
State
Oklahoma
....if in Texas, VA process includes notification on the assignment sheet sent from Houston regional office, of a person called "point of contact". This person in the case of appraised value not reaching at least the sales price is to be contacted and given 48 hours to provide Sales Price Comparison in grids on suggested other helpful and qualified comps for consideration. These requests normally are returned as copies from MLS with some "helpful" prose. If the Panel appraiser does not consider them complementary or supportive of any changes, they are not considered and the reasons are submitted with the final transmitted report to the Houston VA portal and that is that. But the request for additional information by me is viewed as having little influence after proper, sufficent final market analysis. It does serve to give an opportunity to provide additional information for legitimate considerations. VA instructs that other than to a person called a SAR(staff appraisal reviewer) who is designated by VA to ask questions or VA themselves, the only communication we should have with anyone is "timeliness" or answering, "when ya gonna be done?" They encourage a little wiggle in contrary to stated instructions called "public relations" but VA does not push for it very much. My policy has always been almost no communication by anyone other than in writing, so my 48 hour notice is an attempt at "friendly writing" of notice of needing additional informational help. It is also "inadvertantly" a little intimidating to the average realtor because it has to be read for compliance and understanding. Others have work and profits involved, so they are entitled to some consideration. Everything in writing defers any exchange of "educations" rather than a quick phone call which takes little effort and leads possible arguments. In the world of appraisal I have found realtors strong on "square footage" comparisons "only" with little regard for other important "similiars" like same neighborhood. They generally like to do sq ft regardless of the rest of the story.....best to all...........rs
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Prior to confirming an appointment with ANY Appraiser, any seller has the right to inquire as to an Appraisers':

license level
experience level
specific LOCAL neighborhood experience level
and experience level representing a specific mortgage lender.

This information should be voluntarily profferred as part of the initial phone discussion with the seller.

When hiring any licensed professional - the Homeowner has the Option and the Control.

p.s. the last sale u noted.......was possibly listed and/or under contract as of the Effective Date of the appraisal on your property and MOST assuredly should be have been addressed in the appraisal report. While ONE comparable does NOT "make a market" .......clearly, based on your comments, that property would serve as a reliable value indicator.

A competent, experienced, Ethical Appraiser would consider ALL local market data as the basis for developing a credible, fully supported, opinion of value.

Good Luck.

 

Green Hornet

Senior Member
Joined
Dec 29, 2006
Professional Status
Certified Residential Appraiser
State
Washington
bjrod,

A few points -

- Time at your house - I just refinanced my home. The appraiser was in and out in 10 minutes. Really fried me since we have done so many upgrades. How dare he not take the time to show his appreciation for our hard work! A week later I read the report. He had noted all of the upgrades and was spot on with the appraisal. How did he do that? Maybe it is his 23 years of experience and that he has seen 1000s of homes.

That said, I like to spend more time at each house, even when not necessary. It seems to make the home owner more confident in the report.

- Determining value by the use of $/SF - this is a technique that RE agents use. It makes them sound very professional when they can break it down to $73.75/SF. Man they are good. Better than any appraiser I know :) That aside, appraisers might use $/SF as part of the analysis, but it is seldom the deciding factor. One reason is that the $/SF only uses the size of the improvement to determine value. It ignores site location, view, topography, amenities (pool, fencing, landscaping) etc. differences. For additional information, search this site. Do you have an inferior site?

- "All involved were shocked" - except maybe the buyers who now think they are over paying. They must REALLY like you house to be willing to pay $21,000 above the appraised value. Please remember that the loan officer and RE Agent, as well as you, beneift from the higher sales price. They may not be the most accurate folks to listen to. Did you offer to reduce you price?

- Did the listing close before or after the effective date of the appraisal? Was it included in the appraisal. If so, were adjustments made for the condition/upgrade differences? If non were, it is possible that the market does not care.

- One last item - I am not one, but from what I understand, VA appraisers operate under an additional set of guidelines that are different from FHA and conventional.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
Financing Concessions

Bjrod,

Pontificating while lacking the detailed information contained within most appraisal reports by breaking the rant down to dollars per square foot for a complaining session typically falls on the deaf ears of real estate appraisers. Here is why.

Sale price of a comparable house, reported with no details about the transaction whatsoever, shows a 3,800 SqFt house selling for $276,450 or $72.75 per square foot. What nobody told you, that the appraiser found out, is the seller paid $15,000 in closing costs for the buyer. This is called a financing concession and represents $15,000 the seller did not get! So the appraiser appropriately adjusts for this seller paid buyer's closing costs concession and now the real price per square foot of $68.80 shows itself from out of the dark alley it was standing in. If you want to use such a unit of comparison as it is a really lousy way to do it. As doing so fails to account for other differences in the property. Gee, do the numbers look similar to your post?

Why is using this price per square foot a lousy way to estimate market value? Let's take a drastic comparison.

A) 3,800 SqFt house, on a 0.23 acre site sells for $280,000 = $73.68 / sf

B) 3,800 SqFt house on a 2.30 acre site sells for $420,000 = $110.53 / sf

C) 3,800 SqFt house on a 5.00 acre site that is water front with a boat dock, horse riding arena and stables, 1,500 sq second guest house, tennis courts, and helicopter pad sells for $4,200,000 = $1,105.26 / sf

I could go on. But I am betting you can imagine the examples. Now then, stupid real estate agents / brokers take a bunch of these mixed into one big pile and use some silly average or median to predict a seller price per square foot for your property, while failing to disclose and consider financing concessions to boot. Do you see any problems yet? Don't laugh! ... I have been hired to review real estate agent CMA's by sellers and this is exactly the mix of data I have seen tossed into the pile of goo they called comparable data. So I apologize to you because real estate agents seriously need to stop teaching the public that this is the way it should be done.

Webbed.
 

TEL2002

Elite Member
Joined
Jan 16, 2002
Professional Status
Retired Appraiser
State
Louisiana
In the sale that occurred a couple of weeks after your appraisal...were there any seller concessions? These can be significant. Did the seller agree to pay the buyers closing costs, did they throw in the family corvette as part of the deal, did they agree to give the buyer a $5000 decorating/repair allowance, etc. These amounts would need to be subtracted from the sale price.

Has that sale actually closed? Maybe it will have the same problem with its appraisal.

Some good advice above. Remember it is not your appraisal, it beongs to the buyer's bank & is for their sole and exclusive use.
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
....ahhh, the ol' hidden seller-paid-closing-costs trick......and maybe nobody will notice that the ACTUAL selling price for the property was $15,000 LESS than what shows in the database ! The seller received $15K less because they directly paid-out $15K as the grease to make their personal negotiated transaction move to the closing table. The AVM and Zillow proponents drool over such un-checked and un-verified concessions scenarios !

There are folks among us who will defend Fannie's lame Definition of Market Value so as to NOT make a straight $15,000 reduction (to a selected comp in their report) upon the database "price" posted in the local records......or else state that the "reaction" in the local market perhaps only justifies a $1,500, or $3,100, or $5,700 adjustment, should the resulting concluded opinion of value for their subject property appear to come in below-contract for its pending sale. Whatever it takes, I guess, to avoid being labeled as a "does not appraise to-contract" type of appraiser !

Purchase contract review should be a lender function, reconciled and interpreted within the offices of the client/lender/underwriter, and only involve the appraiser's commentary AFTER the appraisal of the subject has been submitted. It could very easily be a supplemental service for a respective fee, or else they let the attorney in their closings department waive whatever negative impact such concessions have upon the % of down-payment made and the total amount of money loaned. The appraiser should not have to be drawn into that muck pile.
 

toddmallard

Junior Member
Joined
Oct 4, 2007
Professional Status
Certified Residential Appraiser
State
Georgia
With regards to the house that just sold, Is it closed and when did it go into contract. It may have gone into contract 6 months ago. This would be reduced if the market is showing a decline in prices. As to the seller concessions, this is extremely important. That could change the value up to 9%. As to the seller asking questions about the appraisers qualifications, That is not his business, He is not the client. no information should be given to the seller unless the seller themselves is the client. In other word, the seller hired the appraiser directly for the appraisal.
 
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