Appraisal Questions Difference Between C4 And C3

[Ygb]

Hello, we just did the appraisal of the house. I have a couple of questions.
Our house appraised at $285000.

1) the comparison properties were used that sold between August of last year and December of last year. Our neighbors just sold the house for $350k but that house hasn't been used.
Two of compared properties were of the same size ( $285k and $275k) and one was 180sq ft larger ($360k) . The question is if he instead of the last years sale from August ($275k ) used a sale from two weeks ago for $350k our appraisal would have been in low $300s, by looking at the numbers the way I understand it. Is there any particular reason why that property wasn't used? Is it worth pursuing?

2) one thing I don't understand even after reading about it on this forum is C3 vs C4.
All houses are 31-32 years old, so how come one of them is listed as C3?
The main question is, what kind of improvements need to happen in the house so it moves up from C4 to C3? I looked at the photos of the house and it looks clean and maintained and from the photos I couldn't tell the difference between C3 and C4 considering the house age is the same.
The reason I am curious about it as this where the biggest cost difference is, so I would like to know what can we do to improve.

3) kitchen. All the kitchens in comparables were rated as "gourmet". Ours were rated as "modern". I am not arguing there, but I would like to know what makes a kitchen "gourmet" in an dirt cheap townhouse? It seems one of the houses had very basic kitchen with stainless steel appliances and new counter top. Kitchens are really small here, so I am trying to understand basic guidelines here on what to change.

 

[Riick]

On upgrading your home - I suggest that you speak with a *busy* local Realtor about what to do to raise value of your townhouse.

As far as why appraiser did not use neighboring home...

(a) When did it settle, before or after the appraiser inspected your property.
If after, should not have used it as a Sale, but as an Active/Pending- yes.
(b) Was it listed in the local MLS system, or sold outside the MLS? Appraiser may not have been aware of it.​

Fannie Mae Condition Ratings and Definitions

C1
The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.*

*Note: Newly constructed improvements that feature recycled materials and/or components can be considered new dwellings provided that the dwelling is placed on a 100% new foundation and the recycled materials and the recycled components have been rehabilitated/re-manufactured into like-new condition. Recently constructed improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (i.e., newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).

C2
The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

C3
The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.

C4
The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate.

C5
The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains useable and functional as a residence.

C6
The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

 

[JTip]

Tell us more about the neighboring property that wasn't used.

Have you been inside? Seen pictures on the interweb? Why do you think it would be better than your home to sell at that price?

 

[Ygb]

Tell us more about the neighboring property that wasn't used.

Have you been inside? Seen pictures on the interweb? Why do you think it would be better than your home to sell at that price?

The sale closed a 1.5 week before the appraisal, so he probably didn't have a record of it. I don't know if I should have told him about it or what would have been appropriate action in this case.

I've seen photos on zillow.
I wouldn't even pretend to know how appraisal works but here is how things compared and my work nderstanding.

Appraiser used 3 properties .
1 - same size as ours has updated kitchen was sold in December for $285k.
Ours compared to it at -$5000 because our kitchen wasn't updated.
2. Same size as ours sold for $270k August- September of last year. We gained +$3k something on that one, can't remember how much.
3. 170sq ft bigger more updated , extra bathroom . Sold for $340 October last year. Compared to that one ours was at $318k according to appraisal. We lost 10k on C4 vs C3 , updated kitchen (5k) and extra bathroom and extra square footage. Total of -$21k.

Now I am assuming he average things out somehow to end up at $285k.

The neighbors house was sold for $350k two weeks ago. Yes it's 170sq ft bigger , has an extra bathroom and upgrades . Very much like the comparison number 3 he used, so we would loose $21k or so based on condition and space and end up in $318k, just like he calculated.

Am I not correct that if he used sale number 2, number 3 and the neighbors instead of sale of 270k from 6 months ago,
We would be compared to $285, $340 and $350, instead of $270,$285 and $340.
Considering that $270k sale was in August, wouldn't it be more appropriate to use more ricent sale?
I don't know if I explained it well. I. An attach the appraisal if it helps. We needed $290k for refinance, that's why I am asking.

 

[Ygb]

On upgrading your home - I suggest that you speak with a *busy* local Realtor about what to do to raise value of your townhouse.

As far as why appraiser did not use neighboring home...

(a) When did it settle, before or after the appraiser inspected your property.
If after, should not have used it as a Sale, but as an Active/Pending- yes.
(b) Was it listed in the local MLS system, or sold outside the MLS? Appraiser may not have been aware of it.​

Fannie Mae Condition Ratings and Definitions

C1
The improvements have been very recently constructed and have not previously been occupied. The entire structure and all components are new and the dwelling features no physical depreciation.*

*Note: Newly constructed improvements that feature recycled materials and/or components can be considered new dwellings provided that the dwelling is placed on a 100% new foundation and the recycled materials and the recycled components have been rehabilitated/re-manufactured into like-new condition. Recently constructed improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (i.e., newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).

C2
The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either are almost new or have been recently completely renovated and are similar in condition to new construction.

C3
The improvements are well maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well maintained.

The sale had closed two weeks before the appraisal. My guess is that he wasn't aware of it for some reason. I have no idea where it was listed. The question is , if the refinance would not go thru can this property be used to change the appraisal or is it too late?

What is considered major building component? A roof? Front door?


Thank you very much for taking time to answer !

 

[JTip]

Our house appraised at $285000.

We needed $290k for refinance,

You do realize this is a 1.75% difference.....while not brain surgery, if it was a hand grenade it would have taken off both legs....

 

[hastalavista]

As JTip pointed out, the difference between what you hoped to achieve and what the appraisal concluded is less than 2%. Unless there were significant condition/quality items overlooked in the analysis, I doubt anything would change.

However, the sale that you cite, if comparable and closing prior to your appraisal date, is relevant data. Not knowing what kind of MLS or public records system is available in your market, that sale might not have been discovered in the course of an appraiser's normal data search.
So, my advice is to talk to your lender and provide that sale as a data point. Ask your lender to forward it to the appraiser. The process is called a "reconsideration". If the sale you cite is a valid data point to consider, it will (or should) be considered. I know of no appraiser (although I'm sure there are some) who wouldn't reconsider their value if provided with a valid data that supported such a change but wasn't available or discovered during the original research.

You can list your other items of concern if you'd like but it sounds like you are arguing adjustment amounts. Unless you can prove and support your adjustments (persuasively so they are more credible than the appraiser's) that probably isn't going to move the needle.

Go with the new sale. State in your request that it may have been so new that it wouldn't be available to the appraiser (many appraisers are naturally defensive; if that gets passed on to the appraiser, at least s/he won't think you are questioning their competency but recognized it was so new that it could have been missed through no fault of the appraiser). Ask the lender to provide it to the appraiser and state that given this sale, you believe a reconsideration of the value may be warranted.

Good luck!

 

[Ygb]

Ok, thank you. I am not arguing at all and definitely I am not arguing the adjustment amounts. But because the difference of properties sale is $65k it seems matter what properties are used for adjustment as when he used more expensive properties out value was $15k higher after adjustment.
I just wanted to know if it would be appropriate to point out to that property to him and ask to reconsider.

The rest of the questions were mostly for me to understand what kind of work is worth putting money in to raise the value.

I have absolutely no problem with the appraiser or the work he did or the adjustments for that matter.

Thank you for the response.

As JTip pointed out, the difference between what you hoped to achieve and what the appraisal concluded is less than 2%. Unless there were significant condition/quality items overlooked in the analysis, I doubt anything would change.

However, the sale that you cite, if comparable and closing prior to your appraisal date, is relevant data. Not knowing what kind of MLS or public records system is available in your market, that sale might not have been discovered in the course of an appraiser's normal data search.
So, my advice is to talk to your lender and provide that sale as a data point. Ask your lender to forward it to the appraiser. The process is called a "reconsideration". If the sale you cite is a valid data point to consider, it will (or should) be considered. I know of no appraiser (although I'm sure there are some) who wouldn't reconsider their value if provided with a valid data that supported such a change but wasn't available or discovered during the original research.

You can list your other items of concern if you'd like but it sounds like you are arguing adjustment amounts. Unless you can prove and support your adjustments (persuasively so they are more credible than the appraiser's) that probably isn't going to move the needle.

Go with the new sale. State in your request that it may have been so new that it wouldn't be available to the appraiser (many appraisers are naturally defensive; if that gets passed on to the appraiser, at least s/he won't think you are questioning their competency but recognized it was so new that it could have been missed through no fault of the appraiser). Ask the lender to provide it to the appraiser and state that given this sale, you believe a reconsideration of the value may be warranted.

Good luck!

 

[Ygb]

You do realize this is a 1.75% difference.....while not brain surgery, if it was a hand grenade it would have taken off both legs....

I am not sure what you mean.
My point is how is it possible that extra 200 sq ft and a bathroom jumps price of the house by $65k? Only because cheaper houses were sold almost 6 months ago. In this market 6 months is too long. The prices had been climbing up again. It's a tiny houses of 1060 sq ft and 1200sq ft. Of course I want to be compared to the sale from two weeks ago and not August of last year.

 

[jay trotta]

You may find the Buyer to be the result; were they Local or Out of Town ?

Were they Renting ?
Did they recently Sell a Home ?
Is there something that captured their, emotions about the property ?
Were they Trust Fund Kids ?
Did someone provide some leftover capital ?
We could go on and on, but you get the gist, there are ample reasons for the Buyer to have, what some may consider; Overpay for the property?; that is another thread on another day. You need to gather All the facts; Also, the Closing was 2 weeks prior to your visit, he/she may just have missed it or the local MLS delayed publishing or may have had other figures.
What was the "List Price" of the other House that Sold for $65k above ?