Detached living space not valued in appraisal

[jjonak]

I'm working on a refinance of our home, and we have 800-900 square feet of finished living space that the appraiser did not include in the appraisal. This space is above-grade, was fully permitted with our building department, and I pay taxes on it thanks to an increased tax assessment of our house as a result. It is plumbed and wired for kitchen appliances, so it could function in future as an in-law, although it is not currently used as such. It is a large building that is attached to our carport and 2 car garage, and it has a 500 square foot studio with 20 foot cathedral ceilings, a bedroom and a full bathroom. The level of finish is excellent - hardwood floors, its own heat pump, its own electrical panel, septic, custom tiled full bath with footed tub, etc.

It is not attached to our main house.

The appraiser did not include the extra bathroom or any of the square footage in his report - yet he included pictures of it which show it to be of the same quality as our main house that he photographed.

The only spot I can see on the appraisal where he's made an adjustment for it is lumping it together with "sheds" and considering other properties with barn/shop as similar. (Even if that were the case, I still assume an adjustment would be appropriate because our property has three barns, a 2400 sq ft greenhouse, and two other storage facilities, not counting this finished living space.) The appraiser gave no adjustment compared to any other property that had a shed or barn. With one comp that had no out-buildings, he added $30,000 in value.

Does this sound right?

There are a few other issues with the appraisal. He didn't count 240 sq ft of finished living space that we added to the main house, under-counted the number of car garages, omitted most of the outbuildings, and his description of the interior appears to be cut and pasted from a 4 year old appraisal (pre-remodeling) that he'd requested from me. Mentions of carpet when all photos show hardwood, butcher block on kitchen counters when it's all marble, etc. Also seems like he did not do any adjustments for location. So while our property is located less than 10 min. from town, he used comps for properties located 53 miles from town in poor school districts withou

 

[Mike Kennedy]

Conventional Loan or FHA?

 

[jjonak]

Conventional loan.

 

[DaniG]

Must be one of those underpaid, overworked AMC appraisers. Living area, bedrooms and bathrooms not attached and without direct access from the main house are never counted the same as the actual house. There is value in a guest house as well as outbuildings, how much depends on your market. As far as the factual errors in the report, unfortunately it happens everyday now. I would make a list of the factual data that is wrong, send it back to your lender and require it to be corrected or ask them to pay for another appraisal from a different appraiser. You paid for it, you deserve to have an accurate report. Don't mention the value issues, they will just think you are another homeowner complaining because your house is worth less than you thought.

 

[Paul Isolda]

The living area has to be attached to and accessible from the house to be part of the gross living area. The detached living space probably counts toward value, just differently than the main living area of the house. The contribution of that space is usually less than the contribution would have been if it were part of the main living area.

 

[jjonak]

Thanks!

Dear everyone,

Thanks for the input. As you suggested, I pointed out the inaccuracies to the lender, and they ordered a new appraisal. The new appraiser is coming out tomorrow.

While I was at it, I checked some comps. I was amazed because the last appraiser told me there were none (and I believed him given how poor the market is right now). He took three weeks to do the appraisal report because he said he needed more time to do research. Turns out there was at least one 3 month old comp right down the road that would have put the appraisal price 50% higher. It was by far the most relevant comps of the ones that he selected, because it was within 2 miles (his were anywhere from 20-50 miles away), most recent (his were 6 mos - 18 mos or just listings), waterfront (none of his were and our property is waterfront), similar acreage, similar size, and same town.

Do you think the new appraiser would be offended if I handed this to her when she comes out to do the re-appraisal?

 

[Webbed Feet]

Welcome to lender appraiser selection today.

<....snip....> Do you think the new appraiser would be offended if I handed this to her when she comes out to do the re-appraisal?

No, I would appreciate a property owner presenting market data to me in good faith. As long as they understand there may be reasons I decide not to use the sale in my analyses. Typically, I personally in a report would explain what a property owner presented me and why I opted not to use what was presented if I did not use it.

At first, early on, in your first post it seemed as if you just did not understand what appraisers consider to be "GLA," but then your last paragraph certainly bothered me about the lack of correct details about your home. Welcome to the world of lenders all ordering appraisals through Appraisal Management Companies (AMCs) who in turn only hire the cheapest, fastest, and due to that about the worst appraisers there are that have not yet lost their licenses due to an appraisal board complaint.

 

[jjonak]

Thanks so much! It was actually an interesting experience doing the comps. I did not realize how much of a difference water frontage makes on pricing. Even much more isolated, smaller or inferior construction properties with riverfront fetched far higher prices than ones without. I found 9 comps, and even if the appraiser used different ones or the very lowest one, I would still be fine in terms of the refi, so I'm feeling much better, actually. I'm guessing that it might even help if the appraisers are paid as little as I suspect they are (and the new appraiser told me by phone that she only has time to spend half an hour and needs to do everything on a rush).

 

[Van Gogh]

We tell you what, that is not a good sign.

 

[Webbed Feet]

Thanks so much! It was actually an interesting experience doing the comps. I did not realize how much of a difference water frontage makes on pricing. Even much more isolated, smaller or inferior construction properties with riverfront fetched far higher prices than ones without. I found 9 comps, and even if the appraiser used different ones or the very lowest one, I would still be fine in terms of the refi, so I'm feeling much better, actually. I'm guessing that it might even help if the appraisers are paid as little as I suspect they are (and the new appraiser told me by phone that she only has time to spend half an hour and needs to do everything on a rush).

I have no idea at all why you, or anyone, would think it would "help" if appraisers are paid "as little as" you would suspect. Nor would I remotely think anything regarding your situation has improved whatsoever when some appraiser informs you they only have half an hour and must do everything in a rush.

Like I said, welcome to the world of AMCs, and lenders allowing them to select the worst of the worst, the cheapest of the cheapest, and the result most likely to be work rushed so fast that it is meaningless.