Different appraised values for different types of loans?

[alalalp]

Our bank ordered an appraisal for a line of credit against our house to purchase another house. You could say it was more like a bridge loan to pay for the new house until our existing house sold. Our realtor did a comp analysis and said we could list our home for $215,000 and that in the worst case it wouldn't sell for any less than $200,000 in todays market. Our assessment was just increased to $215,000, so I thought we were in the ballpark with what the realtor told us. Our appraisal came back at $190,000 and now we are panicing because $200,000 is the lowest we can sell the house for to make the deal work out for us. We are afraid that the bank/mortgage company's appraisal for a potential buyer will come in at less the $200,000. Do appraisers determine a value differently depending on whether the loan is a line of credit or a mortgage? Our realtor says that an appraisal for the buyer should come in at more than $190,000. Should I worry about that? I know I wouldn't pay more for a house than it's recently appraised value and I don't think others would either. Am I worrying over nothing? Thanks.

 

[Mike Kennedy]

Where is the proprty located?

 

[KD247]

There are few givens in today's market. Depending on the area, it's possible that everybody is right, that $215,000 and $190,000 are both reasonable opinions of value.

Because nobody will know what it's going to sell for until it actually sells, I'd be reluctant to financially commit to the new home until you're free of the old home. This isn't a market to be doubling down in, and if you're that close to the bone on this transaction there's a pretty good chance that something could go wrong.

Unless you have the reserves to handle the worst case scenario, insist that your broker change the deal so that there is no time period, even for an instant, that you're simultaneously responsible for both properties.

But this isn't a decision to be hashed out on a forum. You need the advice of a knowledgeable, unbiased, and trustworthy partner. Hopefully you have a financial consultant or a family friend who can help you explore your options.

 

[alalalp]

The house is located in Canastota, NY, halfway between Syracuse and Utica. When the appraiser arrived, he said that he had trouble finding comp sales in the neighborhood and he would probably have to find some from the next town over from us, about 7 miles away.

 

[KD247]

... he said that he had trouble finding comp sales in the neighborhood and he would probably have to find some from the next town over from us, about 7 miles away.

The most common misconception is that "value" is a characteristic that can be objectively measured, like weight, height, size, speed, etc. It's not. The definition appraisers use involves an "opinion" as to what the property would "most likely" sell for, with "typical" buyers and sellers.

So appraisals are basically an educated guess, sort of a prediction of what would have happened if the property had been placed on the market and successfully sold. When you look at it in those terms, and acknowledge that there is actually no such thing as a "typical" person, or "normal" reaction to a property, it's easy to see why different appraisers might come to different conclusions. Much in the same way that every sale of identical homes wouldn't result in exactly the same sales price.

Then, in your case we're dealing with even more variance because of the lack of sales data. Not only are the buyers and sellers going to have more variance in their actions, and not only will there be more variance in property characteristics, but different appraisers will have different opinions as to which data is most relevant. For example, an appraiser would have to decide whether a very old sale in your immediate area is a better indication of value than a recent sale in a distant area. And different appraisers will have different opinions regarding how they handle conflicting data.

To address the question in the title of your post, no, theoretically the appraised value should be the same for every appraisal. In the real world, it could be argued that a more thorough appraisal is likely to lead to a more credible value but it doesn't always work out that way. Also, in the real world, some appraisals are done with a wink and a nod, knowing that the appraised value only needs to be some lower, more easily supportable value for the lender to qualify for the loan. Or, the assessor might be applying some pressure for his appraisers to develop the highest possible supportable value to increase tax revenues. It's not supposed to happen that way, but it does. (Given that there value can be rather ambiguous in some situations, many appraisers would prefer providing their opinion of value as a range instead of an exact dollar amount.)

That's why, even with the best appraisal, I recommend looking at your situation in terms of probabilities, risk, worst/best case scenarios, and your ability to handle the risks and maintain personal cash-flow even if the worst case scenario plays out. When it comes time to sell the house, even the most logical, diligent, and well-informed appraiser is likely to have an opinion that doesn't exactly line up with your final deal.

 

[Webbed Feet]

Our bank ordered an appraisal for a line of credit against our house to purchase another house. You could say it was more like a bridge loan to pay for the new house until our existing house sold. Our realtor did a comp analysis and said we could list our home for $215,000 and that in the worst case it wouldn't sell for any less than $200,000 in todays market. Our assessment was just increased to $215,000, so I thought we were in the ballpark with what the realtor told us. Our appraisal came back at $190,000 and now we are panicing because $200,000 is the lowest we can sell the house for to make the deal work out for us. We are afraid that the bank/mortgage company's appraisal for a potential buyer will come in at less the $200,000. Do appraisers determine a value differently depending on whether the loan is a line of credit or a mortgage? Our realtor says that an appraisal for the buyer should come in at more than $190,000. Should I worry about that? I know I wouldn't pay more for a house than it's recently appraised value and I don't think others would either. Am I worrying over nothing? Thanks.

I regret to inform you that if the numbers involved are THAT close for you to financially afford a new house, that the above plan you have is financially irresponsible. You are highly likely to end up owning two houses and having to make two mortgage payments with such a purchasing / sales scheme.

Do NOT use the assessors number like you are using it. It is not meant for that. Do NOT count on the Realtor being correct or any appraiser being correct. These are OPINIONS... not promises of future events.

 

[MikeinLA]

The only thing I would add is that sometimes lenders use "Drive-by" appraisals for credit lines as opposed to a full appraisal which is usually required for the buyer's mortgage lender. In this case, there could be elements of value which were not known to the first lender which could become apparent through the second, more thorough, appraisal. Not sure if this is what happened in your case, just a thought.

Mike

 

[ctapraser]

I regret to inform you that if the numbers involved are THAT close for you to financially afford a new house, that the above plan you have is financially irresponsible. You are highly likely to end up owning two houses and having to make two mortgage payments with such a purchasing / sales scheme.

Do NOT use the assessors number like you are using it. It is not meant for that. Do NOT count on the Realtor being correct or any appraiser being correct. These are OPINIONS... not promises of future events.

THIS!!!

If you are that tight, any one thing that goes wrong could effect both properties. If you end up owning both, can you pay for both untill one sells (even at the $190,000?). If not I would rethink your approach.

 

[Mike Kennedy]

The house is located in Canastota, NY, halfway between Syracuse and Utica. When the appraiser arrived, he said that he had trouble finding comp sales in the neighborhood and he would probably have to find some from the next town over from us, about 7 miles away.

http://www.homes.com/Real_Estate/NY/City/CANASTOTA/