Extremely Low Appraisal Quote why?

[kalparker]

Hi I am trying to understand the appraisal process and how they came out with their number on a property. The home is 12,000sq ft. home 33 acres and was purchased in 2003 at 6 million and over 2 million was spent renovating the exterior from wood to stone. 3 Million was borrowed on it, and in 2008 it was valued at 8 million conservatively as per the bank and an additional 2.5 million was borrowed. In the 8 million dollar appraisal estimate it was given 8.178 million as indicated value by cost. A few homes flip on the street in the 3 million range, but the home doesn't compare to them it compares to the higher tier in the town and surroundings. Long story short they went to do a refinance with another bank, the first appraiser valued it at 5.7 Million, and after protesting with proof of the construction raised it to 5.9 million. A second appraiser brought by the bank also appraised it at 5.8million. I can assure you it’s worth more than that, and a lot of people would jump to get it at that price. Did anything change? Does the bank get a pre-report since they bank go with the lowered amount? And how many weeks does it take to get a report after the appraisal? Also does the bank give criteria or parameters on what kind of estimate they want? Sorry if I went on to long, I just want to understand the industry and for future deals.

 

[Michigan CG]

$8,000,000 in 2008 and $5.9 MM in 2011 = 26% decline. Not unreasonable in this economy. You have read about the housing problems?

 

[Calvin the Airedale]

Were I quoting price and turn time on a similar high end property in my market, I would quote a $3.5k fee and a 4-5 week turn time, from the date of inspection, which would be at least 1 week out.

There is obviously no way to comment on the appropriateness of the value estimate. However, I will make this observation: the truly wealthy don't have or need mortgages.

 

[Walter Kirk]

$8,000,000 in 2008 and $5.9 MM in 2011 = 26% decline. Not unreasonable in this economy. You have read about the housing problems?

Ditto, please remember that the cost to renovate or remodel a property does not always translate to an increase in value.

 

[TEL2002]

Your value question is specific to your local area. No one on this forum will be able to tell you if the appraiser's OPINION of value is on target or not.

I would never give a bank a 'pre-report', they would get a final and only a final.

You spent a couple million on updates. What is spent does not always mean an equal increase in value. For example...you decide to replace your perfectly good kitchen countertops with something more to your style tastes. So you spent $80,000 on new kitchen countertops...did the house suddenly increase 80K? Probably not, but again this would depend upon the local area market and how countertops impact value. Remember there was zzz value in the original countertops.

Probably you best choice is to find a highly qualified local appraiser, and have them do an appraisal for you, or have them review the appraisals that were already done.

Good luck

 

[VAppraisals]

Sounds to me you have two problems.

1. Potential over improvement for the area..
2. You are trying to hold on to 2008 values..

 

[Terrel L. Shields]

A second appraiser brought by the bank also appraised it at 5.8million. I can assure you it’s worth more than that, and a lot of people would jump to get it at that price.

Put it on the market and see how man "people would jump to get it" at your preferred price...

 

[The Warrior Monk]

A couple of points:

1. An appraiser that is qualified to appraise this particular property type must be hired. I have no idea what criteria the lender used.
2. Cost does not equal value. As a recent example I came across, I know of a situation where someone paid nearly $4.5M for a property at the market peak, then proceeded to sink another $4.5M into the property...all in the wrong things. The owner will be lucky to get what he paid for it...and that's the broker's opinion, not mine.
3. Most market have declined in the past 3 years. Certain high-end markets are less affected than the others. Where I work, there is a lot of Wall Street money, and the market is within a relatively short drive from Wall Street. Other areas that are further away may be battered.

 

[jlabauve]

Looks like you had two separate appraisals that said basically the same thing. Two professional opinions within 1% -2% of each other ... hard to find fault with the value opinion.

 

[Lobo Fan]

The answer to your question is that it is illegal to give the appraiser any value clues for a refinance appraisal. The lender wants it to appraise for as much as possible in order to close the loan. The appraiser is an impartial observer. Like a referee, we do not care about the outcome of the game, only that we called it correctly.

The proper procedure for challengin an appraisal is to start with errors of fact. These would include problems with square footage, room counts, lot size, etc. The next area is errors in research. If you have any better comps, then please provide them to your lender. They should be nearer, closed more recently, and more similar.

It is entirely possible that your market has tanked by that much. There is a 7 year supply of over $1 MM homes in Albuquerque. I don't think we have more than 10 houses worth over $5MM in the whole county. That is huge money, even for Santa Fe.

So no, the appraiser did not tank your loan. Yoy could easily be upside down by huge numbers. Sorry...