fraud or not on GLA adjustment

[sprydle6]

I just had an appraisal done and the sales price per square foot in my area is between $300 - $375. I am selling my home for $342 / sf. I actually had a bidding war and sold the condo for full ask at $309,000. Here is the problem. The appraiser came back with a value of only $260,000 or $288 / sf. My condo is brand new and uses top of the line finishes, not an old run down place. The comps the appraiser used appear to be misleading on purpose.
Comp 1: 700 sf sold for $357 / sf or $249,900
Comp 2: 750 sf sold for $372 / sf or $279,000
Comp 3: 925 sf sold for $245 / sf or $226,625

Comp 3 is a basement condo sold AS/IS in other words a dump. Then the appraiser used $55 GLA adjustment to normalize the values. Which really skews the value of the condo I am selling!

If I just accept this, I would be forced to sell the property for much less than what the market is willing to pay. How do I handle this. It just doesn't seem ethical!

 

[Lobo Fan]

Dollar per square foot is not a valid measure of value. That measurement is used by realtors more often than appraisers.

Your next step, if you have access to the data is to provide new comps you consider to be more comparable. Keep in mind that many lenders are getting very strict about comp selection. Many are requiring comps that have closed in the last 90 days plus two actives or pendings. Condos are often required to use two comps from the same complex plus at least one from a competing development.

Just because you don't like the final value doesn't make the appraisal incorrect.

GLA adjustments are a little trickier to explain. The gross sales dollar per square foot includes the entire project amenities including land cost. GLA adjustments are just for the actual improvements. For example a $300,000 sales price for a 1,000 SF unit would start out at $300.00 per SF. 30% or more of that figure could be attributed to land cost and location. So now you are down to $210 per SF. FNMA suggests using 40-60% as the GLA adjustment, so now you are down to $84.00.

That number could go up or down depending upon the quality of the iprovements versus the location. For example, if much of the value is attributed to the location than a lower GLA adjustment could be used.

Your next move might be to present a list of comps with some comments as to why they should be used, as well as requesting an explanation for GLA adjustments. Ne nice and be professional. Simply suggest a list of comps that the appraiser may have overlooked.

Be prepared for the possibility that the appraisal is correct. Just because you found someone to pay your asking price does not mean that the price is real market value.

 

[Thern Newbell]

You should consult a local appraiser on this, possibly even discuss it with the appraiser who appraised your property to better understand his/her reasoning. It would not be possible to speak to the credibility of the report without having more detail about your unit and the local market. Are you aware of any other sales in the area that were not used? From an initial glance the price per square foot of the appraised value fits within the range of the sales listed. Whether or not those sales are valid or not, I don't think that anyone could really determine that without being more familiar with your situation and market. I would also anticipate a drop in the price per square foot the larger a unit is due to economies of scale.

 

[Thomas Fiehler]

You will likely find out in this forum that as the seller you are not entitiled to a copy, or even knowledge of the value, of the appraisal on your condo. You might contact your Realtor and ask for a second opinion. I would also contact a local appraiser and have an independent appraisal completed for you. Now the Lender will not be able to use the appraisal for mortgage purposes but it might get you some luck in having them reconsider the original appraisal.

 

[JonGalt]

It would be difficult to give you an answer with the limited information in your post. I could suggest however that you ask an experienced appraiser to appraise your condo at your own expense. I imagine that would be $300-$400. Ask the appraiser to give you their opinion of market value, don't tell them what you think it's worth or anything about this situation. See what the opinion comes back at and that should ease your mind. Be sure to use an experienced appraiser, you may be able to find one from this board if you post in the New Jersey section.

I would also ask what bank sent out the appraiser, some banks send the work to the lowest bidder appraiser and in many cases receive sub-par work as a result. Post the bank name and it may open some eyes on the board.

 

[stefan olafson]

Get more information on how the appraiser was selected, ask your REALTOR or the lender to step in. If in fact there was a bidding war on your property, then more than likely someone did something wrong on the appraisal.

Buyers are becoming more astute I believe, especially after the market meltdown we are experiencing. There are condos all over the east coast that are sitting vacant, no buyers at any price. That may have entered into the appraisers thinking.....

 

[Mztk1]

Comp #3 is way out of whack. We know it needs work, we know its a basement, But was it also the most recent sale?

Did the appraiser use any listings or pendings?

Are there better sales than comp #3 available? Is there a competitive project around that could replace comp #3 due to its condition and location?

I'd look for new sales if I were you. Make sure they are recent, and make sure they are only slightly superior to your subject. If you can't find one inside the project, look outside and include competitive listings and pendings from inside.

Lobo is right, though. From a value point of view the price per square foot means little to appraisers. Some buyers make offers on a price per square foot basis at the suggestion of a REALTOR or just believing that is a smart approach. A buyer who does that is not very well informed, nor is a seller who prices a house that way.

 

[sprydle6]

had a new appraisal!

I contacted an independent appraiser last night and they completed the appraisal today. Guess what they came back with as a value? $320,000!
They told me they had comps which were much higher but excluded them simply because the value was so much higher. This is where I am just baffled. The banks appraiser said the property is worth only $260,000 even though the buyers think it is worth $309,000. I have an independent appraisal done and he tells me it is worth $320,000. That is a LOT of money.

Please help me understand this. Are the banks that nervous that they are telling their appraisers to be extra conservative so if they foreclose the banks cannot lose money? Something seems fishy here.

 

[Mountain Man]

I actually had a bidding war and sold the condo for full ask at $309,000.

It's not unethical, you are not the appraisers client. However, the fact that you had a bidding war at this day and time leads me to believe that very pertinent data was not considered. I'd say sit down with a very experienced agent to go over all the data, maybe even hire a very experienced appraiser...some one who has been through a couple of recessions and knows how to interpret the shifting markets. I've said it before, but so many newer appraiser have been trained to do nothing but fill in the forms when the market was hot and hopping.

 

[Webbed Feet]

So what newspaper did you wrap this one in?

I contacted an independent appraiser last night and they completed the appraisal today.

<...... snip.....>

Something seems fishy here.

Sprydle6,

You got that last part finally correct. So just how long did you own this "brand new" condominium? Would that be from the time you purchased the land to build your condo project, or would it be after the real borrower on this transaction contacted you to broker a loan for them?

Webbed.