Help! Appraisal came in $100,000 too low!

[TheXman]

I need some advice. I am trying to refinance my home and I determined that my home should be worth $600,000 to $620,000 based on both Zillow and the most recent sales within my immediate neighborhood. I was hoping to get at least $600,000 for the value because I was going to pay the remaining balance down to $480,000. I can pay a little more, but not an extra $72,000! I noticed that the appraiser listed six comps. Five were adjusted to account for differences in features, number of rooms, square footage, etc. and ranged in value between $510,400 and $563,845. One was not adjusted at all even though it was 78 sq ft smaller (should have been adjusted up $4290 based on$55/sq ft that the appraiser used to adjust the other comps). It sold for only $510,000. Now, can anyone explain how my house appraised at the same exact value of the very lowest comp? I challenged the appraisal on the basis that only the lowest comp was used and that other, closer comps should have been used. The two closest comps were both 0.08 mi. from my house and had adjusted comp values of $563,845 and $544,075 (the two highest because we live in one of the nicest neighborhoods in the area). The other four were all 0.47 mi. or further from our home and had adjusted comp values between $510,000 and $524,575. Given all of this information and more (including half a dozen other potential comps worth considerably more than $510,000) the appraiser refused to change his appraisal or consider any other closer comps. He supposedly factored in all of the comps to differing degrees based on which ones he thought were most like our home, but since our house appraised not one penny above the lowest valued comp, this is, by definition, a lie! I feel like I have been defrauded and that the appraiser either made a major mistake which he is refusing to correct even after it was brought to his attention, or he is trying to justify the lowest possible value in my home and hoping that I'm too stupid to realize that I've been had. How do I go about getting this corrected? Should I contact American Appraisal Group (they hired this guy), should I contact the appraiser directly, or is there some sort of watchdog agency that I can appeal to so that someone can correct this blatant incompetency? I have other problems with how the appraisal was done, but I think this post is long enough. Anyone have any suggestions on how to get the value changed or get AAG to have another appraisal done by someone different at their expense?
Thanks, Josh

 

[Randolph Kinney]

Theoretically, the appraiser has no interest in appraising the value of your home either high or low.

The best way to go about getting the appraisal assessed as to its credibility is to hire your own appraiser to conduct a field review of this appraiser's appraisal along with a market value opinion.

The review appraisal will document errors of fact and an opinion of whether of the supporting information found in the appraisal adequately supports the opinion of value.

If the review appraisal confirms your assertion, then notify the lender. If not, then you know what the truth is.

If there are egregious errors, file a complaint with the OREA (Office of Real Estate Appraisers) at:

http://www.orea.ca.gov/html/enforcement.shtml

 

[hastalavista]

Once a moderator sees your post, it will probably be moved to the general public folder; so don't be surprised if that that happens.

You are convinced that your house is worth $600k regardless of what the appraisal concludes. So I'm not going to point out any of the deficiencies I see in your logic. And, you may be correct in your opinion of value.

Since this is for a mortgage loan, the first thing I suggest you do is contact your lender and find out what the process is for requesting a reconsideration of value.
You do have the right to ask the lender to obtain another appraisal. They will select the appraiser, and you will probably be charged for it.
You can ask for the lender to review the appraisal (and provide all your arguments for their consideration). You may be charged for it. If the review concludes a different result, the lender can then rely upon the review value.
Randolph provides advice of obtaining your own appraisal. This is a good idea, but I'd explore the two options above first; your own appraisal cannot be used by your lender; they must order their own appraisal.

In the end, you can file a complaint against the appraiser following Randolph's links. As a consumer, you always have this right and should exercise it if you believe you've been harmed. Keep in mind that the state regulator will not be able to provide a "fix" to your mortgage appraisal situation, and will review the original appraisal for regulatory and industry-standard compliance. We all have an interest in ensuring that only competent appraisers are licensed.

But, before I filed a complaint, I would get a second appraisal for your mortgage finance process. Your anger is apparent. You may or may not be justified. If you are reasonable, then I presume if the second appraisal values your house closer to $600k, you will feel (and most likely be) fully justified in filing a complaint (and I would encourage you to do so). However, if the second mortgage appraisal comes in at or around $510k, then (again, as a reasonable person), you ought to reconsider filing a complaint; because if two independent appraisers are telling you the same thing, the motivation behind the complaint is probably based on retaliation for being told something you don't want to hear rather than based on the justification of a deficient appraisal or incompetent appraiser.

(it severs no ones' interest to file a punitive complaint. It serves everyone's interest to file a justifiable complaint).

Good luck!

 

[CANative]

Denis is too nice.

I noticed that the appraiser listed six comps. Five were adjusted to account for differences in features, number of rooms, square footage, etc. and ranged in value between $510,400 and $563,845. One was not adjusted at all even though it was 78 sq ft smaller (should have been adjusted up $4290 based on$55/sq ft that the appraiser used to adjust the other comps). It sold for only $510,000.

The property that needed the fewest adjustments is almost certainly the best indication of value because it is the most similar (adjustments are to compensate for dissimilarities.) The 78 square foot difference is too small for a supportable adjustment.

 

[TJSum]

You already received excellent advice. Also, if I read correctly, you stated the appraiser utilized six comparables. Most lenders currently are requiring at least three sales with at least two active listings or contracts. So two of those comparables might be based on list prices and are active listings instead of sales. These could be the two highest comps and why the value is more towards the lower end ???

 

[Randolph Kinney]

It may not be public knowledge but lenders or AMCs have their own quality control procedures for appraisals. Typically, a desktop valuation is conducted to see if the form is filled out correctly and the factual data verified. Next comes a valuation. Depending on LTV and other requirements, desktop review and valuations are biased to the lower value range to make sure those requirements are not marginally met by the appraisal.

Lenders and AMCs will not spend their own money for second appraisals or field review appraisals unless they have really good reasons to believe the first appraisal is flawed.

If you are going to be charged for another appraisal and you really want an appraiser is who not connected to the AMC that gave you the first appraisal, you might as well hire your own appraiser and pay for it.

Denis is telling you the truth about not being able to use the appraisal generated by an appriser you hired for lending assignments in obtaining financing. But, if you really want to know the truth about the lender / AMC appraisal, you would have more confidence in the appraiser you hired. If you want satisfaction about having been done wrong, you have your own independent appraisal as the basis of filing a complaint; with the state, with the lender and with the AMC.

 

[JAgnello]

You have already been given some good advice but I also wanted to give you some points to consider.

You said that you determined that your home should be worth $600,000 based on Zillow’s analysis and the most recent sales within your immediate neighborhood. Zillow’s automated valuation model (AVM), dubbed “Zestimate” has been heavily scrutinized as a pricing tool. You may want to read this article by Jonathan Miller, and be sure to check out this report.

Many homeowners believe their property is worth more than it is, and sometimes their basis for value is based upon a financial obligation. Keep in mind that personal finance has no bearing on the properties value and it’s critical that you remain objective while reviewing these kinds of reports.

One of the posters made an excellent comment “the property that needed the fewest adjustments is almost certainly the best indication of value because it is the most similar.” Even though your home is located in a subdivision with properties that sold for much higher does not necessarily mean that those properties are the most comparable to your own and the adjustments made in the report are a reflection of that.

You mentioned that the other four comparables were approximately half a mile from your home which sounds ok if those properties were determined to be closer in comparison to your home. With that said, it is difficult to say for sure without having seen the report, the data, your home and the surrounding area.

Was this appraiser from the area? Keep us posted on what happens.

 

[Webbed Feet]

I need some advice. I am trying to refinance my home and I determined that my home should be worth $600,000 to $620,000 based on both Zillow and the most recent sales within my immediate neighborhood.

To a real estate appraiser, services you used and named above, are not to be taken seriously. They are well known to be completely incorrect much of the time. You are the property owner, hence you are biased, and it can be assumed you are NOT a trained real estate appraiser. So your comment about "the most recent sales within my immediate neighborhood" also means nothing to us. So far, this is just a rant.

I was hoping to get at least $600,000 for the value because I was going to pay the remaining balance down to $480,000. I can pay a little more, but not an extra $72,000!

What you hoped to do is beside the point.

I noticed that the appraiser listed six comps. Five were adjusted to account for differences in features, number of rooms, square footage, etc. and ranged in value between $510,400 and $563,845. One was not adjusted at all even though it was 78 sq ft smaller (should have been adjusted up $4290 based on$55/sq ft that the appraiser used to adjust the other comps). It sold for only $510,000.

So you are telling us that if the one not adjusted had been adjusted, so then showing an indicated value of $514,290, that you'd be happy with that?

Now, can anyone explain how my house appraised at the same exact value of the very lowest comp?

Not explain, as we are not located there and have never seen this appraisal. But we can guess. My guess is as California is one of the very hardest hit states in the Union, that the appraiser explained that your local area was in a state of decline regarding values, so this "very lowest comp" was probably not only the most recent sale, but was the best overall match for your property, therefore it was given primary consideration in the appraiser's final opinion of value. This might be a pretty good guess. IF not, stop to consider, how could we explain regarding a report we've never seen?

I challenged the appraisal on the basis that only the lowest comp was used and that other, closer comps should have been used. The two closest comps were both 0.08 mi. from my house and had adjusted comp values of $563,845 and $544,075 (the two highest because we live in one of the nicest neighborhoods in the area). The other four were all 0.47 mi. or further from our home and had adjusted comp values between $510,000 and $524,575. Given all of this information and more (including half a dozen other potential comps worth considerably more than $510,000) the appraiser refused to change his appraisal or consider any other closer comps.

Sorry, it's not 100% about nothing else other than proximity. I appreciate that you want to make it that way as that seems to make things come out the way you want. But an appraisal analysis is about all sorts of things. There is one fact that hardly anyone in your position likes to hear very much. That fact is you and your lender get to pick the subject property for the analysis, the appraiser gets to select what sales get used for comparable.

He supposedly factored in all of the comps to differing degrees based on which ones he thought were most like our home, but since our house appraised not one penny above the lowest valued comp, this is, by definition, a lie!

Focusing on part of what someone else said, instead of all of what they said, is a very fine art that has been honed to a razors edge here on this forum. In that way we get to debate all sorts of things for days on end claiming we are right and the other person is incorrect. As a result of us having done this for so long, we all know it when we see it.

I feel like I have been defrauded and that the appraiser either made a major mistake which he is refusing to correct even after it was brought to his attention, or he is trying to justify the lowest possible value in my home and hoping that I'm too stupid to realize that I've been had.

Yes, refusing to correct major mistakes and/or intentionally teasing people with the lowest value opinion we can come up with brings all appraisers lots of business and keeps us all entertained with this boring job we have. All the resulting angry people screaming and threatening us with lawsuits and the like is what all of us lay in bed dreaming about as the perfect life to live.

How do I go about getting this corrected? Should I contact American Appraisal Group (they hired this guy), should I contact the appraiser directly, or is there some sort of watchdog agency that I can appeal to so that someone can correct this blatant incompetency?

In your opinion. I didn't read a thing that suggested any incompetency at all. Rather, a lot of ranting.

I have other problems with how the appraisal was done, but I think this post is long enough. Anyone have any suggestions on how to get the value changed or get AAG to have another appraisal done by someone different at their expense?
Thanks, Josh

Other posts made good comments. But should you want to take the time for filing a board complaint with the state, remember it will take about two years before you see an outcome over that.

 

[TheXman]

You already received excellent advice. Also, if I read correctly, you stated the appraiser utilized six comparables. Most lenders currently are requiring at least three sales with at least two active listings or contracts. So two of those comparables might be based on list prices and are active listings instead of sales. These could be the two highest comps and why the value is more towards the lower end ???

Actually, the two comps that are only list prices have adjusted comp values of only $512,260 and 510,400. They are two of the furthest away and one of them was listed as being in only "Average" condition throughout whereas our house was listed as being in "Good" condition throughout. I'd be thrilled if these two were replaced because I do not think they are nearly as nice as my house, but I still have the problem that nobody here is addressing: How can you use six comps and yet come up with a value that is exactly the same as the very lowest one? By definition, none of the other comps were given any weight at all. If you detect anger, this is why. I just wish someone would come out and say either, yes he can use only one comp, or no, he has to give other comps some weight, and how you determine how the comps are weighted. I think that the house just around the corner which is of similar design, location, same number of stories, same age, same condition, same number of total rooms, bedrooms, and bathrooms, similar landscape, only 200 sq ft larger and sold for $576,000 (adjusted down to $563,845 to compensate for sq footage) in May is a much better comp than a house 0.62 miles away that is in a cheaper neighborhood, has half a palm tree in front, is a totally different style and floor plan, is two stories vs one, has a much smaller kitchen, has a cheaper slab foundation, has no grass for the kids to play on and sold in June for $510,000. Yes it's slightly closer in sq footage, but that's easy to adjust for. It's harder to assign a dollar figure to adjust for neighborhood which is why I think the closest houses deserve the highest weight, vs no weight at all which is what this guy obviously did.
I appreciate all the constructive comments that all of you have provided, but am frustrated (mostly with my appraiser, loan officer, and AAG) that nobody will tell me what the weighting guidelines are. I am hoping that someone here will give me the straight answer to the questions: How much weight can one comp get, and why isn't the closest and most similar house the highest weighted comp?

 

[TJSum]

The reason we are not giving straight direct answers is because..... "it depends". Without knowing all the facts, how can we give you an exact answer? Have a local appraiser conduct a field review on it to get direct answers. Without seeing the report and having experience in your market, we all will have more questions than answers. If the two listings adjust out lowest (and are adjusted properly), it points towards a market still in decline and might be why the lowest number was chosen. After all, why would it be worth more than active listings (when adjusted properly) if they have enough market exposure, this points toward the current market ceiling.