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

[TheXman]

Just to be clear, the lowest comp is NOT the most recent, it is the third most recent out of the four sales and was sold on 6/25/10.

 

[TheXman]

The reason we are not giving straight direct answers is because..... "it depends". Without knowing all the facts, how can be 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.

OK,
Let's forget about this particular case. Are there any rules that state how many comps are used and how much weight any one comp can get?

 

[jlabauve]

OK,
Let's forget about this particular case. Are there any rules that state how many comps are used and how much weight any one comp can get?

No, there are no rules. The appraiser should analyze an adequate number of comparable sales with which to derive a trend. But that could be any number of sales. Do you think he used too many sales? Or not enough? Typically, lenders like to see at least three sales, but that is not an appraisal rule.

 

[William K]

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?[/quote]
One comp can get the majority of the weight and other comparables may actually be supportive of another comparable receiving the most weight. ( such as pointing to the lower end of the indicated value range )

When you state " and Most similar", what do you mean by "MOST SIMILAR"?
Was it the most recent sale? did it require the least amount of Net and Gross adjustments? did it look the most similar? did it have the most similar lot size? was it most similar in bedrooms, bathrooms, total rooms? was it the most similar in Gross living area? was it most similar in age? did it require the smallest line adjustments? did it require the smallest number of adjustments?
Any one of these or any number of other reasons could be why weight was placed where it was.
"Closest in proximity" is just 1 factor which may or may not be the most relevant factor in your market.

 

[Duey44]

OK,
Let's forget about this particular case. Are there any rules that state how many comps are used and how much weight any one comp can get?

Comparables - Three minimum, unless more are necessary to support opinion. Different clients also have additional requirements which bump up the amount of comparables utilized.

One comparable can be given 100% of the weight. Or, weight can be given to multiple comparables based on certain similarities.

 

[Mr Rex]

You might want to get a grip on reality and recognize that Zillow was $100k high, as they are prone to be.:icon_idea:

 

[CANative]

I've done appraisals where no sales were used.

 

[Lobo Fan]

The minimum number of closed sales is 3 and many lenders require 2 or 3 additional active listings as well. The most weight is usually given to the comp with the smallest gross adjustments, though it is an individual thing with individual appraisers. I turned one in today that was appraised at the lower end of the adjusted range. It was still a steeply declining market and there were a number of REO and short sale listings in the neighborhood.

Somewhere in the report should be a reconciliation statement that explains how comps were weighted and how he/she arrived at the final value.

 

[TheXman]

When you state " and Most similar", what do you mean by "MOST SIMILAR"?
Was it the most recent sale? did it require the least amount of Net and Gross adjustments? did it look the most similar? did it have the most similar lot size? was it most similar in bedrooms, bathrooms, total rooms? was it the most similar in Gross living area? was it most similar in age? did it require the smallest line adjustments? did it require the smallest number of adjustments?
Any one of these or any number of other reasons could be why weight was placed where it was.
"Closest in proximity" is just 1 factor which may or may not be the most relevant factor in your market.[/quote]

Here is what I mean by "most similar": similar design (both ranch style, houses have same architecture), similar location (both walking distance to my kids' elementary school, same number of stories, same age (exactly) , same condition, same number of total rooms, bedrooms, and bathrooms, similar landscape (lawn plus shrubs and flowers, both well-maintained), same type of foundation (crawl space), the only adjustment was for the extra 200 sq ft of living space in the comp vs. 78 fewer sq ft of living space in the supposedly "perfect" comp which has no grass, a dead tree in front of it (out of compliance with local tree ordinance which could result in a hefty fine by the city), is a two story home which looks like a 1000 sq ft home with an addition added above it, no attic above, and no crawl space below (slab foundation) (makes me wonder what a pain rewiring, repiping, or repairing plumbing would be), kitchen may have been updated but has only about 1/3 the counter space of ours and half the cabinet space, and the house is in a cheaper neighborhood that is a 30 minute walk to the school.

 

[Daystar]

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?

Its obvious by the way you write you are not an idiot, however you are making some very serious claims against an appraiser who is going out and doing his job. What does he have to gain by bringing your house in short. He went out and did his job, less face it you just dont like the value he came in at, many people dont. Is it possible that your house is not worth what you think it is? is it possible that when he reconciled his value he stayed on the lower side due to other apparent market forces that may be in play in your area?