Just got back an Appraisal, not counting all square footage?

[chris288]

Hey everyone I just got back an appraisal today to refinance on my home and it came back wayyy lower than expected. Basically, for the most part I was expecting 80-90 dollars per square foot, but the problem was the appraiser did not count all the square footage on the home.

This is a HUGE issue and I am hoping someone can offer some advice on above grade and below grade differences.

So over the past year or two here is what we have done to the home....all new...

• Added over 1000 sqft. Total ( 560 above grade, 480 below grade as a finished basement...Addition (October 2012)
• All New Roof (November 2012)
• All New Windows throughout the house (November 2012)
• Added a second Heating & Air System (November 2012)
• Added new insulation throughout house (October 2012)
• Added a 16x16 new deck patio (June 2012)
• New Hardwood Floors (October 2012)
• New Siding and Shutters (January 2013)
• Completed 500 sqft in basement (February 2014)
• Completed second bath in basement (February 2014)
• New paint throughout all the house (October 2012-February 2014)
• New Window treatments in new addition (November 2012)
• New Garage Door and Basement Door (February 2014)


The problem is the appraisal shows 1510 square ft of Gross living space. We concreted, insulated, central heat and air, electricty and added a full bathroom downstairs below grade on the home of about 485 square ft. The appraisal doesn't show this

The appraisal says basement total square footage is 960 and 50% is finished. Doesn't say anything about the square footage, bathroom, closet etc downstairs. This is why the appraisal is about 30K under what I was expecting.

Also, all 5 comps pulled in the area on my appraisal range from 86 dollars per square foot to 103 dollars per square ft. So they all averaged 93. dollars per square foot, but my home gets an average of 80 per square foot and that didn't even include the finished basement either?

My wife and I are so disappointed with this. Is there anything we should or can do? Will a different appraiser be any different? It was for an FHA loan so do they have different guidelines on how they factor the above grade square footage and below grade? Maybe they don't count it as total living square footage?

Should I put a bed, dresser and just make the downstairs another livable bedroom? Would that show more livable bedrooms and the second bath hence being looked at differently?

Thanks for the advice, we just do not know what to do.

Chris

 

[Michigan CG]

Basements are not included in GLA. This is appraisal 101. However, basements and finished basements have value and the appraiser should have attributed value to the basement and the finished basement area.

A lot of this depends on the bank or lender you are dealing with and most likely the AMC (Appraisal Management Company) you are dealing with.

Was the appraiser local, or from miles away? How much did you pay for the appraisal? What is the name of the AMC that hired the appraiser?

Did the appraisal "give" value to the basement and the finished basement area?

Did the comparable properties have finished basements that were comparable to yours?

It is really hard to decipher what you have without looking at the appraisal.

 

[Mike Kennedy]

"We concreted, insulated, central heat and air, electricty and added a full bathroom downstairs below grade on the home of about 485 square ft. The appraisal doesn't show this

The appraisal says basement total square footage is 960 and 50% is finished." =480sf

 

[Mountain Man]

Cost does not equal value. In the appraisal there is a line item adjustment for above grade "living area" and below grade basement area. Basement is basement, it is not and never will be considered "living area". Doesn't matter how nicely it is finished, Fannie/Freddie/FHA/VA defined what is basement and they make the rules for lending purposes.

For comparison an appraiser can use total building area, square inches, or even cubic feet for that matter. But for lending purposes gross living area and basement are clearly defined are what is used in the market. Therefore, that's how appraisers make adjustments based on their professional opinion.

 

[golandmark]

A common misunderstanding by borrowers is that the price per square feet used by Zillow, Trulia, other online valuation sources, and even realtors is a reliable indicator.The fact is that this is only useful when all the comps are similar in all amenities and site size/value is the same. The problem with the price per square foot method (that many realtors rely on and that borrower are led to believe is a valid method) is that it does not take into consideration the differences in properties. Price per square foot is not valid for most residential appraisals.

For example, two homes that are equal with the exception of site value can have vastly different indications for prices for sq ft.

The other misconception you have is that the market is going to award you value for dollars spent on updates and repairs to improvements. The market may expect and it may be common for homes to have new siding. Homes are expected to have good insulation. There may not be examples in the marketplace where the appraiser can extract a value for this amenity. The same applies to windows and flooring which you say are new but actually are not new if they are installed. They have begun to depreciate and buyers expect homes to have windows and flooring. They might have a contribution to value but it is almost never what you paid except on tv shows where the realtor with magical powers can tell you to the dollar what your home is worth based on hanging photos, painting and putting in new bath fixtures. This is fairy tale stuff on tv.

As the appraiser above me said, GLA is not finished area--GLA is finished area COMPLETELY above grade. It almost every market I have seen above grade and below grade are valued very differently with above grade finished area (GLA) being much higher. It is very difficult to extract what below grade area is really worth and much harder to determine what new windows, new siding, and new flooring are worth.

In summary:

1) GLA is above grade area
2) Price per square ft calcuation means nothing essentially in the sales comparison grid
3) Repairs and upgrades do not increase the value of your home at a dollar for dollar rate
4) A window and a closet with appropriate access to the home would generally indicate a room is a bedroom not placing a bed in a living area.

 

[golandmark]

so a disparity of five feet is the basis of one of your arguments? This amount of sq ft is negligible and not a substantial error. I would argue that it is not an error but an estimate. A bathroom below grade is not going to add value commensurate with cost in nearly any market. As stated, homes are expected to have insulation and probably central heat and air in your market. The typical buyer is not going to respond to this any differently to homes that have central heat and air in your neighborhood. I am not hearing anything that is actionable on your part. Here is is how you evaluate and understand your appraisal.


1) Does it accomplish your mortgage needs? lower rate, cash out, lower payment, etc...If the value does suit your needs and you get the rate and payment you want then your attitude should be "Who cares?" If you are selling this might be different but you are not right now (it sounds like).
2) Is it factually correct (differences of 5 square feet are not important)
3)Understand that it is not setting the value of your home in stone until you pay $400 bucks for another appraisal. It is one appraiser's professional opinion based on principles of substitution and conformity among other things. It does not become a matter of record but only applies to this transaction. Your home value is like a stock price it goes up and down.
4) Consider what you do for a living. Do people have misconceptions about how you do your job? This is true for the appraisal profession as well. Appraiser, generally, are very technical people who have done years of professional practice and thousands of reports and dealt with scenarios that you have never or ever will consider. It is not possible that you can duplicate his work, knowledge, and experience looking at Zillow or Trulia. If you really doubt the validity of his work then hire another professional or insist that your bank order a review on the property. Refer to #1 before investing your time, energy, and money in this endeavor.

"We concreted, insulated, central heat and air, electricty and added a full bathroom downstairs below grade on the home of about 485 square ft. The appraisal doesn't show this

The appraisal says basement total square footage is 960 and 50% is finished." =480sf

 

[chris288]

I appreciate everyone's reply and help with this. A lot of this info has come as news to me, along with my expectations being that I was told the biggest increase in value is adding square footage so we did.

I was completely unaware of the differences in loan value to above and below grade. So as I am thinking my 2000 square foot living area will be looked at as a 2000 square foot living area I was wrong as its really looked equally at 1510 square ft of GLA.

Its a shame how the general public are unaware of this. Not one person every told us about this from the get go. Realtor , contractors, etc.

Also when I meant that he didn't count the basement living area as square footage in the prior post, I meant he didn't seem to give it any $ value.

On the appraisal it shows 480 of it finished, just looked like he gave it zero value.

Thanks again for everyone's clarification. I just wanted to know if everything was as it should be.

 

[golandmark]

Good luck Chris. I hope the appraisal accomplished what you were looking for when you applied for the loan.

I appreciate everyone's reply and help with this. A lot of this info has come as news to me, along with my expectations being that I was told the biggest increase in value is adding square footage so we did.

I was completely unaware of the differences in loan value to above and below grade. So as I am thinking my 2000 square foot living area will be looked at as a 2000 square foot living area I was wrong as its really looked equally at 1510 square ft of GLA.

Its a shame how the general public are unaware of this. Not one person every told us about this from the get go. Realtor , contractors, etc.

Also when I meant that he didn't count the basement living area as square footage in the prior post, I meant he didn't seem to give it any $ value.

On the appraisal it shows 480 of it finished, just looked like he gave it zero value.

Thanks again for everyone's clarification. I just wanted to know if everything was as it should be.