Opinion Request on Rebuttal of Appraisal (Tidewater)

[leslie7622]

Hi,

We received a very low appraisal value and we are in the process of submitting a rebuttal. The property received multiple offers and was sold within days of relisting (previous buyer was not able to close due to losing his job from covid 19). Previous appraisal was at LP of 675K from an appraiser in the town. Current appraisal was at 600k and did EXTERIOR ONLY (property was vacant and unfurnished).

The rebuttal we are submitting is below. Any suggestions for revisions? Our lender is loandepot.


Unfortunately we are dealing with a very unique property, but desirable multi family in
the desirable area of Passaic Park with very little to no like properties to compare it
to.

Compared to the subject property we have 287 Cleveland Ave in Lyndhurst which is
a similar neighborhood. Although, Cleveland ave like Lafayette is a completely renovated 3 family
that is smaller in size and sits on a smaller lot, this home offers similar beds
& baths and like Lafayette has a finished basement with a bath and has the legal qualification
of being a 3-family versus the 2-family comparable sales currently used in the report.
The current appraisal report used comparable properties are that are 2 family
(the subject property is a 3-family). Although adjustments were made for additional
bathrooms and building square footage, we believe that the legal qualification of an extra
unit holds more value than additional bathrooms and square footage.

Compared to the subject property we have Grace terrace which was already previously
used in the report.
(1) The current report currently uses an adjustment of +$30,000 due to
Grace terrace having a building square footage of 3795 sq ft vs the subject property's
building square footage of 2795. However, the building square footage of Grace Terrace
includes the finished basement (calculated when it was still allowed to include
the finished basement's square footage) while the subject property's square footage does not.
Without the finished basement, Grace Terrace's building square footage is approximately
2795 sq ft and the current $30,000 adjustment should not be considered in the comparison.
(2) The subject property also sits on more than double the lot size of Grace Terrace
(11830 sq ft vs 3750 sq ft) but no adjustments were made for this in the report.
(3) In addition, the subject property's roof, facilities, and interior finishes are all
new (2 new furnaces, 2 new hot water heaters, NEW ROOF, new doors, new windows, new
plumbing, new electrical wiring) while Grace Terrace did not yet the adjustment for
overall condition was only for $18,000 in adjustments despite the renovation list
(attached in current report) stating that total renovation work costed $295,000. We believe
that the adjustment should be much higher.
(4) The subject property also has additional finished space above the garage of
approximately 700 sq fit that Grace Terrace did not have that was not considered
in the comparison.
(5) The subject property also has 2 utility rooms in the basements that Grace Terrace did
not that was not considered in the comparison.
(6) The subject property also has an extra kitchen in the third unit that Grace Terrace did
not that was not considered in the comparison.
(7) The subject property also has a legal qualification of an extra unit (3-Family)
vs Grace Terrace only having a legal qualification of only 2 units (2-Family) that
was not considered in the comparison.


Lastly we have a 2 family which is 7 wood st in Garfield which has similar interior
square footage. Although a 2 family (vs the subject property being a 3 family),
it has an additional summer kitchen and full bathroom. It's also a town over and
is in a very similar neighborhood.

 

[gregb]

Please see 3(c) for the appropriate response and format to an appraiser invoking Tidewater.

https://www.benefits.VA.gov/HOMELOANS/documents/circulars/26_17_18.pdf

 

[glenn walker]

First Read Gregb-VA link on Tidewater.

I think your rebuttal is very clear concise and a good job, frankly better than what I see from some of our appraisers responses in reviews . With that being said In my opinion these types of properties are not suitable for Exterior and Drive by Appraisals but due to Covid-19 some States are not allowing appraisers to do full inspections. In my State we can still do full interior inspections and on a property like yours and If I was the appraiser I would have told the lender the property is unique or not a cookie cutter . BUT in New York I assume your wonderful Governor is not allowing full inspections ? So the consequences are values being established that are either to high or to low but typically what I have observed over the years is the Exterior only or drive by appraisal on either a highly updated, remodeled or unique property will be at the mid to lower point of value if there are no true comparables . Apples to Apple's and if there are no higher sales prices of similar properties than a Exterior is like Forrest Gump said - you never know what your going to get in a box of chocolates.

So with that said it looks like you are off by about 10%+/- which may or may not be the correct number BUT unless you or your Realtor can find two or three recent and similar sales comparables I doubt the appraiser is going to budge because all your points which may be valid are about what adjustments should have been made and even as a reviewer I can disagree with another appraisers adjustments BUT I can't tell him/her what those adjustments should be. Your lender has no control over the VA appraiser which is randomly selected by VA so the lender can't really help you with a VA . So the appraiser will read it and most likely do nothing with it. Or respond with get me some good recent sales comparables and nobody has any.

So now I am taking off my appraisers hat and putting on investors hat. First I have to determine the sellers motivations, but $295,000 of improvements sounds like he-she is in the tall weeds and probably did this all Pre-Covid-19 and now with Nation Wide Riots he is caught in a double trap. Initially he was only dealing with Covid-19 but now he is also dealing with something much worse . He knows he has to get this bad boy sold and closed like yesterday because the pool of buyers is now shrinking faster then during C-19 and he only has one thing going for him and that-is two weeks ago there where more buyers then sellers because the markets are out of balance and out of equilibrium and trying to find a sustainable trend.

Each week the real estate markets takes another head shot and more and more buyers and investors are now going to the sidelines. That's why multiple offers no longer mean the market is strong because often Real Estate Melt Ups happen 6 to 12 months before major tops. We saw that in 2007 when suddenly inventory shrank to extremely low numbers and people were standing in the front yard in bidding wars and prices actually increased but none of us knew the markets strength was a head fake. As as an- owner of rental properties as of last week suddenly 25% of our residential tenants quit paying rent and our eviction courts are closed and there is nothing we can do . So we let them stay because vacant properties attract vandals this has never happened in my 35 years. We also anticipate we may have to lower rents for the first time in our lifetimes because unemployment is going up daily. So as a buyer on a 2 or 3 three family property am I paying for Pre-Covid & Riot rents ? When next year the rents may be lower or worse the quality of the tenants gets bad due to unstable employment. So as investors and landlords there is not much blue sky right now accept interest rates are at 3%+/- but if we over-pay by 10% we really overpaid by 15% because if we needed to sell and get out we have costs.

OK so now if-after considering the markets going forward you still want this property you have to Convince the seller that he-she is now sitting on a Post-Covid-19 property and that the riots and looting in your State has made you decide the property is no longer worth $675,000 and that the appraised value at $600,000 may even be too high. If the seller says no way then you pick up your cards and walk away from the table because he may-not have all those buyers next week and lending guidelines are tightening up due to the millions of forbearance and late payments hitting the banks and now the game is over and maybe the appraiser did you a favor.

1- Sell Fear-The seller is sweating no matter how much money he has but he won't show it or he is not watching TV.
2- Don't blink-Your on a poker table.
3- The seller already lost one buyer and now he is going to lose another.
4- Never fall in love with a property and no inventory today may not be low inventory in the future.


Good Luck :

 

[Tru Red]

"EXTERIOR ONLY (property was vacant and unfurnished)."

My first question would be why was this exterior only? Put on a mask, wear gloves if needed and go do a real and complete appraisal.

"Previous appraisal was at LP of 675K from an appraiser in the town."

Second question would be how long ago was this? I'm guessing not more than 90 days? Was this (more recent) exterior completed by a local appraiser familiar with the uniqueness of the subject property?

So much seems so wrong here.

 

[leslie7622]

Hello everyone.
Thank you so much for the replies.


This property is actually in NJ. NJ qualifies real estate as an essential business and interior appraisals are allowed. The appraiser actually requested to enter the premises but the listing agent did not want to enter the premises with him and that seemed to rile him and he decided not to enter the property and blamed it on covid. Based on my lender's and agents experience talking to the appraiser, all are in the opinion that the appraiser is very arrogant. My agent called him this morning to discuss issues found in the appraisal report and the appraiser spent 95% of the conversation talking about his accomplishments and how good of an appraiser he is and said that he is not willing to look at any of the comps we have found because he KNOWS that the comps he found are the best. As for issues that we found, all he said that he has been doing this a long time and knows what hes doing.

Our next step is to get the VA sr. Staff appraiser to reconsider the appraisal value but there is a stupid covid19 condition stating that they only adjust up to 7% or $10k. (Thanks VA for watching out for your veterans during this time of crisis... NOT)

@glenn walker thanks for the advise. I definitely will try to talk to the seller but only after i show him that I exhausted all avenues of increasing the appraisal value. Hopefully this helps me in selling fear to the seller and get him to go down. Only thing is that we actually wanted him to give us 40k in repair credits for a crumbling retaining wall and other minor issues and he gave us a measly 11.5k after several days of haggling so this seller plays hard ball...

@Scott R. This current appraiser from central nj and the last appraiser was from the actual town of the property. Anyone who knows the town well knows that there are good parts and parts in the town.

I am prepared to walk away from the deal but its just frustrating that so much value has been placed one individuals opinion and unfortunately we got stuck with an unreasonable appraiser.

Since then Ive found more issues in the report.

1. Adjusted value per unit was calculated at 296k, 159k and 301.5k but actual value per unit used was 200k. Why is it so far off from the average of 245k?

2. Condition of the subject property and or the functional utility was rated as good and average respectively despite a new roof, new interior, new plumbing, new electrical wiring, new appliances, new lighting, new walls, new furnaces and hvac, new water heaters.

3. Finished basement rooms (additional 3) were not included in the total rooms

4. 6-car driveway in addition to 2 car garage not considered in the comparison.

5. One comp used was actually mixed use not residential (MLS listing was incorrect)- cant prove this yet though

6. 1 comp used was for a property sold almost a year ago 6/19 while the comp we proposed and he rejected was sold 1/20 and only 2 miles further away and in a similar neighborhood.

7. Utility room in basement was not considered and adjustments were made against the subject property for $5k for not having one while comps had a utility room.

8. Extra kitchen in 3rd unit of the subject property not considered in the appraisal report.

HOW IS THIS A FAIR PROCESS???

 

[leslie7622]

@gregb thank you for this. I sent this link to my broker and he didnt believe me at first and the lender didnt believe me either. I had to strongarm him to calling the VA to confirm that we need to do this. Were going to fill the grid/form with our comps and send it tonight or tomorrow morning to the VA. Would tomorrow be too late? We got the report late on 6/1. It is now 6/3 evening.

 

[glenn walker]

Hello everyone.
Thank you so much for the replies.


This property is actually in NJ. NJ qualifies real estate as an essential business and interior appraisals are allowed. The appraiser actually requested to enter the premises but the listing agent did not want to enter the premises with him and that seemed to rile him and he decided not to enter the property and blamed it on covid. Based on my lender's and agents experience talking to the appraiser, all are in the opinion that the appraiser is very arrogant. My agent called him this morning to discuss issues found in the appraisal report and the appraiser spent 95% of the conversation talking about his accomplishments and how good of an appraiser he is and said that he is not willing to look at any of the comps we have found because he KNOWS that the comps he found are the best. As for issues that we found, all he said that he has been doing this a long time and knows what hes doing.

Our next step is to get the VA sr. Staff appraiser to reconsider the appraisal value but there is a stupid covid19 condition stating that they only adjust up to 7% or $10k. (Thanks VA for watching out for your veterans during this time of crisis... NOT)

@glenn walker thanks for the advise. I definitely will try to talk to the seller but only after i show him that I exhausted all avenues of increasing the appraisal value. Hopefully this helps me in selling fear to the seller and get him to go down. Only thing is that we actually wanted him to give us 40k in repair credits for a crumbling retaining wall and other minor issues and he gave us a measly 11.5k after several days of haggling so this seller plays hard ball...

@Scott R. This current appraiser from central nj and the last appraiser was from the actual town of the property. Anyone who knows the town well knows that there are good parts and parts in the town.

I am prepared to walk away from the deal but its just frustrating that so much value has been placed one individuals opinion and unfortunately we got stuck with an unreasonable appraiser.

Since then Ive found more issues in the report.

1. Adjusted value per unit was calculated at 296k, 159k and 301.5k but actual value per unit used was 200k. Why is it so far off from the average of 245k?

2. Condition of the subject property and or the functional utility was rated as good and average respectively despite a new roof, new interior, new plumbing, new electrical wiring, new appliances, new lighting, new walls, new furnaces and hvac, new water heaters.

3. Finished basement rooms (additional 3) were not included in the total rooms

4. 6-car driveway in addition to 2 car garage not considered in the comparison.

5. One comp used was actually mixed use not residential (MLS listing was incorrect)- cant prove this yet though

6. 1 comp used was for a property sold almost a year ago 6/19 while the comp we proposed and he rejected was sold 1/20 and only 2 miles further away and in a similar neighborhood.

7. Utility room in basement was not considered and adjustments were made against the subject property for $5k for not having one while comps had a utility room.

8. Extra kitchen in 3rd unit of the subject property not considered in the appraisal report.

HOW IS THIS A FAIR PROCESS???

With lenders ordering exterior appraisals on two-three or four family units in my opinion it's not a fair process and it's your Governors issue- I have no idea what or how he-she is telling lenders what they can or cannot do and the truth is the appraiser is just doing what he-she is being told and exterior or drive by appraisals should not be used on these type of properties BUT I am a nobody.

 

[leslie7622]

@glenn walker i agree. Exterior only cannot be done. But shouldnt an appraiser be willing to review the issues i have stater above knowing that his appraisal could be inaccurate because he was limited to an exterior only appraisal?

 

[Terrel L. Shields]

Finished basement rooms

are not GLA so not counted

6-car driveway

I've never adjusted for a driveway and am confident even the most sophisticated multilinear program wouldn't be able to extract a reasonable value either.

Utility room in basement

ditto

Extra kitchen in 3rd unit

What utility or purpose would that serve?

You may have "issues" but the above ain't them.

 

[leslie7622]

@Terrel L. Shields thanks. Ill take those out of my rebuttal. For the 6 car driveway, the comp had a 6 car driveway and the appraiser adjusted 5k against us. Same goes for the utility room (he adjusted 5k against us because comp had a utility room and he assumed we didnt)