Problem with appraiser

[castcore]

I know there are alot of appraisers that visit this board so I hope I can get a fair answer.

About 2 weeks ago I hired an appraiser to appraise my home. The appraisal came in today and the value this person put is so ridiculously low that 5 out of 5 real estate agents in the area told me they will be able to sell the house in 24 hours if I put it on the market for the appraised value. And if not, they will buy it.

My question is, how can this happen? I am in California by the way. Do I have any recourse other get another appraisal? Why should I spend another 350 bucks because of an incompetent appraiser? I am not asking for over value here but when 5 Real estate agents who know the areas tell me they can sell my house in 24 hours or if not they will buy it for the apprasied value. Something is wrong?

 

[David Mullen]

You might ask the agents to support their opinion of value with information about some recent sales of comparable properties in your area.

Then, if they look reasonable, submit them to the appraiser and ask for a reconsideration of his or her opinion of value.

I am alway skeptical of agents because many will say and do absolutely anything to get a listing.

Having saying that though, they may be right but you will not know that until you see their data.

After receiving any data that they have to offer, drive by the homes that they say are comparable and compare them to the comparables used by the appraiser. At that point, you should have a pretty good idea of who is right and you can proceed from there.

 

[Tim The Enchanter]

Dave M has a good thought. The appraisal is almost entirely based on the comps in most cases. I would just add that MLS that the realtors use contains a fair amount of misinformation, sometimes sales that appear there never closed, or the price shown is wrong. Every other data source has some bad or missing information in it for that matter. Good appraisers will verify data on the comps through at least 2 data sources, and I'd suggest you do the same. Take the MLS data the realtor has, and compare it to some public records data from the internet or your tax assessor.

 

[Austin]

You answered your own question: “How could this happen?” Answer: I live in California. I had a buddy I grew up and went through college with. He moved to California in the 70’s. He purchased a home for $70,000. He came home for a visit in the mid 90’s and told me the value of his home had risen to $225,000 and he had just gotten an equity loan based on that appraised value. The last time I heard from him he called me in the middle of the night and wanted to borrow $2,500. He had to come up with that amount in 24 hours or lose the house. I asked him what happened. Seems he lost his job, tried to sell his house with a loan against it of $200,000 but it was only worth $125,000.
Seriously, in California unless you are getting the appraisal for a loan, what difference does it make. Just take the advice of the real estate agents and go for it. How do you think a house could go from $70,000 to $225,000 to $125,000 in about ten years? You ask: “What can I do about it?” Answer: Move out of the California fruit basket.

 

[castcore]

Well 2 houses down from me sold for 100k more then my appraisal. And I have 5 beds and 4 baths and this one had 3 beds and 2 bath. I have a panoramic view. Please the appraiser is an idiot in this case.

 

[Austin]

Castore: Tell us more. What was the purpose of the appraisal? Did the outcome of this appraisal have anything to do with you getting a loan? What do you think your house is worth? Tell us why you think it is worth that amount? Tell us how you found this appraiser? Is the appraiser certified? Did you hire the appraiser or did the lender send the appraiser? Did this appraisal have anything to do with a divorce or property settlement? What is the average ratio of combined total family income to average property price in your neighborhood? Based on what you have told us, this could be a fast sale appraisal for an impending bankruptcy or a divorce settlement. We need more facts from you so we can see what is going on here. You have basically accused this appraiser of being incompetent and brought into question the integrity of the appraisal profession, so to be fair give us a better picture of the purpose of the appraisal.

 

[Pamela Crowley (Florida)]

Castcore, you wrote:

Well 2 houses down from me sold for 100k more then my appraisal.

I hear something like this from almost every homeowner while I'm doing the inspection of their house. The RECORDED records of that sale, 99% of the times, are much lower than what I was told. Please check the true records and find out for yourself.

The saddest part is that many, if not most, Realtors will tell you whatever you want to hear and worry about reality later, as in after you've signed the listing and it doesn't sell right away. Will any one of them put that offer in writing with a deposit???? You don't have to agree to that written offer. The Realtors are also doing a HUGE 'spin' on how great the market is with nothing but the hype that most of the media is putting out. In many areas, this is simply not true. Ask those Realtors for copies of current listings, with the listing dates on them, and the comparable sales that they are using to base their pricing on. Use the sales that are within the past 6 months only. Drive by the listings and the sales, including the sales that the Appraiser used. BE OBJECTIVE and if you still feel that the Appraiser is wrong, ask the Appraiser to please look over the data that the Realtors provided. Keep in mind that a large amout of the data on Realtor MLS sheets is erroneous.

Ask yourself who stands to gain how much in all of this. The Appraiser received $350 and all his/her expenses come out of that. The Realtors stand to gain thousands if they can just get you to sign. Take a good realistic look at this situation and the individual motivations. I'll never say it can't happen but, it really is exceptionally rare to have an Appraiser come in low.

IF, after you do your own thorough research, you still feel that the Appraisal is way too low, do something about it.

 

[castcore]

I don't want to divulget too much info.

My zip code is 94030. And My house is on the hills. Great schools. Low crime, infact almost no crime neighborhood. My house has 5 bedrooms and 4 baths. Want to take a guess how much she appraised the house for?

The agents in this case has nothing to gain. In fact , 2 of them are personal friends and they know I am not selling the house.

 

[castcore]

The house is on Murchison Dr. 5 Bedrooms, 4 baths , on the hills with view into San Francisco Bay. 2 new full bathrooms down stairs. Done last year. House it self is about 3500 square feet, San Francisco Bay Area.

 

[Dee Dee]

Castcore,
Location of comparables is important (the closer to the subject property the better), but there are other factors which are equally as important.
Here are a few more questions for you.
Were the other sales on your street within the past year? If not, it is possible that they could not be used for that reason alone. The more recent the sale the more likely it will reflect the most current market value, assuming it was not a distress sale (divorce, foreclosure, etc.).
How does the square footage of your home compare to those other homes on your street? Larger? Smaller? Basement square footage is not as important as above ground square footage, and generally basement bedrooms and baths are not as significant as those which are on the main living area levels. Walk-out basements tend to command a higher value than those which are not walk-outs.
What is the style of your home compared to the comps that the appraiser chose? In my market area a ranch-style (all on one level) home sells for significantly more per square foot than, say, a two-story home, and a bi-level design is worth even less than a two-story.
How about the age of the home? Is your home older than those other sales you mentioned?
How do the views that you have from your home compare to the views of those other homes? In my area two homes can be right next door to each other and almost identical, yet one will have a superior view that could potentially command as much as a $50,000 price difference.
It is not always as simple as choosing two other sales on the same street and considering them as 'comparables', particularly in high-end neighborhoods where the homes are custom-built.
My last question is if the comparables chosen by the appraiser were within your general neighborhood. If so, take a very close look and be honest with yourself. Are they more similar to your home (square footage, design, views, age, etc.) than the ones that you had hoped would be used in the report? This is something only you would know, as no appraiser on this forum can possibly estimate a value based without a full inspection of the property and analyzing the neighborhood market.
Every appraiser knows that there are other appraisers out there that are incompetant, but most homeowners don't always realize that a home that sold right up the street isn't necessarily a good comparable sale to be used in the report. Choosing sales that require major $$ adjustments for any of the criteria that I listed above will often throw out red flags to the investor, especially if there are homes that require fewer adjustments because they are more similar to the property being appraised but are deliberately omitted from the report. For example, if the home being appraised is a 2000 SF, 2-story home built in the 1970's and all of the comparables are 3,000 SF ranches built in the 90's (even if they're on the same street), it would probably cause quite a commotion with the loan underwriters, especially if there are homes more similar to the subject property that are a few blocks away that sold for significantly less than the comparables chosen.
Choosing comparable sales, if done correctly, is much more complicated than most homeowners realize.