Reconsideration of value declined

[skc26]

I’m currently in the process of refinancing my rental property (ZIP code 76011), and I’ve run into issues with the appraisal that I’d like some input on.

The property is located in an entertainment district where short-term rentals are legally permitted, which creates a unique buyer pool and limited inventory. Although it’s legally classified as a single-family home, it’s actually an attached townhome and is relatively new (less than 5 years old).

Before the appraisal, I worked with a realtor to analyze comps. Based on nearby sales—including older homes from the 1960s selling for $235+ per sq ft—we estimated a reasonable range of $220–$240 per sq ft. The lender agreed with this range and provided pricing accordingly.

However, when the appraisal came back, the appraiser did not use any comparable properties from within my ZIP code. One of the comps was located more than five miles away, and the resulting valuation came in at under $190 per sq ft.

I submitted a reconsideration of value (ROV) with better comps from within the ZIP code. The appraiser increased the value by $10K, but still did not use any local comps and instead added a rental analysis that didn’t seem relevant. No location-based premium was applied.

I requested a second ROV. This time, I provided seven strong comps within 0.5–2 miles of my property—all townhomes, condos, or similar SFHs sold within six months, most within 30 days. I also specifically asked why no local comps were being used and why no location adjustments were made.

The lender has now informed me that the second ROV was declined.

At this point, I’m trying to understand my options. Has anyone dealt with a similar situation? What would you recommend as next steps?

 

[KeyWhiz]

My understanding is that the Reconsideration of Value process is pretty much a one-shot deal. I certainly don't recall ever having been asked to do so twice. Your best options from here are probably to either ask the lender if they would be willing to order another appraisal from a different appraiser, or find a new lender and start over.

 

[Surf Cat]

Although it’s legally classified as a single-family home, it’s actually an attached townhome and is relatively new (less than 5 years old).

It's hard to get the gist of the situation based upon your description. But if it were me doing the assignment, I would look for attached townhomes as I bolded above.

How many Townhomes are attached in your newer 5-year development? Do you own the land that the improvements are on? Are there HOA dues? Common areas or a community swimming pool? How could "the lender" agree to yours and your Realtor's price per square foot determination?

An appraiser is going to look for like for like sales that are comparables to your attached townhome. I wouldn't look at a 1960s single family residence owning the land and improvements as you described above as a competitive sale to what you have.

Maybe that's why the appraiser went so far out? Since your sale is only 5 years old, I would also research your sale 5 years ago in comparison to detached Townhomes to ascertain what the market perceived to be the difference between attached and detached Townhomes. That way, I could derive a % for that difference and probably adjust a detached townhome in your immediate area accordingly as I would want a sale in close proximity to yours. I would also want attached Townhomes like you have in the report.

Once again, just guessing based on your description.

 

[shrubberyvaluation]

I’m currently in the process of refinancing my rental property (ZIP code 76011), and I’ve run into issues with the appraisal that I’d like some input on.

The property is located in an entertainment district where short-term rentals are legally permitted, which creates a unique buyer pool and limited inventory. Although it’s legally classified as a single-family home, it’s actually an attached townhome and is relatively new (less than 5 years old).

Before the appraisal, I worked with a realtor to analyze comps. Based on nearby sales—including older homes from the 1960s selling for $235+ per sq ft—we estimated a reasonable range of $220–$240 per sq ft. The lender agreed with this range and provided pricing accordingly.

However, when the appraisal came back, the appraiser did not use any comparable properties from within my ZIP code. One of the comps was located more than five miles away, and the resulting valuation came in at under $190 per sq ft.

I submitted a reconsideration of value (ROV) with better comps from within the ZIP code. The appraiser increased the value by $10K, but still did not use any local comps and instead added a rental analysis that didn’t seem relevant. No location-based premium was applied.

I requested a second ROV. This time, I provided seven strong comps within 0.5–2 miles of my property—all townhomes, condos, or similar SFHs sold within six months, most within 30 days. I also specifically asked why no local comps were being used and why no location adjustments were made.

The lender has now informed me that the second ROV was declined.

At this point, I’m trying to understand my options. Has anyone dealt with a similar situation? What would you recommend as next steps?

What do you mean by "strong" comps. You talk about a mix of townhomes, condos, and similar SFH.

Why were these not in the first ROV,

Zip code might not mean anything, the appraiser should explain why they deem the more distant comps better.

$ per square foot isn't a good metric. The lender and realtor do not seem to be that experienced based on your comments.

Your best bet is to drop the lender, and get advice from someone with more competence in pricing.

 

[Tim Hicks (Texas)]

Attached town homes require attached town home comparable sales unless there are none available. Even closed attached town home sales that sold over a year ago would be more similar than 1960's detached homes. I also wonder why the second batch of sales presented were not presented the first time. However, the appraiser should have been local and had access to the MLS and any of those sales presented already. They would not have considered older homes built in the 1960's compared to a home built in 2021. Your agent did you wrong by considering these as "comparable" for your valuation. Town homes have different property rights than condos. A "unique buyer pool?" A property is only worth what it can get on the open market. There would be examples of this "unique buyer pool" with the presence of comparable sales of the same type.

 

[skc26]

It's hard to get the gist of the situation based upon your description. But if it were me doing the assignment, I would look for attached townhomes as I bolded above.

How many Townhomes are attached in your newer 5-year development? Do you own the land that the improvements are on? Are there HOA dues? Common areas or a community swimming pool? How could "the lender" agree to yours and your Realtor's price per square foot determination?

An appraiser is going to look for like for like sales that are comparables to your attached townhome. I wouldn't look at a 1960s single family residence owning the land and improvements as you described above as a competitive sale to what you have.

Maybe that's why the appraiser went so far out? Since your sale is only 5 years old, I would also research your sale 5 years ago in comparison to detached Townhomes to ascertain what the market perceived to be the difference between attached and detached Townhomes. That way, I could derive a % for that difference and probably adjust a detached townhome in your immediate area accordingly as I would want a sale in close proximity to yours. I would also want attached Townhomes like you have in the report.

Once again, just guessing based on your description

It's hard to get the gist of the situation based upon your description. But if it were me doing the assignment, I would look for attached townhomes as I bolded above.

How many Townhomes are attached in your newer 5-year development? Do you own the land that the improvements are on? Are there HOA dues? Common areas or a community swimming pool? How could "the lender" agree to yours and your Realtor's price per square foot determination?

An appraiser is going to look for like for like sales that are comparables to your attached townhome. I wouldn't look at a 1960s single family residence owning the land and improvements as you described above as a competitive sale to what you have.

Maybe that's why the appraiser went so far out? Since your sale is only 5 years old, I would also research your sale 5 years ago in comparison to detached Townhomes to ascertain what the market perceived to be the difference between attached and detached Townhomes. That way, I could derive a % for that difference and probably adjust a detached townhome in your immediate area accordingly as I would want a sale in close proximity to yours. I would also want attached Townhomes like you have in the report.

Once again, just guessing based on your description.

Thank you for your input. I should clarify what I meant earlier when I said the property is legally described as a single-family home but resembles a townhome. While the home is attached, it does not have a townhome association, HOA dues, or shared/common areas. I fully own the land it sits on and pay property taxes on it, just like a typical single-family home. I also have an individual land survey. The only real difference is that the structure itself is attached. In contrast, the townhomes referenced in the appraisal report all have HOA dues or association requirements, which makes them somewhat different from my property.
I understand that homes from the 1960s may not be the best direct comps, but they are located within walking distance and are selling at strong price points, which to me reflects solid buyer demand and confidence in this immediate area.

 

[skc26]

What do you mean by "strong" comps. You talk about a mix of townhomes, condos, and similar SFH.

Why were these not in the first ROV,

Zip code might not mean anything, the appraiser should explain why they deem the more distant comps better.

$ per square foot isn't a good metric. The lender and realtor do not seem to be that experienced based on your comments.

Your best bet is to drop the lender, and get advice from someone with more competence in pricing.

Thank you for your input. I have a follow-up question: if a property is located within a specialized area—such as an entertainment district within a city where tourism is a major driver and short-term rentals are legally permitted—shouldn’t that be considered in the comp analysis?

 

[Trihard]

Thank you for your input. I have a follow-up question: if a property is located within a specialized area—such as an entertainment district within a city where tourism is a major driver and short-term rentals are legally permitted—shouldn’t that be considered in the comp analysis

Based on nearby sales—including older homes from the 1960s selling for $235+ per sq ft—we estimated a reasonable range of $220–$240 per sq ft.

Attached townhouses do not get comped to single family detached dwellings.

Although it’s legally classified as a single-family home,

Classified by who? If its a townhouse, its a townhouse in appraisal world.

 

[skc26]

Attached town homes require attached town home comparable sales unless there are none available. Even closed attached town home sales that sold over a year ago would be more similar than 1960's detached homes. I also wonder why the second batch of sales presented were not presented the first time. However, the appraiser should have been local and had access to the MLS and any of those sales presented already. They would not have considered older homes built in the 1960's compared to a home built in 2021. Your agent did you wrong by considering these as "comparable" for your valuation. Town homes have different property rights than condos. A "unique buyer pool?" A property is only worth what it can get on the open market. There would be examples of this "unique buyer pool" with the presence of comparable sales of the same type.

Thank you for your input. I want to clarify a few points about my property and why I’m confused by the appraisal approach.
My home is attached and looks like a townhome, but it does not have any HOA, condo, or townhome association dues. I own the land and only pay property taxes, similar to a typical single-family home. When I referred to a “unique buyer pool,” I meant that demand is particularly strong within this entertainment district due to tourism and the fact that short-term rentals are legally allowed. For my comp analysis, I included a mix of townhomes, condos, and single-family homes to reflect that demand. What I’m struggling to understand is why the appraiser did not use any comparable properties within this specific ZIP code or the immediate entertainment district. I was able to find several relevant comps—across property types—that sold within the past year, many within close proximity. Given that, it’s unclear to me why the analysis relied on properties outside the area.

I understand I’m not an appraiser and may be missing something, but this raises a broader question for me: under what circumstances is a location-specific premium typically warranted, especially in areas with distinct demand drivers like this?

 

[Tim Hicks (Texas)]

If it is the Arlington Entertainment District, then town home sales from that area should have been considered. Although, there would need to be actual attached town home sales proof that they sell for more in that area. We would have to support adjustments with comparable sales of attached town homes. Did you consider that the market has been down in the past year in most areas? Also, the appeal of short term rentals has lost its luster over the past couple of years.