• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Undervalued Appraisal

Status
Not open for further replies.

Russ Gregory

Freshman Member
Joined
Jun 19, 2003
I built a 4300 sq.ft. Cypress log home on 5.27 acres in the third fastest growing county in the nation. The appraisal came in at a conservative($137.50 sq.ft.) $454,900.(2450 heated)Some features are:1200 sq.ft. cypress decks and covered porch,35 ft. of Corian countertops on solid oak cabinets,open beams,2200 sq.ft. oak flooring,marble floors and walls in master bath,tongue and groove pine on all interior walls,Andersen windows,10ft. poured walls,electric baseboard heat,masonry fireplace,etc.The underwriter refused the appraisal and found an appraiser that lowered the value to around $260,000.There are NO comparables(Cypress homes)other than Pine log homes which are much smaller and not near the quality.Could adjustments be used or is it permissable for their appraiser to ignore the obvious differences?
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
I think you've just run into the fact that cost does not equal value. Additionally, price per square foot has no bearing on anything until AFTER the land and all other external items have be adjusted out. Realtors talk about price per square foot - appraisers don't because it is absolutely unreliable and misleading.

I cannot give you any specifics regarding your situation. I haven't seen your house and I don't know your market area. It's possible what you have built is what is known as a superadequacy - overbuilt for the market area. The biggest and the best very rarely ever returns what was invested.

I know I've been brief, but I'm very tired right now and trying to head to bed. I'll try to write more in the morning and hopefully others here will give you more insight.
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Without seeing both reports and being familiar with the area I can not really comment on them. I do know from experince with log homes that cost does not equal value in my area. I have yet to do a log house that the building costs were even close to what the market value for it was.

Ryan
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Russ:

I will attempt to explain what *may* have happened to you.

Log cabins as mentioned seldom come in at what they cost to build. Sometimes they do appreciate over time faster than frame built, but not often unless there is a huge demand in the area for that specific style of home.

Picture a residential subdivision of near identical homes.
There are several offered properties, and a history of sales indicating a sales range from $200,000 to 250,000 in that subdivision. Most owners have lived there 3-5 years... many are 'moving on up' into bigger homes.

1. One owner leaves his home the way it is, fingerprints from the rug-rats and all.
2. One owner spends $85,000 on an extreme high quality kitchen and bath remodeling job.
3. One owner paints the interior and exterior and just cleans up.

They all list at $250,000 hoping for the best:
Probable outcome of listings
1. gets offer just below mid point of value range, but it takes a while for the offer to come in
2. gets offer of $250,000 but 'loses' some of invested remodeling money...
3. gets imediate offer at upper end of spectrum

Owner #2 has overimproved, it is "superadequate". It is not that folks would not like his sparkling new kitchen and bath, it is just that they are only willing to pay so much for his house when the freshly painted one with an only slightly older kichen is right down the block... Five years from now the difference between the 'slightly newer' kitchen and bath isn't going to make that much difference to the lender or the market.

The lender is asking an appaiser to value a property at a specific moment in time: the 'perceptiion of added value over time' that is one of the major appeals of a well constructed log home is oversold by manufacturers to builder/buyers of log homes, by comparison with what we typically see as actual RE-sales in the market.

Yes quality matters, but the granite counters and hardwod floors of the remodeled sale #2 are nice but not to the point of the typical buyer being willing to pay what the former owner spent to acquire that level of finish!

Lenders want to know what a home will sell for in a reasonable period of time: defined as typical of the market area... not "what you can get for the house if you are willing to take a few yeears to sell it".

Yes an appraiser should take quality and condition into account, but without knowing specifics of your market AND the effect log homes have on buyers in your market there is very little we can comment on that woudl be of assistance.

IF you are deeply concerned, or at risk as a result of this 'unwelcome' second appraisal, you may have to seek a different lender (good luck :rolleyes: ) or pay for another professional appraisal.

An appraisal is an opinion of value, opinions vary but should be based on sound appraisal practice. The rather large percentage/difference in value appears to indicate that one or the other appraiser may have been a bit biased...

Ummm was the 'higher' appraisal performed by someone hired by the person/entity who sold you the kit/home? <_<
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Just a note: I agree that Cost and Value is not the same. The question involves buyer perceptions, not the owner's perceptions. That is, what a BUYER would pay for the home as it sits. The fact that you built out of Cypress as opposed to Spruce or Pine (I would never build a Pine log home - too chancy for bugs, shrinkage and rot) and it cost more than the market would return (as per Appraiser 2), well, that happens.

You can overbuild a home and not get a return. For an extreme example, look at the very high dollar homes. They generally do not sell for cost, but take a large hit as the potential buyer will want to do a major remodel for their tastes.

I cannot answer your question specifically, other than as Lee Ann said, ask another lender and appraiser.

Roger Strahan, SRA, IFA
 

xmrdfghap

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Florida
Russ, hire your own appaiser. If you don't know of one go to http://www.naifa.com and look on their website or look on the Appraiserusa.com listing at the top of this page. Preferably find one person in your area that is on both lists.

Ask the appraiser what they will charge for an appraisal. Make sure they are charging enough to cover what you have already indicated is going to be a difficult assignment. Once you have an appraisal ordered, pay the appraiser in advance and tell him to be honest and give you the best effort possible. Ask him for a complete narrative report.....the "form" report is set up for loan officers to expedite the loan. A complete report (not a summary) will provide you with all the details of his research and will help you understand why and how he did something. The form report, by its nature, is a summary, and all you are getting is the results of his research in the form of a lump sum adjustment. For you to be satisfied that that number is a good number to adjust by, you need to be able to see HOW that number was derived.
 

Tom McDowell

Member
Joined
Jan 19, 2003
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
North Carolina
Originally posted by Greg Goodpasture@Jun 20 2003, 11:53 PM
Russ, hire your own appaiser. If you don't know of one go to http://www.naifa.com and look on their website or look on the Appraiserusa.com listing at the top of this page. Preferably find one person in your area that is on both lists.

Ask the appraiser what they will charge for an appraisal. Make sure they are charging enough to cover what you have already indicated is going to be a difficult assignment. Once you have an appraisal ordered, pay the appraiser in advance and tell him to be honest and give you the best effort possible. Ask him for a complete narrative report.....the "form" report is set up for loan officers to expedite the loan. A complete report (not a summary) will provide you with all the details of his research and will help you understand why and how he did something. The form report, by its nature, is a summary, and all you are getting is the results of his research in the form of a lump sum adjustment. For you to be satisfied that that number is a good number to adjust by, you need to be able to see HOW that number was derived.
Also ask the appraiser how many log homes he has appraised.
 

Rich Hahn

Senior Member
Joined
May 2, 2003
Professional Status
General Public
State
Colorado
Ouch!

"Log Cabin"

Ouch

Comparable sales tell the story..until you sell it no one really knows what it is worth.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks