Unique Historic Home Appraisal for Refinance

[grossmont art colony]

I am trying to refinance my home in an upscale neighborhood in San Diego County, and I ran into an unexpected snag. Everything was going smoothly until it came time for the appraisal. I bought my home 3.5 years ago as a bank-owned foreclosure for $440,000. The home had been valued at $890,000 in 2006, so I think that the purchase price already reflected impacts of the market downturn. At the time of purchase, the home had some serious issues (inoperable septic system, substandard electric with post& tube wiring, plumbing breaks, and the separate garage/utility room was a total loss due to termite damage). Despite all these problems, the home generated 4 offers on its first day of being offered for sale, and I won a four-way bidding war to purchase (I was able to back negotiate the purchase price from $480,000 down to the eventual $440,000 because of the extent of repairs necessary to make the main house habitable). The point being that the home and the neighborhood are highly desirable.
Since that time, all of the issues have been resolved and various improvements have been made (bathroom & kitchen remodel, new doors & windows in sunroom, etc.). I have no intention of selling, so I do not care whether these improvements have increased the value of the home or not. I just want to refinance to take advantage of the great interest rates available now. Everything went smoothly with locking in a 3.25% mortgage rate until it came time to place a value on the home to establish the loan to value ratio, and that is why I am posting here.
My home is a unique historic property, located in the hills east of San Diego. The home was one of the early homes in the Grossmont Artist’s Colony, which was developed between 1911 and 1929. Nearly all of the early homes in the area were unique in one way or another, reflecting the artistic sensibilities of the first residents, the challenges of building on the rocky slopes of Grossmont, and the craftsmanship of an earlier age. My home is more unique than most, in that it is constructed of local fieldstone quarried from the area. The result is a craftsman style stone home with 18” thick stone walls that is built both on top of and surrounding a bedrock outcropping. The original craftsmanship was excellent, and the stone walls have no cracks or other issues; the interior lathe and plaster walls are also free of cracks (not bad for a 85+ year old house!). The home is listed in the California historic home inventory, and is considered to be one of the most interesting properties in a very interesting neighborhood. The main house is ~1600 sq ft; there is also a guest house, and a new separate garage/ utility room on the ~½ acre property. The house sits near the crest of a hill with views that include San Diego Bay, Mexico, the local San Diego mountain parks, and the cross on top of Mt Helix. The property is terraced (5 levels) with stone retaining walls that match the house and has nice landscaping. In other words it looks good both inside and out these days.
The lender had a stable of five appraisers that they use, but because there were no comps for a home such as mine, none of them was willing to put a value on the home for the purposes of my refinance. Apparently none of them thought that their appraisals would pass review. This seems absolutely crazy to me. The dollar figure of the mortgage (~$325,000) was not part of the discussion; none of the appraisers were willing to assign ANY value to the property. Please note that there are 5 other stone homes in the former art colony and many historic homes (i.e. in this neighborhood the home isn’t “that” atypical), but none of the stone homes have been for sale in the last twenty years. The lack of comps was cited by the appraisers as the reason they could not assign a value. My mortgage broker tells me that I am going to have a hard time finding a lender in the current market because of the unique nature of my home. I have since been told that most atypical homes have the same problems in today’s lending environment, and mortgage lenders are only willing to lend on “safe” properties that are of similar quality and construction to other homes in the area.
So my questions to this forum are:
Were these appraisers just lazy, or do you think it was associated with lender preferences?
Can an appraisal be done on a home such as mine?
What steps would be necessary to ensure that the appraisal will be acceptable to a review board?
I would still like to drop my interest rates by refinancing. Any advice on next steps?
Thanks for any help!

 

[PLCG]

It is the lender that hires the appraiser so it matters not that there are appraisers who can value your home. You can't choose the appraiser, or hire your own appraiser - the lender does that. You may need to search for a lender who will hire a qualified appraiser.

Maybe someone from your area will hop on and be able to give you some direction.

 

[Lee Lansford]

1st, yes, your property can be appraised for market value.

2nd, based upon what you offered, the appraisal would likely quite complex and the result may be one where the number and size of adjustments (comparing your property to others) may be "excessive" for some underwriting "guidelines".

3rd, if you bank at a local institution (perhaps a credit union?), such may be your best opportunity to refinance.

 

[CANative]

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[Ca Ar Independent]

I live and work in an area which is also very unique and most properties are unusual, many are historic and most require exceeding guidelines for one reason or another. Ideally, data should be similar, proximate and recent. In the absence of relevant sales that are all of these, I use data that are each of these. Your best bet will most likely be to work with a local bank that knows your area and has a loan committee comprised of local folks. The larger lenders just don't seem to want to touch anything that is out of guidelines and while they might tell you 'No problem" up front, it sounds like you have hit the point where it no longer works. Your house can be appraised, and a credible opinion of value may be obtained. I see this frequently, but it will take some creativity and perseverance on your part. Curious that you mention "refinance". Is there currently a loan on the property and is this the lender that has the appraisers that can't find comps?

 

[NorthTexValuation]

1st, yes, your property can be appraised for market value. 3rd, if you bank at a local institution (perhaps a credit union?), such may be your best opportunity to refinance.

You need to get very "local" with a lender, preferably one that is located close to your neighborhood that really understands your market. Small local bank or credit union is your best shot here. Get past the "loan officer" and speak with the branch manager.

Talk with some Realtor friends and see if they know any good local appraisers that specialize in your type of property in your neighorhood. If so, provide the appraisers names to your lender.

You are not allowed to select an appraiser, but you are not prohibited from "passing along a name" of one or more appraisers to the lender. Then its their choice whether to use them or not.

This can be done, but everything needs to stay as local as possible in order to get a credible and accurate appraisal on your home.

Good luck.

 

[Michigan CG]

Get rid of the mortgage broker and go to a local bank or credit union. Your statement that the mortgage broker uses five different appraisers and none of them cold appraise the property speaks volumes about the quality of the appraisers they utilize.

All properties can be appraised, it is just a matter of the appraiser having the competency and confidence to do so.

http://appraisersforum.com/showthread.php?t=183931

 

[Paul Isolda]

The larger the lender you go to for this type of property, the more trouble you are going to have. They want the loan to fit neatly into their underwriting guidelines so they can package it easily to sell to the secondary market. A complex appraisal with no comparables that does not neatly comply with their guidelines kicks the loan out of the package. The appraisers that were approached about it know this and know an underwriter with the giant lender mentality is going to make them insane with all the stipulations they give the appraiser to try and make the appraisal fit the guidelines. You have to find a lender who understands the uniqueness of the property and that the appraisal is not going to fit neatly into the guidelines. Preferably a portfolio lender but they do not have to be. Good luck.

 

[Smokey Bear]

Did any of the appraisers actually DO an appraisal? I'll bet they all turned it down due to an extremely low fee for an extremely complex property. I highly doubt that 5 different appraisers ALL stated that they 'couldn't assign a value' to the property; it sounds made-up to me. Any property can be valued, given sufficient time and a sufficient fee to make it worth the headache.

 

[grossmont art colony]

I live and work in an area which is also very unique and most properties are unusual, many are historic and most require exceeding guidelines for one reason or another. Ideally, data should be similar, proximate and recent. In the absence of relevant sales that are all of these, I use data that are each of these. Your best bet will most likely be to work with a local bank that knows your area and has a loan committee comprised of local folks. The larger lenders just don't seem to want to touch anything that is out of guidelines and while they might tell you 'No problem" up front, it sounds like you have hit the point where it no longer works. Your house can be appraised, and a credible opinion of value may be obtained. I see this frequently, but it will take some creativity and perseverance on your part. Curious that you mention "refinance". Is there currently a loan on the property and is this the lender that has the appraisers that can't find comps?

Thanks for the response and the encouraging words about the nature of an appraisal in my type of neighborhood...
In answer to your question, yes I have a mortgage on the home now, but my rate is at 5.25% (original rate from purchase 3.5 years ago). I was shopping around for the best rates on the refinance, and I went back to the guy I worked with for the original mortgage. I had no idea that the appraisal would be such an issue. One of the avenues I will now explore is to go to Chase (current mortgage holder) to see what I can get through them. When I checked their rates online they were about a 1% higher than the rate I locked in with the mortgage broker.