Got Screwed on House Appraisal

[mww982]

So you realtor experts, what range of living area adjustments do you commonly use for comps?

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Depends on the area and how many homes have sold. If it is an area where there is a lot of movement I try to stay within 200 sq. ft +/-.

I take the square footage of the larger home, multiple that by the price sold, and then diving that number in half to make my adjustment.

Curious where you are getting your comps from since Texas is a non-disclosure state. Meaning closed sales prices aren’t a matter of public record.




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[Wits_End]

So you realtor experts, what range of living area adjustments do you commonly use for comps?
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Depends on the area and how many homes have sold. If it is an area where there is a lot of movement I try to stay within 200 sq. ft +/-.
I take the square footage of the larger home, multiple that by the price sold, and then diving that number in half to make my adjustment.
Curious where you are getting your comps from since Texas is a non-disclosure state. Meaning closed sales prices aren’t a matter of public record.

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This area had slow movement over the winter and with the appraisal being performed the first of May, there were limited perfectly matched homes. Instead of the appraiser raising that 200sqft difference to 400sqft, he went to a completely different style of neighborhood.

I don't quite follow your math, but if you meant you take the $/sqft of the sold comparable and divide by two, then the appraiser used $10 and you would have used about $50.



This is the way I chose my comps.
Sell price: I first found the average difference between the public last listing price and the official MLS sold price. I used the several MLS comps the appraiser used as well as the several MLS comps I was given when I listed the house, about 9 houses. I found the difference between those MLS numbers and the lowest Zillow/Realtor/Redfin number I could find.
Selection of comps:
I then found my own comparable properties that actually met USPAP standards and right off the line applied that average delta to the lowest listing price I could find. It was only $5-10k. Same neighborhood, <20% diff in sqft, normal time on market, similar style.
Adjustments:
I adjusted pools at $20k, gross interior differences at $20k(complete kitchen and bathroom remodel needed). I left everything else alone as the Quality of Construction I chose were all similar. No house would have a nicer fence, roof, or more bathrooms. I gave houses with nicer floors a $10,000 bump.
GLA and Lot size:
I found the best $/sqft and $/Lotsqft that reduced the variations among the adjusted values to the minimum, which came out to $39/sqft for GLA and $5/sqft for lot size, reasonable numbers.
Total:
My adjusted appraised value was $34,000 higher than appraiser. Maybe I'm off $10-15,000, I highly doubt it, but for the fun of it even if I was, the house would still meet the LTV of the lender and would be a few days away from closing and I wouldn't have brought it up.

[Wits_End]

You should have had buyers sign a appraisal addendum and any agent should have met the appraiser with their own comps and upgrades for your house. Good luck

Pretty sure it is not common for a buyer to sign an appraisal addendum stating they don't care what it appraises for. Maybe in the Plano/Frisco/McKinney market in the last few years, but not in a standard market. I would never sign as a buyer in a general market. In either case, this is the lender's LTV that it's failing, which is the entire reason for 3rd party. Without that I wouldn't have had a contract in the first place.

An appraiser can be challenged with realtor comps after the fact, but the appraiser is suppose to be independent of both parties. What you are telling me is that your realtor shows up at the house with the appraiser and starts feeding the appraiser their own selected comps for him to use? hmm, that doesn't pass the sniff test.

[Miller]

Ok, you have actually gotten some really good advice on this thread, but you seem to be reluctant to listen to it. Obviously, like everything you get some good and bad advice, but there are some things that could really help you.

The reason to get your own appraisal is to be in the "drivers seat" as you like to say. You now have had some Realtors tell you that your price is a challenge and a licensed appraiser tell you it is lower. Like someone mentioned $500ish is pretty cheap especially considering what the last appraiser came in at and the contract price.

This will allow you to show prospective buyers that a licensed appraiser has already come up with the price. This can help give them a peace of mind. This is done more in more in hot markets these days. It is just like getting your house inspected before you list it. I would rather know what to expect instead of a surprise like you are dealing with now. Yes, you can show this to the next appraiser... will they use anything off of it, who knows? I bet they look at it though.

Also, like mentioned a few times a list of any positive improvements is a really good idea to. It can't hurt and anything to make the job of the appraiser easier is a good thing to me.

Now of course you could hire an appraiser and it could come in low again. You really should disclose this appraisal to. That would stink, but it doesn't mean you have to set your list price with this appraisal or anything. It just gives you some working knowledge.

As to the appraisal addendum, that is pretty common around central Texas, and sometimes it is the only way to get your foot in the door to compete with other offers. Like you mentioned it may not be in your area. It really depends on the market. If you have multiple offers again I would see if one of them would add this to the contract.

The appraiser that you just had, may have really done you a favor to. It sounds like there aren't great comp's to pull from recently. Unfortunately, if the appraiser uses older comp's that can sometimes cause the appraisal to get thrown out by the underwriter... yes this happens. It is nothing like being a few days from closing and having an underwriter say an appraisal isn't valid.

Good luck. Sounds like you had some other offers so hopefully it won't be long.

[phoneman]

Would that help any more than piece of mind? Buyer lender is guaranteed not to accept seller paid for one.

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Yes because he will have to come up with the other 10k, on a conventional loan they usually loan 80% of appraisal then the other 10k comes out of his pocket also

[Wits_End]

Ok, you have actually gotten some really good advice on this thread, but you seem to be reluctant to listen to it. Obviously, like everything you get some good and bad advice, but there are some things that could really help you.

The reason to get your own appraisal is to be in the "drivers seat" as you like to say. You now have had some Realtors tell you that your price is a challenge and a licensed appraiser tell you it is lower. Like someone mentioned $500ish is pretty cheap especially considering what the last appraiser came in at and the contract price.

This will allow you to show prospective buyers that a licensed appraiser has already come up with the price. This can help give them a peace of mind. This is done more in more in hot markets these days. It is just like getting your house inspected before you list it. I would rather know what to expect instead of a surprise like you are dealing with now. Yes, you can show this to the next appraiser... will they use anything off of it, who knows? I bet they look at it though.

Also, like mentioned a few times a list of any positive improvements is a really good idea to. It can't hurt and anything to make the job of the appraiser easier is a good thing to me.

Now of course you could hire an appraiser and it could come in low again. You really should disclose this appraisal to. That would stink, but it doesn't mean you have to set your list price with this appraisal or anything. It just gives you some working knowledge.

As to the appraisal addendum, that is pretty common around central Texas, and sometimes it is the only way to get your foot in the door to compete with other offers. Like you mentioned it may not be in your area. It really depends on the market. If you have multiple offers again I would see if one of them would add this to the contract.

The appraiser that you just had, may have really done you a favor to. It sounds like there aren't great comp's to pull from recently. Unfortunately, if the appraiser uses older comp's that can sometimes cause the appraisal to get thrown out by the underwriter... yes this happens. It is nothing like being a few days from closing and having an underwriter say an appraisal isn't valid.

Good luck. Sounds like you had some other offers so hopefully it won't be long.

Thanks for providing some clarification as to the value in getting my own appraisal. I see your point and completely agree for future transactions, I just did not see how it helped in the current transaction and was just hoping to understand what they meant by that. To say that I have been reluctant to listen to all advice is simply a bad opinion. I am simply being cautious to immediately jump on every suggestion made. The goal in my questions is not to be controversial at all, but to truly understand. Sometimes it takes it being repeated once or twice for me.
I have learned quite a bit, with a special thanks to a few that have reached out and have greatly helped me understand the appraisal world.

Thanks.

[jcamp]

Seems like you have it figured out for the most part. I agree with the sentiment that unless these people don’t care about getting canned, no one in the process wants an appraisal to come in low. They probably are not in cahoots, you had a bad appraisal from the facts that i see, however stranger things have happened..

In that case, I’d say it could have helped to have buyers representation. If this is fishy as you say, could be because they knew it was FSBO and you had no one advising or representing you and felt like you would go for it.




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[jcamp]

Seems like you have it figured out for the most part. I agree with the sentiment that unless these people don’t care about getting canned, no one in the process wants an appraisal to come in low. They probably are not in cahoots, you had a bad appraisal from the facts that i see, however stranger things have happened..

In that case, I’d say it could have helped to have buyers representation. If this is fishy as you say, could be because they knew it was FSBO and you had no one advising or representing you and felt like you would go for it.




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Excuse me, seller representation.


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[glen]

I will say this about appraisal's comps. I'm not sure what comp stands for. I recently had one done on my house. The guy said it was a unique property but he would base it off comps.

I got the appraisal and went and drove to the comps just to make sure it was "comparable".
- I live on 10 plus acres overlooking the lake
-I am less than 3 miles to a major grocery store
-I am a large lot close to the City
-My place is 90% cleared of cedars and have the rocks where I can run a shredder

Now for the Comps
-all of them were at least 5 miles further from town
-not one of them overlooked the lake
-every one of them was cedar thick
-did not go inside the homes but mine has new master- new kitchen- and several updates in the process now.

Not sure how they come up with comps other than plugging numbers into a computer and using what the program spits out. I consider comparable to mean similar. In my recent experience it was not the case. I think it is really just a guy taking a guess and you are better off getting an area realtor to walk your place and give you a real market value. When I get done with my remodel this is exactly what I am going to do.

[Burnadell]

Glen, "comp" means comparisons or comparable sales. Not saying this was the case in your deal or anyone else's but often, there simply are no recent sales of similar homes nearby, and the appraiser is left with no option but to find what they can on which to base their appraisal. They will add or subtract to/from the comparable sale to adjust for the subject home's size/location/lot/quality of build, age, etc. to come up with an estimated value.

[Huntindad]

Travis CAD did this to me a few years ago when I protested. The comps they sent...one was within walking distance of Cedar Park high school...fancy yards, curbs, sidewalks... I live about 20 miles away in the sticks. The other comp was a house overlooking Lake Travis.

When I talked to the appraiser. He tossed them out and said...because there were not any comps near by... they had to expand and then just found some with similar square footage house. Gotta watch them...

[Wits_End]

Update

Cancelled contract with suspicious buyer and immediately accepted cash offer with new buyers. Since they knew of the low value appraisal they wanted an appraisal themselves and made contract contingent on it, I felt that was poor advice from their realtor who should have easily been able to value the home. Basically a very bad $450 gamble, but that's their loss. I knew the house was worth more than contract but since the last bad deal I was nervous as I'll get out. Inspection report came in nearly flawless, known older AC units and one plug wired reverse polarity. Appraisal came in above contract and we closed today. It was $19,000 above bad appraisal. Can't describe the relief, it's wonderful.

New appraisal used $40/sqft for adjustments and used neighboring houses as primary comps.

Thanks for all the great help, sure do appreciate it.

[AlaskaFlyerFan]

Congrats!

[rvd]

Good guy wins one!

[quackadikt]

They would have been beyond stupid to NOT have an appraisal done for themselves.

But glad you got it sold for what you wanted.


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