Pearland Real Estate Expert

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How do you fight a bad appraisal ?

How do you fight a bad or low appraisal?  I have a listing and a contract on said house.  We had a contract on this house which I have very good comps on and the appraisal came in $4600 lower than the contract price.... The buyer is walking and I am left holding the bag on 2 houses.  I have never had a house not appraise.  Is there any way to fight one of the biggest banks appraisal?

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Comment balloon 33 commentsDanny Frank • July 04 2007 06:40AM

Comments

That's a tough one.  Pricing real estate is, IMO, an art form.  It's getting tougher and tougher these days with so many homes so overpriced and so few SOLD properties from which to base a price, not to mention falling prices.  The comps used to price may be way over market by the time the home sells.  This is probably an agent's toughest job. 

I've had agents get low appraisals on their listings and, usually, if they speak with the appraiser and give the appraiser the comps from which they priced the property, the appraiser will adjust upwards. 

Can't blame the buyer for walking when they're being asked to pay $XXX over appraised value. 

I've never had a low appraisal, but I have a secret system.

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 11 years ago
The most obvious answer would be to review the comparables used in the appraisal report, and look for inconsistencies, omissions, etc.  I once had an appraisal "miss" a free standing, two story garage apartment on the subject property.... Usually. to successfully challenge an appraisal,  it won't be a glaring mistake but an accumulation of small stuff.
Posted by David Petrovich (S.P.O.C.H. a 501c3 Charitable NP) about 11 years ago

Danny - Tough outcome to what otherwise must have been exciting.  

Furnishing the comps can help but if the Buyer wants to believe the comps, there isn't much you can do other than to furnish more comps.  What this appraiser is doing is in response to the slowed market -- picking the lowest comps s/he can find and it has started to happen (again).  What the bank will quickly learn, however, is that loans that don't close don't make anyone any money and they will be more reluctant to call on that appraiser the next time.   

Ask your buyer and seller if they would split the difference then see if the appraiser will accept some of the comps you provide.   For some markets, the said part about this is that the appraiser may be right -- there has been a slip in value in many parts of the country and the appraisers have been feeling the heat to make sure they are being conservative.   

 

Posted by Andrew Lietzow, MBA-Exec Dir Iowa Real Estate Investors Association - (IaREIA | Iowa Landlord Association) about 11 years ago
I represent the Seller.... And I ran comps again and still have lots of room... But how do you fight JP Morgan Chase... What really upsets me is the appraiser did not even call me to ask how we came up with the price.  Now my seller is in a pickle because they can't buy the other house either...
Posted by Danny Frank, The Real Estate Expert (Heritage Texas Properties) about 11 years ago

"I've never had a low appraisal, but I have a secret system."

OK now, why not share it with the rest of us Lenn?

Posted by Ed DeChristopher, CRS Fredericksburg VA (Fredericksburg Realty, Inc.) about 11 years ago
PLEASE.....
Posted by Danny Frank, The Real Estate Expert (Heritage Texas Properties) about 11 years ago

Whenever i`m stuck with a "LOWBALL"I tell the seller to pay for an independent one and than match ours with the buyers.

It`s helped many times in a situation like yours!

Posted by Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission. (Florida List For Less Realty, Inc. Broker/Owner. ) about 11 years ago

Few times I had them when bank orders appraiser that is not from my area!? You can ask them to revise the existing one or insist on getting new one done and offer to help with the cost. However if buyers get scared and run there is not much you can do. Just one more great thing to deal with in this business of ours! Have a great 4th !

Posted by Sonja Babic, New Bern NC, PRIME Realty NC, LLC (Sonja Babic/PRIME Realty NC, LLC) about 11 years ago

Danny:

If you wold have been working with a mortgage broker, the loan officer can appeal the appraisal at the lender and at the same time place the loan somewhere else simultaneously.  This is one of the many advantages with dealing with a good mortgage broker.

The problem you have seems you had a buyer who was going through a bank.  This is a one shot deal! They get turned down, you lose.

Let's peel back the skin of the onion a little further.  The real problem could be the buyer is weak. There may be a credit gliche, employment problem, reserves problem, too many inquiries that may not be seen at first pass but spooks any underwriter.  What many do not understand in this automated world is there still remains discretionary underwriting. I know in over my 26 years of originating that on more than one occasion I've had an underwriter cut a good appraisal just to t.d. the deal.  This is very common.

Again, an experienced loan officer can expose the problem to the underwriter at the beginning of the process and use LOXs or addendums or compensating criteria to offset the weakness to get the deal to close.  The bank's loan officer will get paid on Friday whether your deal closes or not.

Find an experienced loan officer in your area and work with him/her as a team and you will start seeing your money piling up in the bank, nothing but blue skies, more free time, early retirement and abrighter tomorrow.

As Mark Twain once said, "A banker is a fellow who will gladly lend you his umbrella when the sun is shining, but wants it back the minute it begins to rain".

I love the banks. I make my living on bank turndowns!  

BlOG ON!

 

Posted by » Bill Burress Nationwide Mortgage Originator (» Bill Burress Nationwide Mortgage Originator) about 11 years ago

Remember when telling an appraiser he is low you are telling him that he didn't do his job correctly and most people don't like that.  What we do here is to appeal to the underwriter to look at the comps that we send over. 

The seller won't come down $4,600 to sell his home today?  He will put it back on the market and hope he gets another offer at full price and the appraisal to match?   You are loosing two deals for $4,600?  You two can't come up with a comprimise?  For that amount of money its not worth putting people back in my car.  I would reduce my commission by that much and move on.

Posted by Gene Allen, Realty Consultant for Cary Real Estate (Fathom Realty) about 11 years ago
We offered, but the seller walked....
Posted by Danny Frank, The Real Estate Expert (Heritage Texas Properties) about 11 years ago
Usually we'll have another appraiser take a look and see why the first one came in so low. -Charles
Posted by Jacqulyn Richey, Las Vegas Real Estate (Prominent Realty Group) about 11 years ago

How about a really bad appraisel for a REFI... The house is remodel and had over 250k in improvements on the property by the owner w/in last 2 years... including a new, larger kitchen with honed black granite countertops, 2 sep sinks, new appliances, new designer family rm w/ 14 ft library bookcase w/ brass rail ladder, vaulted ceilings, cove lights, fireplace., expanded master bath 28 ft long - deluxe!, new carport, new 40 year roof, new cent AC/Ht, hot water on demand and so muchmore the works! 

This horse property w/ 6 stalls, barn, large storage rm, tack rm, work rm, arena etc came in at 465k at 175 sq ft... lower than any of the comps or sale prices that were dud homes with property no remodeling, original 1962 kitchens, smaller lots and 1000 ft less square footage... yet those other properties had $235- 400/sq ft...   The property should be at 675K conservatively..

 The owner lost the locked rate and the appraiser appeal (by the same appraiser) and is filing complaints w/ state board... but what recourse do they have? the rates have gone up now... The Obama plan?

This was not a good appraisal. off by 35%

Advise?

 

 

Posted by F B about 9 years ago

I just attemped to buy my first home.  I have excellent credit, had more than 20% to put down and had gone through the whole process (lawyers, inspections, etc.) The appraisal was done by an "approved" appraiser specified by the lender (a mortgage broker for GMAC.)  The appraisal came in quite a bit lower then the price the sellers wanted, but we re-negotiated a new price and signed a contract.  The new price was over the appraised value but worth it to me, as I had enough reserves to make up the difference.  Then 1 week before closing, the underwriter rejected the appraisal of their own person and knocked it down so that the selling price was unacceptable to the sellers and I could not come up with the difference out of pocket.  My deal is off and I feel like what the underwriter and appraiser did was underhanded and wrong.  If we had gotten the lower value the first time, we (seller and buyer) would not have spent money on lawyers, surveys, inspections and all the bills we are stuck paying for nothing... oh, yeah and I have to pay that appraiser 300 bucks for his "professional services".  Sorry but I DO blame the appraiser AND I also think it should be illegal for the underwriter to reject an appraisal since it was not an independent appraisal but done by the guy they specified in the first place.  OR they should have to pay for all the stuff we paid for based on reliance that what the appraiser said was accurate the first time.  This house is small (under 1300 SF) but sits on almost 4 acres and is very unique.  They said they could not find enough comps.  So what they are comparing to is not comparable, as the ones they used did not have a large lot.  Also now they are actively searching for a certain percentage of foreclosures to add into the calculation.  It sounds to me like they are falsely deflating values (exact opposite of what was going on before but still just as wrong.)

Posted by Theresa over 8 years ago

It is a complicated world out there and why the underwriter did what she did I don't know.  Hopefully you will be able to make it work.  Perhaps another bank may look at it differently.

Posted by Gene Allen, Realty Consultant for Cary Real Estate (Fathom Realty) over 8 years ago

I just had an appraisal for a property I want to purchase come in at $62,000, yes you are seeing correctly.  This is not a dump, in a good section of town, 3000 sq ft brick home with 2 fireplaces, hardwood floors throughout, 4 bedrooms, 2 1/2 bath on 2 acres.  Anyone know where I can buy a home like this for $62000?  Closest we could find in the area was a 3 bedroom 2 bath home on 1.5 acres, 2500 sq ft for $155,000.  What's wrong with this picture?????

Posted by Vicky over 8 years ago

Our appraisal came back 40,000 less b/c they included short sales and foreclosures in their comps!  Can you say stupid!!!???

Posted by Heather over 8 years ago

Need suggestions. Home is in the midwest in a nice wooded golf community. Our home has been updated since we bought 8 yrs ago & originally paid 275,000.  Our "taxed assessed" value is 320,000 , the banks appraiser returned an appraisal for 260,000, nothing but good things said on report w/ home in very good condition. This is a HUGE difference. We are currently protecting the tax assessed value, Q: Are we s.o.l. with the refi since the appraisal came in so low ?

Thanks, Arlan

Posted by Arlan about 8 years ago

CORRECTION::::    Sorry, we are PROTESTING tax assessed value !

Posted by Arlan about 8 years ago

Would love some advice on what I believe to be a bad appraisal for a refi.

Came in at $375K.  Should have been around $425K.  Lowest comp per SF on 5 houses was $131/sf.  So mine is at $107/sf which isn't even close.

So I'm sitting here going WTF!  and to top it off, not 1 comp was in the 3000+ sf range.  My home is 3400sf with many upgrades.  The stock home across the street with 2900sf just sold for $398,900 and was a complete builder special....no nice kitchen, etc.

Any advice?  I'm in the NH Seacoast area....

Posted by Kingofbytes about 8 years ago

I wear a few hats in the world of real estate.  I hold an appraisal license as well as real estate license.  I'm active in both but realized very quickly that there was more money to be made in "flipping" real estate.  I had the skill set from the appraisal side of things to realize I would have a niche.  So this statement comes from the prospective of one of my flips.  Obviously I can't appraise my own property but I do have the knowledge to know what to price it for, how long it will take to sell, etc.  Long story short it's happened multiple times on different homes.  I get the home under contract in just a fews days (it's advertised on the MLS so it has full exposure to the market).  Often times I have multiple offers.  Because it is a flip, the underwriters require 2 appraisals and it about 50% of the time one of the appraisals comes in low.  The appraiser legally can't talk to me as the agent because of the HVCC (Home Valuation Code of Conduct) but I do inform the appraiser via the MLS listing that there were multiple offers and 40+ showings in just 1 week on the market.  To me, and everyone else, that tells me that the market is willing to pay the price I'm asking.  An appraiser is supposed to REFLECT the market yet it's not happening.  The system is flawed as a result of appraisal management companies over charging the consumer for the appraisal and then hiring the cheapest appraiser they can find that will return the report very quickly.  The cheaper the appraiser is hired for, the more money the management gets (the spread).  Cheap appraisers = poor reports.  I think a lot of the better appraisers are getting out the industry for this reason.  That's my soap box for the night!

Posted by Nate about 8 years ago

Is there anyway to report a bad appraiser? I provided more recent and accurate comps to the appraiser and he is still refusing to use data. I can't understand why an appaiser would be ignoring data when the data he used was totally in accurate.

Steve

Posted by Steve about 8 years ago

Because he can is the best information I hear.  Not much you can do. 

Posted by Gene Allen, Realty Consultant for Cary Real Estate (Fathom Realty) about 8 years ago

I had an appraisal on my home to remove a hold on my mortgage (Chase thinks the value has dropped off the shelf). The appraiser was in and out in less than 15 minutes.  I thought that seemed a bit fast but shrugged this off.  When the report came it was full of inaccuracies and did not include one of the many improvements we had made to our home (windows, doors, gutters, garage door, fence, retaining wall, interior paint and trim, exterior paint, etc).  The comps used were the two lowest sales in the past three months.  

The value was listed just below the value Chase required to remove the hold.  When I challenged the appraisal with all of the factual inaccuracies and with other comps the result was the same, no value change.  The appraiser stated that the other comps had a better view therefore they were worth $65k more than the appraisal of my home.  

The moral of the story, the appraiser feels the need to save face when confronted with correct information so he sticks to his guns an screws the consumer that pays his salary.  I will be filing a complaint with the state board and hope to see this guy dealt with accordingly.

Posted by Michael almost 8 years ago

LOW APPRAISALS MEANS APPRAISER WILL GET TO DO IT AGAIN WHEN THE HOUSE GOES UP FOR SALE WITH A NEW BUYER DO THE MATH DOUBLE THE NUMBER OF APPRAISALS DOUBLE THE APPRAISER INCOME YOU BET IT'S A SCAM . KEEP IN MIND NOT THAT MANY HOUSES ARE UP FOR SALE SO THE APPRAISERS ARE STARVING.

Posted by HUGH over 7 years ago

I recently applied for a refi and was basing my expected value on Zillow and original price plus improvements and market conditions. The appraisal came in 12% low. I had paid a "non-refundable" mortgage application fee that would be credited at closing. But the low appraisal killed the refi. I have heard that an acceptable range of appraisal accuracy is +/-4%.

In reviewing the appraisal, I saw that the appraiser left out about half of the square footage of the house. It has a large addition integrated to an older cape (designed by an architect), with an in-law apartment on the first floor and two large rooms above. The appraiser left out the entire addition in the area, so the selected comps were based on comparison to the cape only with "amenity" adjustment for the in-law apartment. I think this is a gross error.

Your thoughts?

Posted by thinkfreeer about 7 years ago

One thing you can do is to go to a different lender and talk to them about what happened... You can use any lender to do the refi... You don't have to go with the one you used or your bank... I have found that by using a mortgage banker rather than a bank, you will get better results.

Posted by Danny Frank, The Real Estate Expert (Heritage Texas Properties) about 7 years ago

We bought a 5 acre piece of property in April of 2010 for $63,000. It was appraised a bit high because it is on a golf course. We are in the process now of building a house on the property, and an appraisal was done last week. It came in at $40,000 for the land... a $23,000 decrease in value in one year!!! I am livid and my bank had me write a letter explaining my concerns, and had the appraiser rework the numbers. He came back $2,000 higher... big deal. What are my options? The original purchase was with the same bank I am getting the construction loan from. This tells me that they were ok with lending me $63,000 for the land a year ago, but now they say its not that valuable??? HELP!!!

Posted by Scott Boone about 7 years ago

All of you are right and at the same time have a focus thats a little narrowed.  You need to look at the banking industry as a whole and understand the fact that its acting on its best behalf.  To sale a home new in distress is good for the bank and will reflect so in the appraisal to refi a home under any option is not good for the bank because of increased exposure so there hand picked team will short the appraisal.  The market has to be looked at from the inside out.  Banks esp. large ones are in a win win situation right now regardless of what the media is saying.  Remember all of the subprime mortgages had PMI.  Research the banking industry and you will get answers.  Also theres alot of very bad ( LAZY ) appraisers, appraising homes

Posted by Jacade almost 7 years ago

I have my house sold  and the appraisal has come back $46,000. lower than the selling price, and the buyers are in total agreement that the appraisal is way off the mark. What to do next?

Posted by Carol Summers almost 7 years ago

We are yrying to refinance.  We had a bad appraisal.  He used houses in lower income areas and houses that had not sold.  So we failed. What can we do?

Posted by Les Burbank over 6 years ago

In 4 years I have had 7 appraisals done on two houses.  I purchased, got two appraisals right in May 2009, which is when the HVCC got put in place.  That first set was with different banks and they were $40k apart.  The low one missed rooms, was a drive by appraisal and was horrible.  I filed a complaint with the Texas Appraisal Review Board, showed both appraisals to the reviewer and his idiotic comment was, 'I wonder what a third appraiser would have said.'. My comment back was that it probably would have been on the higher side because the bad appraiser missed entire rooms.

Since 2009, I refinanced twice and sold the house.  The quality of appraisals varies greatly and not nearly enough reporting to state authorities is done and the states do not have competent regulation boards in most cases that I have seen.

 

In today's world the appraisers now just default to +- 2% of the assessed value.  We should completely stop the appraisal process and use large scale city assessors who annually review property valuations and just set price per square foot regulations based on some kind of trim level.  That's all that happens now.  How on earth will we ever build new houses in undeveloped areas?  Oh, we aren't and people wonder why the economy is stuck in the granny gear.

 

Here's how to fix the problem.  Vote out incumbents, insist on real estate reform and stop performing real estate transactions if you can.

Posted by Dave over 6 years ago
 

Excellent information I will forward it if that is ok? thank you!!!

Posted by Dave Sullivan, Michigan Realtor with an investor viewpoint (Real Estate One) over 5 years ago

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