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I just did a home appraisal for refinance, but what I got is pretty low unfair appraisal from bank ordered appraiser, Below are some facts, what can I do since I'm very very frustrated with such kind of unfair appraisal.
1. Inappropriate comparables. For the 7 comps used in the report, 4 are closed sales, 2 are pending/contingent, and 1 is listing. All the 4 closed sales are abnormal sales: 1 short sale, 1 REO, and 2 trust sales. For Comp 2, which is a short sale, there are 6 recently sold houses within a couple of blocks comparable to my house, sold from $725k to $855k. but the appraiser choose the lowest REO home for $680k? Same problems exist for other Comps which used the lowest price.

2. The school district are not considered. The high school of my house has an API of 869, and is the few public high schools in California to receive a distinguished GreatSchools Rating of 10 out of 10. At least 3 Comps in the report locate in an inferior school district. Does school district should be considered in appraisal?

3. Discretionary value adjustments. The report says, "The opinion of value for the subject is below the predominant area values due to average overall condition and location on a busy street." Compared to Comp 2 and 7, The street of my house has less traffic and noise because of the central divide and extra bike and street parking lanes, but no favor adjustment was made. The house is within walking distance to distinguished schools, community center, library, shopping center and parks (includes one national park).

4. Some lot size not adjusted for my house to compare with smaller size house, but the price was adjusted when compared with larger house.

Any one know what can I do for such unfair appraisal? Any regulation or code for such appraisal? Thanks in advance.

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if one can get a variety of houses near you via REO, short sale, whatever, then they are part of "the market." especial... (more)

calvinandhobbes (Jul. 12, 2010 @ 12:32p) |

I did the same, I disputed the appraisal with the bank. They had a formal process to do it and it worked out well secon... (more)

fahz (Jul. 12, 2010 @ 2:20p) |

Unless it effects the LTV ratio and jeopardize the refi, you should be thankful that the appraisal is low.
When I was doi... (more)

wolf17 (Jul. 12, 2010 @ 4:31p) |

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free2go said: Inappropriate comparables. For the 7 comps used in the report, 4 are closed sales, 2 are pending/contingent, and 1 is listing. All the 4 closed sales are abnormal sales: 1 short sale, 1 REO, and 2 trust sales.

So if the appraiser would have found comparables in your favor, ignoring those 4 that you don't want, then would that be a fair appraisal? You have to take the good with the bad. If you have REO and short sales in your area, chances are, your home isn't worth what you think it's worth, which is why we have appraisers to give home owners the wake up call they need.

We put way too much stock in value these days, which is why home prices ended up being so inflated to begin with.

I've had similar issues. My house was remodeled and had a 2-car garage. I'm not talking a 20k remodel. I'm talking 150k, new roof, new heating, new a/c, new insulation, new windows, new kitchen, new plumbing, new electrical, new you-name-it, we got it.

Some of the comparables had not been updated since ~ 1970.

No adjustment for 2-car garage versus 1-car garage.
A 10k adjustment for the "good condition".

I assume you mean "trustee sale", not "trust sale". These really should not be used in the comparative approach. trustee sale prices are not related to true market value by any clear formula. Could be 5% below market, could be 40% below.

You can ask for a second appraisal, and you need to pay for it. Or go to a different lender.

It gets really nasty if you're getting FHA financing. Then you're stuck with that crappy appraisal for 6 months, if I recall right.


And yes, there is a web page where you can report an incompetent appraiser but don't waste your time.


Your situation differs from mine because I was selling the house to a 3rd party in an arms-length transaction. A refi, especially a cash-out refi (not sure if that's your situation) is always scrutinized more heavily.

p.s.
What's the name of the lender? Did you go directly to the bank or through a broker? Key word: retail lending vs wholesale lending. Don't go through the 'independent' broker. Those loans are scrutinized more heavily that those originated in-house.
I don't even sell houses any more to people who indicate that they work with such an external broker. It's part of my counter offer that I tell them to use one of the following loan sources, at least as a back-up.

You always have the option to order a second appraisal. However, be sure to use an appraiser from a list recognized by the lending institution. Have you spoken to the appraiser and ask why he appraised it so low? If you believe that an appraisal is simply not an accurate representation of the property's value, and the appraiser is not willing to listen to your concerns, you can go to your state's licensing agency for appraisers and file a complaint.

Lenders took a beating extending credit to all who asked based on inflated appraisals. Now, the pendulum has swung the other way, and banks are being very cautious with their appraisals and who they land money to. Can you blame them? Whining about the "unfairness" of this will get you nowhere. Grow up. Life is unfair.

I went through a broker for the refinance. I send email to the appraiser and she won't reply, that's why I got frustrated and wonder what the next approach to the appraiser, I don't really care much about the refinance for now, but do care much to the attitude from the appraiser. Thanks.

I just got an appraisal that was lower than expected on a refi. Thats the reality of the current environment, although the appraiser did exclude REOs, trustee sales, and other non-arms-length transactions from his comps.

You just have to deal with it. I'm coughing up another $12k for the refi so I can get the LTV back under 75% (this is an investment property).

Lower than expect is accepted to me, the bad part in my appraisal is 4 usual sell out of 7 comp were used, non of other 3 were not real closed and their sell price is the lowest. I just wander any rule or guidline for them to how to choose comps or the appraiser just choose whatever they want.

free2go said: just choose whatever they want

Q: What is the difference between an appraiser and a terrorist?
A: You can negotiate with the terrorist.

Not all refinace requires an appraisal. Wells Fargo for example, will refinace existing loans w/o one.

RailroadTrack said: free2go said: Inappropriate comparables. For the 7 comps used in the report, 4 are closed sales, 2 are pending/contingent, and 1 is listing. All the 4 closed sales are abnormal sales: 1 short sale, 1 REO, and 2 trust sales.

So if the appraiser would have found comparables in your favor, ignoring those 4 that you don't want, then would that be a fair appraisal? You have to take the good with the bad. If you have REO and short sales in your area, chances are, your home isn't worth what you think it's worth, which is why we have appraisers to give home owners the wake up call they need.

We put way too much stock in value these days, which is why home prices ended up being so inflated to begin with.


I agree with this. Not sure I understand the OP's logic for discounting all those properties, they reflect the actual real current value. If they were somehow worth more, things would be different. When people can't sell things and are forced into these circumstances it is because things are priced too high.

Since you are doing this for a refinance, the bank is skittish and wants to determine the actual current value of the house in reality, not in dream lalaland where the banks and homeowners have been living for many years.

Too bad you don't live in a different state. In Texas you could at least use this to help fight property tax appraisal increase, but I don't think it matters in California.

You call those 4 sales abnormal, but when everything is abnormal it becomes the norm, and that is why you got appraised where you are... Next time I would suggest you do a better job researching your neighbors before buying a house. I would say full financial reviews on the nearest 25-30 comparable houses, perhaps even ask them to post a bond to guarantee they can maintain their mortgage and any market fluctuations. This would help prevent a repeat of this in the future.


I would say you are probably lucky you didn't get hit with an even lower value on the house.

You should talk to the appraiser, and if that doesn't work, order a second appraiser. If that doesn't work too, wake up and realize that your house's value is not as high as you think it is.

kilacam19 said: you can go to your state's licensing agency for appraisers and file a complaint.
Probably not work. You can't just file a complaint because the appraisal price is not as high as you want it to be.

Don't contact the appraiser, he is not working for you and I would be shocked if he responded to your emails/calls. Put your case together on paper and submit it to your contact (loan officer) at the lender asking for an appeal of the appraisal. Be as detailed as possible, but #1 in your post is mainly all they will be concerned about. The appraiser SHOULD be using the MOST RECENTLY CLOSED comps that are the closest in proximity, size, age, and condition to your home. If he did not do that, then you might have a case. For example, if your home is 2800 sq. ft. and he compared it to a 2000 sq ft. home that sold 6 months ago, when there is a 2600 sq. ft. home sold 3 months ago that he didn't use, you have a valid complaint. your LO will give your "evidence" to the underwriter and if they feel your claims are justified, they will ask the appraiser to revise the appraisal to use the other comps. I have done this succesfully on a refi last October.

aeiouy said: RailroadTrack said: free2go said: Inappropriate comparables. For the 7 comps used in the report, 4 are closed sales, 2 are pending/contingent, and 1 is listing. All the 4 closed sales are abnormal sales: 1 short sale, 1 REO, and 2 trust sales.

So if the appraiser would have found comparables in your favor, ignoring those 4 that you don't want, then would that be a fair appraisal? You have to take the good with the bad. If you have REO and short sales in your area, chances are, your home isn't worth what you think it's worth, which is why we have appraisers to give home owners the wake up call they need.

We put way too much stock in value these days, which is why home prices ended up being so inflated to begin with.


I agree with this. Not sure I understand the OP's logic for discounting all those properties, they reflect the actual real current value. If they were somehow worth more, things would be different. When people can't sell things and are forced into these circumstances it is because things are priced too high.

Since you are doing this for a refinance, the bank is skittish and wants to determine the actual current value of the house in reality, not in dream lalaland where the banks and homeowners have been living for many years.

Too bad you don't live in a different state. In Texas you could at least use this to help fight property tax appraisal increase, but I don't think it matters in California.

You call those 4 sales abnormal, but when everything is abnormal it becomes the norm, and that is why you got appraised where you are... Next time I would suggest you do a better job researching your neighbors before buying a house. I would say full financial reviews on the nearest 25-30 comparable houses, perhaps even ask them to post a bond to guarantee they can maintain their mortgage and any market fluctuations. This would help prevent a repeat of this in the future.


I would say you are probably lucky you didn't get hit with an even lower value on the house.


You are right, to some extent, but the OP says the appraiser used ONLY short sale, REO, and foreclosures for the comparable closed properties. Unless his area is 100% distressed properies, this is likely not an accurate appraisal. Sounds like the appraiser should have used at least one, maybe two, "normal" sales to get a more accurate valuation.

Also, OP, if it has been a couple of weeks or more since the appraisal was done, check up on the pendings he used to see if they closed yet and what they sold for. Since they are the most recent, they will give you the best picture of value in the current market.

I'm in the same boat; I had a an an appraisal done recently and I'm currently disputing the valuation with the lender.

The appraiser took a foreclosure from 3 miles away and included the 2 lowest priced comparables in the area (which weren't the most recent either). 1 of the homes a smaller version of my home however, the sq footage was misreported by over 400 sq ft; no finished basement so it made the price per sq ft skewed in the banks favor. I am realistic; I don't expect to have gained 120% equity on this home but I do expect a FMV for my refi

Why don't you call/email the appraiser and ask him to reconsider given your points? And then say you were thinking of something like $xxx,000 as the value.

free2go said:
2. The school district are not considered. The high school of my house has an API of 869, and is the few public high schools in California to receive a distinguished GreatSchools Rating of 10 out of 10. At least 3 Comps in the report locate in an inferior school district. Does school district should be considered in appraisal?


Two reasons school district should not get factored in. First, to people without kids, it's utterly irrelevant. It may be a selling point for buyers with kids but that's it. More importantly, it'd be double-dipping. It's already accounted for in the price of homes in the market. So comparables usually take care of it. To make sure, just look at valuation difference between similar homes right across the school district line between a good school district and a so-so one. Valuations are VERY different (and so are RE taxes usually lol). So making another metric to take that into account is not necessary. You home would be worth much less in a less good school district. IMO the comparables in another school district show that the appraiser was sleeping at the wheel as that's a major factor in home prices.

So real problem here is not accounting for school district but choice of comparables. You have little control over that and usually can only hope appraiser is fair. I think appraisers working for banks directly tend to protect themselves these days (and with blessing from banks) by giving low appraisals resulting in high LTV %. The banks won't fault them for being over-conservative and they stay in the good graces of the ones giving them work.

Adjustments are always kinda arbitrary. Is having a deck worth as much as finished vs. unfinished basement, etc... Often bigger lot sizes don't matter much unless very different because price of home depends more on the construction than the land in many residential areas. Still it should be a consistent adjustment.

One thing is certain, you will never look qualified by the lender to dispute an appraisal. The (possibly valid) arguments of Joe Homeowner unhappy with low appraisal vs. that of professional appraiser don't carry any weight with underwriters. So your best (and IMO only) recourse is to order (at your own expense) and independent appraisal from an appraiser accepted by lender. If it comes back way higher than the bank's, try to dispute their initial low appraisal with the new one.

The appraiser and the banks may know that there is a substantial inventory of bank REO that will eventually flood the market and drive prices down even further. The state of CA is bankrupt, there is little outlook for job growth, taxes are very high, and there are not enough qualified buyers that can afford an $800,000 house. Many economists believe that residential home prices must drop an additional 30 - 50% for the market to become sustainable. I'm in Hawaii with housing prices even higher than CA and nothing is selling with the exception of a few bank owned properties. There is an estimated 2 + years of inventory. Prices fell 30% in the past year and they must fall much further before they stabilize.

All that is required to become a real estate appraiser in most places is a high school diploma, about five community college courses and a short exam to prove you're not a complete idiot and a state filing fee less than $100. It's too easy to become an appraiser, just like it's too easy to become a real estate agent.

OP, there is a good chance that your appraisal is low. But so what?

1. You are lucky you are not selling,

2. Why do you need the appraisal for? Refinance? Then what's the problem? Can't put enough from your pocket to meet the low appraisal? Then probably should not refinance.

Appraisal for refinance is almost inconsequential for asset valuation, unless you are trying to cash money out to float your other needs. If that's the case, then you have other problems.

If you are trying to lock in a good rate, then perhaps shopping around for another lender might be a good idea. A better idea is to have enough equity in your house.

As for me, I would not put even 1 cent above required level for equity. Financing is cheap, so finance at 100% of allowed limit (that may be 80% LTV, 90% LTV, or whatever).

greling said: All that is required to become a real estate appraiser in most places is a high school diploma, about five community college courses and a short exam to prove you're not a complete idiot and a state filing fee less than $100. It's too easy to become an appraiser, just like it's too easy to become a real estate agent.

It doesn't require much brain to do an appraisal, and it also doesn't pay well (after the government changed the rules).

It's easy to become a real estate agent, or but it's not easy to have clients and earn money as a real estate agent.

Had a similar case recently with a new home construction loan. First bank went with an appraiser that valued my home at 400k. Disputed with the appraiser, who at least was friendly, only to get it up to 450k, using some very shady math to come up with that. Finally bit the bullet and applied with a different bank, and the new appraiser valued it at 600k. I say it all depends on the bank and the appraiser, and unfortunately right now it's a crap shoot.

I just got appraised 50K higher than I bought it 3 years ago originally for 335K. Whether it was dumb luck or brilliance you decide.

Here are the special things I did:
1) Made a 1 page (no more than 1) list of updates and notes for the appraiser, I printed 2 copies, one they can take and one for myself to go through with them if they have any questions. I also made sure to highlight the higher ticket updates/value added changes in the neighborhood

The Document was broken down like this
a) Notes on home value (house purchased lower than others in the neighborhood at the time due to desperate seller who moved overseas for example, new high end shopping center is moving in a half mile away, etc.)
b) Home Updates, Outside: (examples are new roof from hail storm, painted house[dont mention if u diyed it is irrelevant], new exterior lighting, new storm doors, new patio)
c) Home updates, Inside: I further broke it down by floor so they could visually walk through the updates in their head (new built in ss microwave [off craigs for $80 works great say its new], updated 2 prong outlets to 3 prong, non gfci bathroom outlets to gfci compliant, new gas valves in basement to code, etc.]
2)None of these things are particularly expensive or difficult to do or even required but safety updates are hugely important (I even mentioned new smoke detectors throughout)

Here are the duh things everyone should know but may miss:
1) House was immaculate, never seen it that clean in my life, we had to move some stuff into the car we were so anal
2) any minor repairs you've been putting off? do them now...ie. light bulbs that are out, caulk missing from entry way tiles, house numbers falling off?, etc. it adds up
3) fix up the outside too, debris, mow lawn



A final word of advice, the cheapest DIY value adds in terms of material cost if you provide the labor are 2 things and they stand out in an appraisal:
1) Paint the exterior of the house, only costs about a grand in material on a smaller house if u DIY but can cost 4-6K to have some one do it, especially if u need to do some sanding and priming which are labor intensive, a fresh coat with a more modern color makes your house stand out (if u dont go crazy with the colors)
2) An irregular flagstone patio, the most dramatic patio look you can have, looks expensive, looks timeless
a) set in class5, then sand, then cracks filled with granite sand (no mortaring).
b) flagstone isn't that expensive and can cost even less than pavers which are usually colored concrete and simply cannot match the richness of real stone no matter how much you pay
c) typical 250sq foot flagstone patio quoted work is around $20K which includes materials, that just includes the patio, nothing special!
d) You can get the flagstone and material needed by buying flagstone from far out places that usually supply wholesale and getting the base materials off smaller family owned places that is just one or two truck operation cost 1/10 as much delivered as any home garden type store, big box or small box. Material cost will be no more than $5K for a 250sq ft size depending on type of stone.
e) Save time and energy by not mortaring it in i have to repeat that as it is a killer time waster, just use the granite sand, water and more granite sand to fill the cracks.

To give you an idea the house did lose value in some areas but it was the goofy fixes and add ons that appraised higher, like the flagstone 400sq ft flagstone patio which cost me $5500 in materials came in on the appraisal at $35K!

If you default, wouldn't the bank likely end up short-selling? Seems like it would make sense to lend based on the value the bank could get for the property..

Looking for update.

OP, I'm in the same position as you are. I just had 3 appraisals done, to value the house for relocation buyout. 2 of 3 appraisals are simply out of the ballpark/too low. It's one thing to consider a range of comparables. It's totally different to disregard any home that was a higher value (and, in many ways, are more similar to house being sold).

I'm trying to figure out the best course of appeal for this process. There are some inaccuracies in the description of my property. I'll start with those. Then, I'd like them to also weigh the homes that do compare.

Some were chosen from different neighborhoods. Some chosen were markedly different (ranch, compared to 2 story). And most disheartening? The ones that are the most similar were disregarded by the low appraisers. (Funny how the one that was on the low side of what I had thought would happen, included the most similar homes).

I just refinance an FHA jumbo loan. I got a rate of 4.5%. Had to do FHA, since about 97% LTV. The appraisal came out that I was upside down on the loan. However, Quicken Loans was still able to do the loan, by doing an FHA streamline (had refinanced about 15 months ago). I was amazed that they were able to pull it off in this market.

The appraiser has no incentive to down-value your house. He/She clearly felt in his/her best judgement that it accurately reflects the value of your home. EVen if you get a higher appraisal, the underwriter won't neccessarily accept a new appraisal.

greling said: All that is required to become a real estate appraiser in most places is a high school diploma, about five community college courses and a short exam to prove you're not a complete idiot and a state filing fee less than $100. It's too easy to become an appraiser, just like it's too easy to become a real estate agent.

This is the most uninformed statement I have read in awhile.

cgshopper said: Had a similar case recently with a new home construction loan. First bank went with an appraiser that valued my home at 400k. Disputed with the appraiser, who at least was friendly, only to get it up to 450k, using some very shady math to come up with that. Finally bit the bullet and applied with a different bank, and the new appraiser valued it at 600k. I say it all depends on the bank and the appraiser, and unfortunately right now it's a crap shoot.

I think banks will give you a list of the appraisers that they allow. I got to choose mine. We're rural and built in a very diverse area. There are million dollar homes and trailers.
I needed an appraiser that would take into consideration "green" features which are not always apparent when looking at the color of the house... I simple asked - up front - for an appraisal "range"... Which they can do completely on comps and data provided.

Just a followup. I formally disputed my appraisal with Wells Fargo after I felt it came in considerably lower than market. After about 10 days I received a revised appraisal in the mail. After resubmitting 3 of my own comps they agreed that the original price was low and they increased my appraisal by $25,000. On a million dollar house thats not a big deal but for me it was an 8.5% increase which makes a huge difference to my LTV. Still not exactly where I wanted to be but for the refi I can live with it. If you get a low figure most lenders will allow you to dispute without too much kicking and screaming, you have nothing to lose except for a couple of days while you wait on a decision.

dcg9381 said: cgshopper said: Had a similar case recently with a new home construction loan. First bank went with an appraiser that valued my home at 400k. Disputed with the appraiser, who at least was friendly, only to get it up to 450k, using some very shady math to come up with that. Finally bit the bullet and applied with a different bank, and the new appraiser valued it at 600k. I say it all depends on the bank and the appraiser, and unfortunately right now it's a crap shoot.

I think banks will give you a list of the appraisers that they allow. I got to choose mine. We're rural and built in a very diverse area. There are million dollar homes and trailers.
I needed an appraiser that would take into consideration "green" features which are not always apparent when looking at the color of the house... I simple asked - up front - for an appraisal "range"... Which they can do completely on comps and data provided.


There is so much fail in this post. Hard to believe that a bank would allow you to shop appraisers. Doesn't surprise me that appraisers would do comp searches for you but they shouldn't.

free2go said: I just did a home appraisal for refinance, but what I got is pretty low unfair appraisal from bank ordered appraiser, Below are some facts, what can I do since I'm very very frustrated with such kind of unfair appraisal.
1. Inappropriate comparables. For the 7 comps used in the report, 4 are closed sales, 2 are pending/contingent, and 1 is listing. All the 4 closed sales are abnormal sales: 1 short sale, 1 REO, and 2 trust sales. For Comp 2, which is a short sale, there are 6 recently sold houses within a couple of blocks comparable to my house, sold from $725k to $855k. but the appraiser choose the lowest REO home for $680k? Same problems exist for other Comps which used the lowest price.
if one can get a variety of houses near you via REO, short sale, whatever, then they are part of "the market." especially given the huge supply of foreclosed upon housing in this country. and remember, what constitutes "value" for one doesn't necessarily constitute value for others. i'd appeal and see what could be done, but your first and foremost argument doesn't hold a lot of weight given those houses actually sold for as much as they went for. if they were gutted and needed huge amounts of work, that's one thing, but there's just so much excess housing right now in some areas (CA being one of them),

I did the same, I disputed the appraisal with the bank. They had a formal process to do it and it worked out well second appraisal came in better. It was Key Bank and no additional charge for the second appraisal. But many years ago before housing took header. I think I took comparable sales to my banker to help the dispute.

munkyxtc said: Just a followup. I formally disputed my appraisal with Wells Fargo after I felt it came in considerably lower than market. After about 10 days I received a revised appraisal in the mail. After resubmitting 3 of my own comps they agreed that the original price was low and they increased my appraisal by $25,000. On a million dollar house thats not a big deal but for me it was an 8.5% increase which makes a huge difference to my LTV. Still not exactly where I wanted to be but for the refi I can live with it. If you get a low figure most lenders will allow you to dispute without too much kicking and screaming, you have nothing to lose except for a couple of days while you wait on a decision.

Unless it effects the LTV ratio and jeopardize the refi, you should be thankful that the appraisal is low.
When I was doing my refi some years ago, I purposely told the broker to ask the appraiser to appraise at the lowest possible value, I then used the appraisal to challenge the county assessor for the value of the house, end result, reduced my property tax by >10%.



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