Profile picture for hoping4bettertimes

What do we do about a low-ball appraisal?

Back in June we tried to refinance.  Had an appraisal done - house came in at 457k.
Husband lost job.  It was right before the bank checked his employment history, and so we couldn't qualify for the mortgage. 

Fast forward to November 2010.  Husband has job, everything is in place with refinance.  We're just waiting for the new appraisal.  When the appraisal came back
it came in at 415k.  A huge difference from 5 months ago.  The comps that were used were for un-remodeled houses similar to ours.  (We just came out of a major remodel - total gut down to studs, new heating, electrical, plumbing, walls, ceilings, marble & granite baths and high-end kitchen.  The new appraisal did use one of the comps that were on the first appraisal, but he gave our house a much lower value vs this comp than the previous appraisal.    There were also inaccuracies on the report on things like the siding material, floor materials, he didn't mention hardwood floors.

The broker has filed a rebuttal/dispute with the appraisal company to have them look over the appraisal for errors.  

Is there anything else that can be done while we're waiting for the appraisal company to get back to us?  The mortgage broker said he doesn't think they are going to change the appraisal.  It seems so unfair they can state their opinion, and then it becomes law with no recourse for the person who actually paid for this thing!!



  • November 27 2010 - US
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Answers (16)

Profile picture for helaurin
I recently went thru a refi myself.  I wasn't thrilled with a couple of aspects of the appraisal, but I knew that appraisers are using a range of collected facts (comps) to create their opinion.  Since I needed the value to be at or close to a particular point to eliminate PMI, when the appraiser's staff (the wife) called to schedule the appointment, I POLITELY asked if it would be helpful for me to prepare a sheet of recent improvements and similar sales in the area. She said yes.  I gave the appraiser the sheet and he did use a couple of the comps I had listed (I found about 8 comps, so it's not like I said here's 3 comps, use them).  I gave him a list of improvements done within the past 12 months as well.   The overall value came in close to what I needed, so I was able to do the refi.  What I wasn't thrilled with is that he entirely discounted a custom 10'x12' wooden shed, a brand-new 6' vinyl privacy fence, brand new gutters, roof and indicated that those are all "average" and "expected maintenance".  We'd bought the property the year before with a roof that was in danger of leaking, no fence, no shed, etc..  Kitchen was also marked "average" with solid cherry cabinetry, corian countertop, new laminate flooring.

Not sure what someone's got to do to get something marked as "above average".
  • June 02 2011
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Profile picture for melh2os
What happened when you disputed the charge with your credit card company?  I am in the same boat, had an appraisal done that had similar and in some ways more egregious errors than what you described, then refused to take any new informaiton into account.  Factual errors not fixed, used short sales as comps when arms-length sales were available, absolutely no consideration or investigation into the housing condition (like you had many replacements/upgrades that were marked as "average" condition, including siding less than 4 months old).

I have notified the lender that I am refusing to pay them for the appraisal (it's Quicken, so they go through this good faith deposit thing and arrange the appraisal directly).  I am interested to hear what reaction you received and if anyone has stepped up to provide justification for the criteria, methodology, etc.
  • May 18 2011
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"The rules that took effect last month created a loophole Congress never anticipated"

What's new?
  • May 17 2011
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Profile picture for hoping4bettertimes
Looks like this is becoming a serious issue:

http://www.mortgagematch.com/news/home-buying-and-selling/federal-appraisal-rules-raise-ruckus-1303/
  • May 17 2011
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You can order a second appraisal. There are desk appraisal that don't cost as much as a regular appraisal. Contact another appraiser and ask for advice. If your realtor that's assisting you can present you with comparables that are similar to your home that can verify the higher value for your home you can present them to the bank.
  • December 16 2010
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Profile picture for sunnyview
That is terrific news! I am so glad that you took the time to post the update. You are right appraisers can cause real problems for people and should be held accountable when the information in the appraisal is incorrect. Good appraisers sometimes get the facts wrong too, but most are happy to revisit them if there is reasonable cause. Hopefully, your credit card company will side with you and the appraiser will think twice about the quality of his future appraisals.
  • December 16 2010
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Profile picture for hoping4bettertimes

UPDATE:

After appealing the appraisal, the appraiser defended his work and refused to change any of the incorrect information stated in the appraisal. We moved on to another lender and tried again.  The new appraisal came in at 461k.  We were able to refinance successfully.   I've disputed the charge for the first appraisal with my credit card company.  At the very least, the first appraiser could have corrected the wrong information he stated in his  appraisal, however he refused to do so.  I'm not going to pay for a product that was inherently incorrect. Even when given the opportunity to correct the information, this jerk refused to do so.  People like this should be removed from the profession. Valuations assigned to products using incorrect information = shoddy workmanship.   Thanks to all who helped me with this problem.

  • December 16 2010
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I am honestly not an expert on appraisals or the appraisal process.

What I can say though is we just had an appraiser come into our office and give a very informative talk on the process.  Two of the things that stood out most to me is how much is based on opinion and how she admitted that some appraisers are simply bad at their job.

I found that so disturbing.   It wasn't a surprise, based on the experiences so many have had with appraisers, but to have an appraiser (who is excellent and I would hire in a minute) admit to the major flaws in her profession was difficult to hear because those flaws make or break real estate transactions every day.
  • November 28 2010
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Profile picture for hoping4bettertimes
I guess I'm looking for accuracy in this appraisal that I PAID for.  I'm not looking to get back every penny we put into the house.  The more I look at the appraisal we were given, the more I question the accuracy of the specifics noted within it.

Some of the glaring mistakes are:  

There is specific mention in the appraisal that he did not take into account any outbuildings not on permanent foundations. I guess he was referring to our 12x18 foot shed.  If he actually would have looked at the structure he would have noticed that is was 2' x 4' stick built construction on a permanent cement foundation.  

There is no mention of hardwood floors throughout our house (the previous appraisal makes note of this) vs. the comps that have carpeting.  We have 9' ceilings, the comps have 8' ceilings. 

There is specific mention that our house does not have any energy saving features, but we have a newly installed cooling system with hepa filtration that has a high EER rating and new Low-e glass Anderson windows throughout the house. 

There is a comment in the appraisal that states the house was remodeled over 12 months ago, but this is incorrect, I specifically told the appraiser the work was done this calendar year, and I have the records to prove it. He was not interested in seeing the records for proof.  The appraiser made a comment to me that there are new regulations that negate any remodeling done if it is more than a year since the project was completed.

The guy came into my house to do the appraisal and wasn't interested in anything I had to say.  It was just what he saw.  When we had the previous appraisal done, she made note of everything that was done, asked a ton of questions about things in the house and walked around the house taking measurements and pictures, many of which were included in the formal appraisal we recieved.  This guy took all of 5 minutes to do the work and quality of his work is apparent. 

I am also questioning the "GOOD" rating assigned to our house.  How do you get a "VERY GOOD" rating?  Everything is new,  nothing is stained, there are no marks on the walls, no wear, no dinged appliances.  Everything less than a year old. I question further the comps he used.  They had had 'VERY GOOD' ratings.  HUH?  a 20 year old house with original kitchen and baths get higher grading than a newly remodeled house? 

The previous appraisal gave our house "VERY GOOD/EXCELLENT" in terms of it's condition.  This is the determing factor that lowered our appraisal by 25,000 in this new appraisal.

I am more concerned that I did not get a quality appraisal. I want the problems with this appraisal fixed so that it correctly cites the true value of the home.  If everything was correct in the appraisal, I wouldn't be raising such a fuss.  I would be glad to accept the value of the home. 

Is this too much to ask for?
  • November 28 2010
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However, the appraisers don't go into the homes

well that just makes me wonder why most of the appraisals I receive have photos of the interior then.
  • November 28 2010
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I have had two recent transactions where the appraisal came back extremely low, one of which was justified and the other simply not a good appraisal.  The lender will order a rebuttal and submit other comparables that he/she felt were more accurate comps than the ones used.  However, the appraisers don't go into the homes so they cannot see the condition of one that is remodeled or not.  In times like now where we are still in somewhat of a declining market, they also do not give you dollar for dollar for your improvements.  It is unfortunate, but what you feel may be the value for your home, may not be what the appraised value is.  If you go to sell your home, a buyer may appreciate the upgrades more than the model match down the street, the buyer may want to pay for it and then your back to the problem of the appraisal.  Good Luck!
  • November 28 2010
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I'd like to point out that appriaser's valuation is not something that can be "low-balled".   The appriaser is a trained professional with education, licensing, and Errors & Omissions Insurance requirements.  It is their job to as accurately as possible value the property.  They put their license and career on the line with their appraisals. 

Each lender has a process to go through to counter/dispute a low value; however in the crazy market we're now init's really difficult for us to comment when there is a possibility the comps used 6 months ago have now expired and nearly perfect new ones are available.

Iit is great your broker asked someone else to see if there is a problem with the accuracy or the appraisal however, a well trained loan originator should be able to identify problems with an appraisal and not hope someone else will catch them.
  • November 28 2010
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Profile picture for SoCal Engr
"It seems so unfair they can state their opinion, and then it becomes law with no recourse for the person who actually paid for this thing!!"

What is "unfair" about a lender using an appraisal to determine if the house has enough value to secure the loan they are about to make? Disappointing? Annoying? Irritating? Yes. Capricious? Maybe. Unfair? No.

I agree that a 10% drop in 5 months seems a bit much. However, it's also interesting that you're much more willing to believe a REA than the appraiser. An appraiser has no attachment/interest in the appraised value of your house, the REA does.
  • November 27 2010
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Given we have to work for reduced fees via AMCs nowadays, you are getting the appraiser who quoted the lowest fee, which sometimes translates into low quality. Blame the 'system'. Regardless if the appraiser was dumb or fraudulant, I would switch lenders. You may not get far on a 'rebuttal'

Normally I would say go with a major lender, but they can be worse than mortgage brokers these days.

Until we go back to the 'old' days - which I doubt -  appraisers are asked to come up with a value regardless of anything - rebuttals, purchase price, value needed, etc. If you 'needed' $450K and the appraiser came in at $449K, well thats that. This is called 'appraiser independence'.

No good answers. But again I would ask around for referrals if your current lender/mortgage lender can not produce results for you.



  • November 27 2010
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Instructions for disputing an appraisal.  
 

1. Obtain a copy of the appraisal report. The lender should be able to provide this for you.

 

2. Review the appraisal report for any discrepancies. Check ALL of the data on the "comps" (comparable sales) pages of the appraisal report. Verify that all information is complete and accurate, including square footage of the house and lot, features, pricing, sales date (for solds) and the location of each property.

Although appraisers are supposed to pull complete and accurate data and drive by each home on their reports, there are some that short-cut this step and include bad data. Some will even "make up" data that doesn't exist, so watch for obvious errors.

Example 1: An appraiser "created" a comp out of thin air, using the address and the list price of the home being appraised, and then altering the square footage and adding a pool to make it look "real".

Example 2: The appraiser was not familiar with the area and used comps that were not in the same development area, nor were they close to the same square footage as the property being appraised. Instead of doing more research, he simply added 500-600 square feet to the interior square footage of two of the comps he selected, thus reducing the price per square foot and the estimated value of the house being appraised.

 

3. Obtain additional comps for the appraiser's consideration. Provide the details of other valid comps in the area that support your claim that the property has a higher value than the appraiser reported. It is possible that the appraiser was not familiar enough with the area to include these comps on the initial appraisal report.

 

4. Document all of the disputed items and additional comparable sales data and present them to the buyer's lender for review. The lender will need to submit this information as part of the request for an appraisal review.

 

5. Ask if another appraisal can be ordered to challenge the value.


Good luck.  Let us know if we can be of further assistance.

  • November 27 2010
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Profile picture for hoping4bettertimes
I should add that we had a real estate broker in because of the low appraisal.  She said that there are a lot of low-ball appraisals coming back now, but this was the lowest she has seen.  She ran comps and feels that the house would sell around $445 - 449k.   She also said that if she listed our house at $415k she would be willing to gamble with fate that there would be multiple offers on the house because that price is a distressed homeowner price.
  • November 27 2010
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