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By Tara-Nicholle Nelson | Broker in San Francisco, CA

5 Next Steps When the Appraisal Comes in Too Low

When recently surveyed, over a third of real estate agents reported having had one or more home sale contracts fall out of escrow per month. Autopsies of these dead deals often surface a truly lethal culprit: appraisals that come in below the agreed-upon purchase price.  

You see, mortgage lenders will only fund transactions up to a certain percentage of the appraised value of the home.  If the home appraises low, either the buyer must come up with an increased down payment amount, the parties must agree to a price reduction, some combination of both of these must happen, or the deal is off.

While low appraisals can be particularly potent deal killers, their danger to your deal can be neutralized in some cases. If you find yourself facing an appraisal lower than the sale price in the contract, add these five steps to your immediate action plan.

1. Appeal errors or bad comps to the appraiser. Read the entire appraisal report, cover to cover. See if you spot any errors – it’s not at all unheard of for an appraisal report to miss a bedroom or underreport the home’s square footage. The trouble is that what starts out as a clerical error can often result in the application of the wrong “comparables” when it comes time for the appraiser to pick the properties to use as benchmarks of your home’s fair market value.

Whether or not you find actual errors in the details about the home you’re buying or selling, check in with your agent about whether the comparable properties used by the appraiser were reasonable, especially if they are from a different neighborhood, school district, town or construction era than the home you’re trying to buy or you are aware that much more similar or nearby homes have been sold in recent times than the comparable properties you see in the appraisal.

In my town, for example, within a half-mile radius you can find vast variations in property values based on neighborhood and schools and city limits that change almost imperceptibly. Changes in the mortgage industry over the last few years have created situations in which appraisers are sometimes assigned who have little or no familiarity with these hyperlocal types of nuances which you, as a party to the transaction, might be more readily able to detect and appreciate.

If you find errors or feel that there are much more comparable recent sales that justify a higher price for the property, work with your agent to send the correct information and the applicable comps you would propose to your mortgage professional, who can relay that information to the appraiser or Appraisal Management Company and request that the appraiser revise their report and estimate of value. The appraiser has no obligation to make the change, but the more glaring the error, the more likely it is that they will. 

2. Ask for a second opinion. Particularly in cases of error or bad comps, if the appraiser ignores your request to revise the report, you might need to escalate your request to the lender itself. Here’s where it’s important to be working with an expert agent and mortgage pro with a great reputation; if they believe strongly in your case, they may be able to plead it to the underwriter and request that a second appraisal be done. The idea here is that if the second appraisal backs up your arguments, listing the correct property details or more accurate comparables, the lender is much more likely to exercise its discretion to deem the first one a dud and go with the second opinion.

3.  Renegotiate.  Low appraisals disappoint everyone around the negotiating table. If the sellers have the leeway (read: equity) or their bank agrees (in short sales), they might agree to bring the price down to the appraised value or near enough that the buyer feels comfortable putting some extra cash into the deal to close the purchase price-to-appraised price gap.  Some buyers refuse to ever do this on general principal, as they feel like it’s overpaying for the property.  Others realize that appraisals may come in low for reasons less indicative of the property’s value, like a dearth of comparable sales in the area, and figure that to get the home they want, they’re willing to kick in a little extra dough.  

Of course, ‘little’ is relative, and neither position is right or wrong for everyone.

And the decision for sellers is just as personal. When the differential between the purchase price and the appraised value is small, it can seem like a no-brainer to bring the price down if mortgage considerations allow, but it can also seem sensible to request the buyer to make up such a small difference – especially in markets where properties are getting multiple offers.  On the other end of the spectrum, when the differential is big, it is less likely that the buyer will want to come up with the cash to close the gap, and also less likely another buyer will come along and offer the appraised price. 

You would think these things would make a seller more willing to slash the price where the gap is big, but it also may make their moving plans less feasible, and tempt them to stay put and wait on the market to be more active and bear better comps. 

Work with your agent to figure out what re-bargaining position really works for you. 

If you do find yourself renegotiating price due to a low appraisal, remember that this is real estate, so everything is back on the table. For example, when the appraisal gap is only $1,000, a buyer might be willing to close the gap if the seller agrees to leave the lawn mower and do some small repairs. 

4. Pay the difference or split the difference. On the flip side of renegotiating is reconsidering your personal position. If you’ve been house hunting for two years, forgoing low rates and the tax and lifestyle advantages of owning your home, and you’ve finally found ‘the one’ – in great condition, not a short sale, perfect location – you might think long and hard about whether you are willing to pay the difference between a low appraisal and the purchase price. This is especially so when the gap is small and you have the cash, or when you know the seller is barely breaking even on the deal or has offered to split the difference with you, or the short sale bank refuses to go any lower.

And sellers, this goes for you, too: if you’re committed to trying to close the deal, it behooves you to consider whether you can reduce the price on the home. Consider that in some states and loan situations, a low appraisal report in a deal that dies may become a disclosure the seller must provide to future buyers (ask your agent whether this will apply to you). The fact is, if you don’t agree to a price reduction of some sort, the buyer could very well walk, limiting your options to selling at a lower price, doing a short sale or staying put anyway.

5. Change lenders. Mortgage banks have more control when it comes to choosing appraisers than mortgage brokers do. (Fortunately, many experienced local mortgage brokers work for companies that also have banking divisions, and may be able to process your loan through that division in an effort to get your transaction a fresh start and work around a low appraisal.  Ask your mortgage broker if their office has a banking division, if you’re not sure.)  

Mortgage brokers are no longer able to hand-pick appraisers for a given transaction like they once could, but unlike broker-only firms (who are forced to work through a middleman company that may pay a cut rate, attracting less experienced appraisers), mortgage banks and hybrid broker-bankers are allowed to pick the set of people included on their own short list of appraisers. I’ve found that lenders use this short list for good much more often than to try to exert any sort of inappropriate influence.

My experience has been that, when compared with the appraisers national lenders and the middleman companies put to work on brokered transactions, small mortgage banks and local, hybrid broker-bankers tend to fill their lists with appraisers who have more local experience and can appreciate the uber-important local nuances like those described in #1, above.  

Agents: What are some other low-appraisal workarounds that have worked for you and your clients? How do you help buyers and sellers decide what moves to make when the appraisal comes in low?

P.S. - You should follow Trulia and Tara on Facebook!  

Comments

By Deborah Griffin,  Wed Feb 29 2012, 07:47
I actually just had this happen and we were successful with renegotiating the price. Great post, thanks!
By River House,  Wed Feb 29 2012, 08:52
Really great post. As a seller- it had loads of good info for us. Cheers!
By James A Ebert,  Wed Feb 29 2012, 11:41
This is good information. As an appraiser, I find that agents wait until it is too late. They can be more assertive before the appraiser comes to the site. If you wait until the report comes back, the appraiser will almost never change his value. I have developed a sample “script” to interview the appraiser, when they call for the appointment. Go to my site at
http://www.eas2.org/ExpertAppraiserBlog.
Scroll down to the article “Agents & Home Owners: Close those sales with Good Appraisers”.

It starts with:
a. Hello, Mr./Ms. Appraiser, can I get your phone number, in case we get disconnected? (Good appraisers understand and will be gracious and forthcoming, bad appraisers may be cautious and inhospitable)

b. I would like to give you the best directions to the property, where are you coming from? (Good appraisers will be from local or nearby communities, that you recognize, bad appraisers may be driving for an hour or more, and will not be qualified to work in your neighborhood. If they withhold that information, they most likely are from too far away.)

c. To read more go to the above site.
By Jay Rezendes,  Wed Feb 29 2012, 17:36
Really great points are made, I will be passing this information on.
By The Pierre Team,  Wed Feb 29 2012, 20:28
This was Very Helpfull Thanks!!!
By Alma Gomez,  Wed Feb 29 2012, 20:48
Appraisers are like underwriters, once they make a decision they will justify their decision at every turn. We have been down the road of disputing errors or bad comps and the appraisers just choose a different way of explaining their decision even if its blatantly wrong. We had one appraisal that the appraiser deducted the closing cost from the values, it was just the standard 3% going in the neighborhood. According to appraisal blogs out there, an appraiser should deduct closing cost contributions if it is over and above the standard cost in the neighborhood only. But the appraiser came back and said FHA guidelines state to factor in closing cost into their values. Killed the deal, buyers lost out on their money and the home was put back up and sold CONV at list price. The appraiser got paid so what does he care. FHA appraisals especially have been terribly low.

These are great points and very helpful and it will work in some markets but a market like ours here in Las Vegas, low appraisals, no deals is the trend.
By Greg Cook 951-265-4532,  Thu Mar 1 2012, 09:41
Why do we always say the "appraisal is low" and not the "home is overpriced"?
By Vadim Chavarha,  Thu Mar 1 2012, 09:47
Ask both real estate brokers to lower their commission ? If they tend to get too greedy just replace the agent. Way much easier than replacing the lender.
By Donald Mowery II, SFR,  Thu Mar 1 2012, 09:47
I am both an agent and a certified residential appraiser with over 20 years experience. Everyone likes to blame the appraiser, however please note that are guidelines come directly from the Fannie and Freddie. With the recent passing of HVCC and than the Dodd Frank Act the appraisal process has been tremendously impacted. Instead of having relationships with the lenders I now deal with appraisal management companies who put the cost and turn time ahead of quality. I used to get paid $400 to $450 for an appraisal. I now get paid $260 to $325 with required turn times of 48 hours from inspection. As a result many qualified appraisers have left the business or turn away these assignments.

Agents solution: Come prepared with comparable's and information. A comparable is not a property that sold 12 months ago, is 10 miles away, and was built 15 years prior to the subject. A comparable is a recent similar sale sold 3 months but no more than 6 months ago, is in the same neighborhood, within 5 to 10 year of age, and 20% difference in the size of the home. Furthermore, bring any additional information that will help the appraiser. Examples are copies of recent upgrades, homeowner's association contact information, and GOOD COMPARABLES. A little homework will go a long way.
By Marsha Bates Team Bates,  Thu Mar 1 2012, 09:51
We have used several of these steps to help with low appraisals. The best advise is do your homework up front and you should not have issues with appraisals. Present clients with the correct info and they will make great decisions!
Tommy & Marsha Bates
Team Bates
Keller Williams Realty Metro South
(205) 966-7795
By Monique Cole,  Thu Mar 1 2012, 10:07
I'm all for giving the appraiser comps and other materials, like a list of improvements the sellers have made, BEFORE the site visit -- I've done this as a buyer's agent and as a listing agent. I've found that they tend to appreciate you doing the homework for them. Make sure you require the appraiser contact the listing agent for access to the house, that way you know who it is and when they're coming. Leave a packet of info at the listing.
By Diane Sheldon,  Thu Mar 1 2012, 10:19
@Donald. This is great information and no doubt you are a good agent. However, frequently I will have all the comps I can find when meeting the buyers appraiser. I have found them to be distant and almost insulted when I try to present my information. It is refreshing to see that you are not prone to this "telling me how to do my job". I never insinuate they don't know what they are doing. I am merely assisting with their information. They can use it or toss it. I just know that I have done what I can to assist in showing the correct value.
By Lucylou21,  Thu Mar 1 2012, 10:22
Our appraisal came in 20000 over what we bid and the lender still turned us down due to the age of the house. This is an historic home in great shape. What's up with that?
By Sherry Mcgarity,  Thu Mar 1 2012, 10:24
As a seller, I cannot express heartily enough to "GET THE RIGHT COMP'S" for your home up front. If you have a realtor that is willing to do that for you, GRAB HIM/HER to sell your home. THey will get you the best deal and work for you, the seller, NOT THE BUYER or JUST THEMSELVES TO MAKE A QUICK SALE!.
I went thru 25 realtors and found ONE who did the appropriate comps OUTSIDE my neighborhood. All the others wanted to do was go by the neighborhood averages without any other info to contribute. LAZY!! All they wanted was FAST BUCKS!! Shame on them!
By Linda Charron,  Thu Mar 1 2012, 10:29
I educate my buyers at the time we do the P&S. If they agree we build in a contingency: Property must appraise at or above selling price or this offer is null and void. Or: If property appraises lower than selling price buyer and seller will re-negotiate selling price to the satisfaction of both buyer and seller or this offer is null and void.
By Sherry Mcgarity,  Thu Mar 1 2012, 10:29
Dear Diane, it appears obvious from what you say that the realtor is not interested in PERUSING CORRECT information to help seal the deal, or get the best price for the home. They are only interested in getting the FASTEST DEAL for themselves, your way of providing CORRECT info. only slows them down. Sorry, I'm jaded because I've dealt with these kinds of realtors WAY too often before I found my guy. I've even hung up the phone on alot of them. :-).
By Sherry Mcgarity,  Thu Mar 1 2012, 10:36
I also refuse to allow the buyer/and their agents, to make THEIR financing, MY problem! EIther they have the money , or they should not be looking at something out of their price range. I also demand they show "proof of life". They must show proof of financial viability (bank statements or cash statements) for the property at the quoted asking price, or no appointment will be made for showing. NO pre-approval letters from the bank. I don't believe in wasting their time or mine. AND NO LOOKY-LOOS!
By Jairo Arreola,  Thu Mar 1 2012, 10:42
Thanks for the info! I just let my buyers know beforehand what can happen if the appraisal comes in low.
By Austin Lender,  Thu Mar 1 2012, 10:48
I actually think you will find the big bank appraisals come in lower than the mortgage brokers and smaller banker/brokers. The big banks generally use the most conservative AMC's and pay the appraisers the lowest fee because the banks own the AMC and it is a profit center for them. If the appraiser is paid the lowest fee, wouldn't you be as conservative as possible too! They have licenses to protect as well.... and when they are making less than half the income and taking so much heat for it. I know appraisers that are getting letters for appraisals they did 9 yrs ago and they are now having to defend themselves. I have gotten to hate this industry, we use to all help each other and act as a team. Now we attack each other. When the Mortgage Brokers were under attack, where were the Realtors & appraisers? when the appraisers were under attack where were the realtors and mortgage people? Realtors, If you think you are not next on the chopping block.... think again..... We ALL need to come together and protect OUR INDUSTRY! MORTGAGE, APPRAISERS, REALTORS and ALL. We are slowly being destroyed.
By Cheri Jessup,  Thu Mar 1 2012, 10:57
Donald M. is" right on" with his advice. I have written about this before. Listing agents -- ALWAYS meet the appraiser. ALWAYS prepare an appraisal package. Provide full MLS print-outs of the comparables including the agent's contact info and highlight if the property was a distressed sale; provide a cover letter discussing the property upgrades and the HOA contact info and what the dues include (if applicable); provide a full MLS print out of the subject property and a copy of your color flyer. In the 25 years I have been selling real estate, I have never had a low appraisal or an insulted appraiser. This is just part of your "job" in my opinion.
By Jeri Creson,  Thu Mar 1 2012, 11:00
I've encountered appraisal problems, as most agents have, and have challenged value successfully, and rarely, but sometimes, unsuccessfully. I agree that the key is in the preparation and prevention of errors. Basing an offer on good comps, knowing that the appraisal "should" come in is key. I've rarely found a property so special that a buyer would be willing to pay more than can be justified on paper out of pocket. But as an agent, I recommend connecting with the appraiser, meeting him/her at the property, with a nice, professional package…not just some "recommended comps", but a clean, neat, orderly version of the complete contract, LATEST counter/final terms on top; a "highlight" sheet that hits the important points: Price; terms; concessions - anything significant in an appraisal that needs pointing out, hoa fees and contact info,... and then some comps underneath that sheet, with a note, saying : "these are the comps we were looking at when the buyer offered this price"; I find that this package is generally received very well, and the appraiser is grateful for the thoughtfulness and thoroughness rather than offended by the agent trying to influence or telling them how to do their job.
By Michael A Knautz,  Thu Mar 1 2012, 11:03
I don't know about the rest of you, but I still don't understand why the appraiser sees the agreed purchase price.....how about just going out and telling the lender what it is worth and not try to "hit" a specific mark?
By Katie,  Thu Mar 1 2012, 11:06
Our appraiser missed a bedroom and I thought that should be addressed, but our realtor and our banker said that since they amount came in for $2,000 over what we were paying for the house, that it didn't matter. Has anyone else had that happen? Our loan went through and we ended up buying the house, but I just thought it was weird that the appraiser missed a bedroom and therefore, compared our house to other three bedrooms in the neighborhood but not four bedrooms.
By Charles Butterfield,  Thu Mar 1 2012, 11:09
I am a Real Estate Broker and former Real Estate Appraiser. The most common errors that I see are the appraiser's descriptions of the comparable sale properties. For example the square footage of comparable sale properties is often overstated. Often the cause is that the listing agent of that comparable sale property overstated the square footage of the comparable sale originally and the Real Estate Appraiser merely repeated the error in the appraisal report.

Another mistake that I see appraisers make is an inaccurate physical description of a comparable sale property. For example the appraiser described a comparable sale property as having a two car garage instead of the one car garage that this comparable sale property actually has. The appraiser made a deduction against the property that my client was purchasing, which was exactly the same model as the comparable sale property, with a one car garage. Essentially the appraiser described the comparable sale property as being superior because the appraiser described the comparable sale property as having a two car garage, yet the comparable sale property and the subject property are the same model, built by the same builder, in the same tract and built at the same time, and both have a one car garage, not the two car garage that the appraiser claimed for the comparable sale property.

Another common error that I see real estate appraisers make is misstatement of the condition of the comparable sale properties. For example a comparable sale property that was used was a recent sale of a bank owned property where the existing roof was at the end of it's useful life, was leaking badly and had to be replaced. The comparable sale property was sold "as is" by the REO lender and discounted accordingly to reflect the poor condition of the existing roof. . The first thing the buyer of the comparable sale property did was to put a new roof on the comparable sale property right after close of escrow.

When the appraiser used that property as a comparable sale, the appraiser described the comparable sale property as having a new roof and made a negative adjustment to reflect the supposedly inferior condition of the roof of the subject property. The appraiser failed to note that the new roof of the comparable sale property was added and paid for by the buyer right after the close of escrow, and in fact that the sale price of the comparable sale property was already discounted and low because of the poor condition of the existing roof of that comparable sale property.

I recommend that when you see errors of this sort, hire a Review Appraiser to make a written review of that appraisal. Then submit copies of the written review to ALL of the parties involved, including The Appraisal Management Company, the loan officers and the lender, and both the buyer and the seller and their agents.

Poor quality appraisers tend to be the most defensive and the least willing to acknowledge errors. However a written appraisal review is something that they must acknowledge.

Yes, a written appraisal review does cost some money. However with respect to a poor quality, inaccurate appraisal it is the best money that you will ever spend.

Also, word does get around the appraisal community when a Real Estate Broker hires a Review Appraiser to review an appraisal. That alone will make your future appraisers much more thorough, diligent and accurate.

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (4080509-6218
Fax: (408)269-3597
Email Address: charlesbutterfieldbkr@yahoo.com
DRE#00901872
By Rory Hernandez,  Thu Mar 1 2012, 11:23
Another similar concern with appraisals is common mistakes made on FHA/VA appraisals where a safety concern is identified where it is based on the appraisers misunderstanding of what he/she is looking at. The new guidelines have apparently overwhelmed many appraisers with fear and it is critical to work with a Certified ASHI Inspector who, if willing, can override many of these misguided findings. Since HUD recognizes ASHI as being the highest standard of care, I was able to save 6 deals over the last few months which had no "real" safety concerns. Make you inspector part of your "team" as we are helping our buyer if, in fact, the defects cited are not valid.
By Jim Somers,  Thu Mar 1 2012, 11:24
Another good alternative is to "pre-qualify" the appraiser. He/she has to call the seller to make an appointment. That's when you pre qualify. Ask the appraiser where he/she is from. In my area, it's not unheard of for appraisers to be sent in from another county, sometimes more than 100 miles away. If your appraiser says he/she is from a long distance away, simply refuse to allow the appraiser to come to your home. Trust me; you will get a call from your lender the same day. Tell your lender exactly why you refused admittance and you will quickly get another appraiser. Repeat this process until you get someone who is hyper local.
By Sherry Mcgarity,  Thu Mar 1 2012, 11:28
JIM, That is GREAT ADVICE! There are SO MANY things just such as this , that 95% of realtors WILL NOT reveal, just to get the sale going. I never knew that myself, obviously.
By Tyler Shields,  Thu Mar 1 2012, 11:35
Vadim, in the same vein of thought, will the Realtors receive more money if the appraisal comes in higher than the selling price? I'm assuming you don't care if you get paid when you go to work either since you are being so callous about the paycheck that the Realtors are earning by deducting from it because of the Realtors "greed"?

And Sherry, the appraiser will go to "immediate" neighborhood comps first to establish your value because they are the closest geographically. This is what they have to do not neccessarily what they want to do. Other close neighborhoods may produce comps that are better but the appraiser may not be able to use them either. This is a problem with the way appraisals must be approached and that is not the appraisers fault or the Realtors. It is the guidelines that they must work under put in place by Fannie and Freddie. Let's remember, the appraisal is an opinion, supported by facts, but is still an opinion. The overcorrection (over-regulation) by our day-late and dollar-short government has changed many things that continue to change and aren't always fair or smart!
If the realtors, lender, appraiser and , most importantly, the buyer and seller work together for the transaction instead of looking at it from an adversarial position more successes would be the result! Let's focus on the positive people and get these houses sold for the market price!
By Foxtrotnkate,  Thu Mar 1 2012, 11:43
This just happened to us last month. The appraiser's measurements were short on all buildings and one was totally omitted which should have been included. We were not allowed to speak to the appraiser and when we contacted the mortgage company we were told that by law they could not dispute the appraisal. Really a bad deal for everyone but the appraiser.
By Ed Corbett,  Thu Mar 1 2012, 11:44
I just went through this. The Appraiser Group is a group owned by the Lender. The Appraiser came in low, comps for outside the area were used. We filed for a reconsideration, the file went back to the original Appraiser and nothing was changed - he just justified the original appraisal.
By Joseph Nazareth,  Thu Mar 1 2012, 11:57
Yes, appraisal is a tricky subject when several factors are intregated to complete the equisation. Bad comp of properties such as incorrect sq. footage. Condition such as run down or well mantained ? Recorded additions to the property, renovation,location(one sub division can be more upscale than the other in the one square mile of the appraisal.Etc Etc. The real estate listing professionalr and the appraiser should know what they are doing or else the results can vary
By Bonnie Kelly,  Thu Mar 1 2012, 11:58
Lately waiting for the appraisal to come in has been a nail-biter for all involved. Thanks for the good and informative article on how to overcome obstacles to keep the deal alive.
By Mariola Abilheira,  Thu Mar 1 2012, 12:19
Appraisers need to be very careful about under appraising homes today. This practice over the past 5 years has cost the public uncountable millions in lost equity. It is getting to the point where the baby boomers don't want to own homes any longer. They all want to dump their mortgages and rent. Home ownership is no longer a great investment but a negative liability like an automobile. If this practice lasts any longer, more jobs will be lost as realtors continue to leave the industry, mortgage brokers and banks will not make money because there will be no demand for mortgages, and investors will not make money in interest payments. The banks and the government need to seriously switch gears.
By Marvin Von Renchler,  Thu Mar 1 2012, 12:20
Oh mercy---this thing has morphed into so much confusion I dont know where to begin.
1. As one pointed out---there is to be NO connection between the appraiser and the loan broker. The appraisals are called by the actual lending source THROUGH an outlet service to which appraisers sing up. Appraisers usually make less now than they did.

A real estate agent or seller is NOT supposed to be trying to influence an appraiser by giving comps or anything at all.

Ive not been an appraiser but I do BPOs. Over 2000 of them and Ive gone through mortgage underwriter training school with a specialty is appraisal review. Comping houses properly is very hard. Appraising is part art, part science. Yes, appraisers are human and can make mistakes. Some mistakes are bivious and you can dispute those, as the thread author suggests but how do you dispute them if you are not supposed to be in touch with nthe appraiser? Through the lender calling for the report unless a real appraiser here has better advices, as I dont know everything. What about mistakes that you cant easily recognize without training? Hard area! Even after 2000 valuations Im sometimes hard pressed to justify ANY value on some subjects. What if there are NO comps? What about SENSELESS GUIDELINES such as not counting 'below grade' GLA? (Gross Living Area) We all have seen daylight basements or two level homes that look one level from the front but are sloped down the back and have 1 or 2 more levels fully open to the yard. In some cases the lenders required me to comp a 3000 sq ft house as 1000 sq ft!!!

In my more active listing days, I recommended the sellers to use a very reliable appraiser and spend the money for a good appraisal just to head off problems This was also to help establish the listing price and hopefully justify my comps used.

I like the one comment by someone here ''Is it a bad appraisal or a bad listing price?'
Many r.e. agents dont realize what it takes to compute true value. Many CMAs are worthless.
By Eric Michael,  Thu Mar 1 2012, 12:22
I have a 50-50 record in changing the appraisal. It's not the easiest thing to do, but it can be done.
By Scottbillingsley,  Thu Mar 1 2012, 12:34
Good points for those listing agents that are not proactive.

The best policy is to first go through the appraisal process BEFORE you place the property on the market. Have your comparable sales.

My market has always been a tough market due to so many custom homes, historic homes and homes on large acreage.

BEFORE the listing hits the market, I am armed as best as I can with my own personal appraisal and comparable sales. I also know my listings. Appraisers can make adjustments for updating:
Kitchen
Baths
HVAC systems
Roofing
Energy Features
Decks
Fencing and more

I am about to close on a home where there really are no comps because it is 160 years old BUT it was completely renovated in 1994 which means it can be compared to homes built in that time period.

Most homes are on 1/6 of an acre but mine is on a full acre. I had land comparable sales to support the much higher price.

Long story short. After an interview with the appraiser before he went to the property, he ended up being able to make the appraisal work.

A much better approach than reacting to a low appraisal.
By John Crowe,  Thu Mar 1 2012, 12:35
Had this conversation this morning with a buyer as we prepared a contract. Not out of concern, simply preparing for all the "what ifs" that pop-up during a deal.
By Tara-Nicholle Nelson,  Thu Mar 1 2012, 12:44
If you're just coming to this post, my advice is to read the post, THEN READ THE COMMENTS! You'll find a wealth of very useful information and insider tips to use if you find yourself in this dreaded situation. Thanks to everyone for adding their smarts and experiences to the conversation.
By Harvey Tepfer,  Thu Mar 1 2012, 12:50
Not just for home sales. I had an insurance company whose appraiser kept contradicting the office building's architect as to square footage. The insurer kept insisting the footage was much higher than was reported and wanted much higher premiums. That finally brought the mortgage holder into the picture, wanting to know why it wasn't receiving the promised insurance policy. The holdup by the ignorant appraiser almost resulted in a foreclosure.
By gt2000cam,  Thu Mar 1 2012, 12:52
Very good information this just happened to us. Very timely
By Kimberly Young,  Thu Mar 1 2012, 12:58
Help the appraiser! I have learned to do the comps ahead. I get 3 neighborhood or like neighborhood listings and 3 solds with 6 months, going out only 1/2 mile. I am in a very populated area so this would be what a typical appraiser would do in following appraisal rules. I choose my best comps based on the subject property and neighborhoods, print the MLS sheet and show up at the same time for the appraisal appointment.
They typically are not allowed to discuss any info with the Realtor so I just hand off the comps and tell them that this may make their job easier.
As appraisals can take hours to complete, this helps the appraiser reduce the amount of time searching. As long as you are using comps within the parameters of the banks criteria he/she should be able to use the comps.
In Pinellas County Fl the rule is 6 months back and 1/2 mile away. Your appraiser will not be choosing neighborhooods that don't compare. That is the biggest problem we have. If you go 3 blocks away sometimes, its a totally different neighborhood with a different price point.
I have only had one bad appraisal since that first one. Now when they send an appraiser from outside the area, I can head them off at the pass :)
I used to do BPO's for a couple of clearing houses so I know the rules for our area.
By Gina Ogle,  Thu Mar 1 2012, 12:59
This article is nicely laid out. When the appraiser calls (me, the agent), I ask if they would like a copy of the comparable properties I used when setting the price. I also point out any upgrades that would justify a higher price. I always stress to have them call me if they run into any problems. Even if they do not want a list of comparable properties, I do leave a feature sheet in the house for the appraiser. Once an appraisal comes back low, it is extremely difficult to "prove the appraiser wrong". As appraisers and real estate agents, we are looking at the same information to determine a price. It benefits us both to be helpful upfront.
By Krystal,  Thu Mar 1 2012, 13:00
I am so very disappointed every time I read articles like these written by uninformed individuals. It appears that most people have little knowledge in what the actual purpose of an appraisal is or how it's developed but are quick to always blame the trained professional. As appraisers, we are legally obligated by our profession to approach things, obtain and utilize certain data and chose comparables in a certain manner which provides the most reliable, accurate opinion of value. We do this 24/7 and have to go through rigorous education and experience to become certified. Short of taking someone aside for at least two years to explain how we do what we do, it is hard to explain the how's and why's of what we do in each appraisal and every appraisal is unique. With the exception of human oversights, there is usually a reason for every item in each appraisal.
It has been written in to law not to try an coerce an appraiser to hit a higher number, 'use these comps' because they are a higher value, change or omit data, etc. Asking for such may end up in with having the 'asker' in some hot water. In PA, loan officer are getting fired like flies for even talking to an appraiser anymore.
Please understand that even if there is a small error, in most cases it is minor enough in nature to not have an impact on the final opinion of value.
Last, please understand "coming in low' is not fun for us either. We have to appraise it for it's true opinion of value irregardless, however, low appraisals make us lose business because we get bad-mouthed for it. (even though the sinking economy is the culprit; not us.) We certainly don't like to lose business but don't wanna end up in jail for being unethical just to make one deal work.
By Todd Krontz,  Thu Mar 1 2012, 13:05
Have you noticed the REO's seem to be so competitively priced to sell very quickly, causing bidding wars? After reading this article, the first thing that comes to mind is that everyone is hoping the market can indeed someday rebound over time. But if we consistently live in the past, how will the values of Real Estate ever make that rebound.

Perhaps a property does have a unique feature that is desired by more than one buyer. It may sell slightly higher than the comps currently available will provide, because of that single or multiple feature(s). So if we kill a deal through an appraisal based solely upon the comp's chosen, will the market ever see higher prices? It appears the appraisal industry will control the Real Estate values of the future for some time.

I have always believed in "Buyer Beware" and that something is only worth whatever someone is willing to pay. Buyer's are very intelligent and know where there dollar is going to stretch the furthest. It's time to chill on values & appraisal regulations and control the lenders costs and qualification requirements. After all, who is to blame?
By Tracy Santrock,  Thu Mar 1 2012, 13:08
I really enjoy reading your blogs! They are simplistic and well organized. Not sure why others try to cause controversy
By Vikki Powell,  Thu Mar 1 2012, 13:19
I am absolutely stunned when a customer looks to the agent and says "cut your commission". Ever notice these are usually the most difficult folks with which to deal? There's probably a 90% chance that both agents have spent countless hours, gas and $$$$ bringing this deal together. Or one/both is having to pay a huge RELO referral fee. All this on top of probably dealing with an Appraiser from God knows where, who knows nothing about the area. And oh yeah....the sellers wants a discount and the buyer says if "you'd cut your commission, we could close".
By Carolyn F Embury, SRES,  Thu Mar 1 2012, 13:19
I had this happen. I had the seller's side and was not allowed to see the appraisal or to comment to the appraiser. I submitted comps that I had gotten, but the bank would not budge nor the sellers or the buyers. They shortly sold the house with a different appraiser who brought it in at $9,0000 more.
By Leonardo,  Thu Mar 1 2012, 13:33
Easy solutions, ask your county the value of your land property.then find the value of plaint contraction for the square feet. At the present time fire insurance estimated replacement value for square feet of contraction are 185 dollars to 225 dollars plaint contraction. Explanation 1200 square feet home total value will be 1200x185=222000
Assume the land value is 2500000 +222000=472000 minus depreciation
By Kerry Gibson,  Thu Mar 1 2012, 13:56
I think that it is sad that Mrs. McGarity finds it appropriate or even fair to judge the Realtors associated with such large companies as Metro Brokers, Re/Max and Keller Williams by a group bashing comparison. I take great pride assisting in every buyer and seller with outstanding service and proactive representation. Just as every nurse, doctor, lawyer, teacher or any professional for that matter should be judged by their individual expertise and conduct, so should Realtors. Real Estate agents are independent contractors for their Broker. They are responsible for maintaining their own individual education, community affiliations and professional standards that hopefully should be encouraged and reflected through their broker. I truly doubt that you would want a consumer to judge you personally because another person in your field or company didn't reflect their standard.

Another point to keep in mind is that todays high rate of REO's and short sales make it very difficult to maintain a set standard of value. Banks are trying to unload REO properties and unfortunately the "regular" seller is a minority...and therefore the underdog when it comes to getting what they want as true value. As stated earlier and appraisal is an opinion of value based on the parameters set by the lender and/or their investor. Stop blaming it all on the Realtor. Remember in the end, you did find a good Realtor. They do exist.
By Greg Lyles,  Thu Mar 1 2012, 13:57
Why not just have the property appraised before you list it? I've been doing this since 2007 and have closed 100% of my listings. The problem is, certainly with our appraisal contingency exhibit, is that most buyers are only willing to give the sellers a day or two to either agree to the bank's appraised value or let them walk. Not enough time to do many of the suggestions in this article.

My approach is that I agree to pay for the pre-listing appraisal if the seller lists, and closes with me. I use the top-rated appraiser in our market - one who all of the lenders know and respect. Having a pre-listing appraisal does several things for the seller;

- First, it provides them with an unbiased, third party estimate of value.
- Second, the seller avoids agents who attempt to "buy the listing" by suggesting a price that cannot realistically be achieved. When agents do this, they are reluctant to suggest a more reasonable price (reduction) for at least 30 days (lest they appear like idiots) and the seller loses the valuable initial few weeks on the market by being priced out of the market.
- Third, the seller is in a better position to recognize a market offer when one is made.
- Last, because I attach our pre-listing appraisal to the Purchase and Sale Agreement as an exhibit, the lender see's it. If the lender's appraisal comes in lower than the contract price, we can simply ask the lender to take a look at ours and see if they are willing to accept it. More times than not they are.

I have saved several clients tens of thousands of dollars in last minute price concessions by taking the initiative to have their property appraised before I market it. For agents, it's a good way to find out if the seller is realistic before you devote a lot of time and money to marketing a listing that may never close.

I also pay for a pre-listing inspection and coordinate the required repairs. By doing so we have eliminated the two main reasons sales fall apart - low appraisals and problem inspections.

Greg Lyles - Associate Broker, Harry Norman Realtors - Atlanta
By Al Chiarito,  Thu Mar 1 2012, 14:03
Just renegotiated a deal because of an appraisal that came in $20K off the mark. This one appraisal so far would have collapsed a big chain of deals associated with it. It goes like this.. Buyer A gets and accepted offer on seller B's listing. B want to buy C's listing and gets an accepted Hubbard on C's property. C makes offer on D's property and gets accepted. A's appraisal comes in low on B's house. A and B don't want to budge, and want to call it off. C steps up to the plate because they want to sell their house to B so they can buy D's and reduced their purchase price on their listing price by $20K so B can even the lose by sellling to A also at a $20K discount. A & B can know keep their deal together and C can now sell to B and buy D house. There's still two more appraisals to be done to keep this chain deal together. I'm not looking forward to those.
This is so crazy how I/we as Realtors work long and hard on these deals until all hours and coast are exhausted, and that's sometimes is just to get an accepted offer. Then after all that, the bank steps in with a low appraisal. Funny how banks are willing to take huge hits on short sales to keep deals together, but can't stretch to work a normal deal. I'll try and keep you posted as all these are supposed to close March 30th 2012.
By Katherine,  Thu Mar 1 2012, 14:12
We always go armed with comps to meet the appraiser , in fact I've started listing with an agent/ appraiser (who has been appraising for 30 years) and actually hire him to meet the appraiser (with a CMA) .....still get low appraisals...as an investor who is joining this conversation...between the banks, the city, and the appraisers...I'm done!
By Steve Morgan - (302) 541-5363,  Thu Mar 1 2012, 14:12
As a mortgage broker - this article is need prior to any appraiser coming out to the home. I get my agents to provide comps given by the homeowner or seller.
By Tom,  Thu Mar 1 2012, 14:34
I am a real appraiser that has worked in the New York area for 14 years and still working. Marvin I would like to know what a BPO stands for thanks.

Now this is my opinion
I would say the first porcess for an agent should be to comparable area for themselves to properly evaluate the best price the property will sell for. Then add your commission and closing costs to finally come up with a realistic sale price for the property you are selling. Now with that being said, You now have the information to tell your seller that this is the price you can sell their proptery for with no hidden costs and you have all the information to complete the transaction in a timely manner.

Lets play appraiser
This is not real but it happens
The comps in the area are selling in arange between 150,000 to 200,000 and the subject property is in averge condition, contract price for property $214000. Now the real estate agent gives you comps that are, different location , superior condition,room counts and larger square footage and all of the comparbles are above $225000 and above.

The appraiser now has to look at these comps and decide if they can be used in the report and have to make a comment why they are not comparable to the subject, If the real agent decides to challenge the report. Then he or she has to go back into the subject neighborhood and studies the most comparable properties to the subject. And writes a detailed report that comes in at $200,000

Now at this point, in the past,The mortgage broker will call your office to ask if there is anything we can do to make this appraisal come in. Do to the fact that if it doesn't come in, it may effect the amount of work that he/she can give you in the future. What do you do, add comps that where given to you by the agent or stand by your report. This was the probem, Real Estate agent mad because the sale is in trouble and mortgage brokers pressuring us to hit the numbers to make it come in or no work in the future
The management agency is born
They go out and offer services to the banks to review and in a timely manner have the competed reports review and corrected and sent back to the banks in 24 hours after the inspection. The appraisers will only deal with the management agencies and be a buffer between banks and appraisers so they can do there work and not be pressured to hit that number.
The Report

The report takes and average of two to four hours to complete depending on the appraisal, 24 pages long(Boiler plate included),MC10042009,UAD version 2010, And then these new additions, compenance of work, GAVR, and Hypolhetical consummation. For an appraiser( how many appraisals you have completed in the area and how long have you worked in the area). Which one of the comparable properties in the report are the most comparable to the subject property, What was the GAVR, Gross adjusted value range and what is the value range for the subject property, Higher, average or lower range. This is my favorite, Estimate the lenght of time the property would sell for in the area even if the subject is a refinance transaction.


Tom
By Marvin Von Renchler,  Thu Mar 1 2012, 15:09
Krystal and Tom. I forgot to adress anoter comment madem in here about how no one shoiuld trust the banks appraiser because they are ultra conservative on purpose. That statement makes the assumption that the appraiser is crooked. An appraisal is an appraisal. Except for judgement calls on hard to comp properties---it is what it is and to manipulate one meand fraud. You guys/gals doing appraisals should hackle a bit at these comments. I would.

In the last few years rules regarding appraising have changed, Much of it was to INSULATE the appraiser from the influence of any other interested parties. As a mortgage broker, we were furious over not knowing who the appraiser would be and that we had nom way of communicating with them, though I understand the point of the rules. Of course, I was an honest agent. One can understand why a dishonest agent would want full contact with an appraiser---assuming the appraiser could be swayed by the threat of no future orders.

If any of you in this thread are fully licensed appraisers, isnt FIRREA the governing body for appraisal regulations? What are your rules concerning communicating with the parties involved, and are there limitations or restrictions on you taking comps, comments, whatever from the seller or any real estate agents involved?

TOM: A BPO is a Broker Price Opinion. Its like a mini-appraisal and called for by nlenders who are checking values for a variety of reasons including considering loan modification, foreclosure, after auction sales or REO (Real Estate Owned) if no one bid on it, etc. They pay from $35 to $70 on average. The lenders dont have to pay full appraisal fees plus there are not enoungh appraisers to handle the orders. Not by a long shot! Ills sometimes get 7 orders a day and Im only one of over 780 real estate brokers in three major counties here working with JUST ONE of about 50 BPO ordering sources! Ive dont around 2,000 of them in the last 20 months or so. They are simple pictures and some MLS comp work to establish a market value. We dont have to take comp pics. Personally, I dont think it should be allowed because Im having to justify my value differences over idiots who dont have a clue. Several times Ive said things like (this is true) 'My value is $250,000 and the previous BPO was $290,000 because the field agent is a moron who should be fired from your list'. I bit my lip when hitting 'send' on those comments but never once received a negative reply or request to change the comments.

Bottom line folks---no one should influence the appraiser in any way. Lenders have UNDERWRITERS who review appraisals. Lenders are acared. They are cautious and conservative. That doesnt mean they can manipulate facts to come up with whatever value they choose. If you are lucky enough to get to see an appraisal and you see clear mistakes then by all means get that info to the lender. Before closding my mortgage shop, we were not able to have any communication with the appraiser at all. I believe that was federal, not state?
By Marvin Von Renchler,  Thu Mar 1 2012, 15:12
My apology for what seem like spelling mistakes---my keyboard is just about shot.
By Laura Bishop,  Thu Mar 1 2012, 15:23
I have been appraising for 27 years and recently was asked to "reconsider" a value on a refinance - I reviewed the information presented to me, did more in-depth research, investigated the points of concern, and was able to determine that an increase in value was definately warranted and supported. I proceeded with a revision (doing the "right thing") only to have this lender put me on suspension and investigate me for fraud. I feel confident in my revision, but will probably loose this very good client over this incident. So what that tells me is....deny, deny, deny and I will never change another value again. Sorry, but this is the nature of this business. By the way, thanks to Trulia, I was able to get some information from local realtors to support my revision and will be using that as part of my rebuttal to the lender. This is the agony I get for being professional, ethical and doing the right thing.
By Elizabeth Nicosia,  Thu Mar 1 2012, 15:38
For those posting on here who are Not in the industry...dropping the agents commission of the set 3% the bank pays on a $14,000 sale after 4 + months of work is hardly an "answer" . If this honestly seems proper. Tell your boss that just so you can help him close his billion dollar deal...the last 4 months youve stayed up until 2 am sending his paperwork and dealing with negotiations on the phone (for his profit) youve decided to take even less than the $290 you made on that venture. Not all deals make agents wealthy. Many are agents who do this to help others through their housing issues. With nothing in mind beyond the closing but positive referrals from their hard work in the years to come. This had to be said.
Elizabeth Nicosia-
By Kerry Gibson,  Thu Mar 1 2012, 15:57
I second that thought Elizabeth!
By Al Chiarito,  Thu Mar 1 2012, 16:06
Wheather you're a Realtor, Appraiser, Doctor or Attorney. All are a dime a dozen, good ones are hard to find. I alway put people first in my business and never count my chickens before they hatch. I never give commission up at the closing because I refuse to get my pocket picked. When I say no it's no and they quickly move on to the other side. I have yet to see a deal fall apart because I didn't pitch in at the closing. Try picking the pocket of your Doctor or Attorney and see what they say,. Good Luck with that.
By Joanne Bernardini,  Thu Mar 1 2012, 16:07
I always meet the appraiser at the subject property and offer a background information packet. Of course it is their decision what to use or not. I have found they appreciate my efforts. As an agent you must be careful how you present your information so that you don't give the appearance of improper influence.
By Christine Ferringer,  Thu Mar 1 2012, 17:43
I JUST had this happen to me a few days ago & buyer walked (not to blame either). Doing 'due diligence' I had approached the Appraisal in a non-judgemental way, with respecting that perhaps it was miscalculation or oversight in error. For reasons never explained, the Appraiser said she wouldn't talk to me & didn't want to discuss anything, nor explain - it was done & that was that. Truly believe unprofessional. Called the bank & said their hands were tied as well, they 'randomly draw' from a list & will not do a 2nd (even asked IF Buyer would pay & they again choose another - still a firm 'NO'). Disbelief in the process! Lost alot of confidence in this case. FYI: this wasn't over a few thousand - it was over 30K-36K on a property that in the end got appraised for $137K. Buyers will continue to search, Seller has no words & has 'never been so insulted' (I completely understand each side).
By ruthann.rost,  Thu Mar 1 2012, 18:04
This has happened to us......fifth third bank i would avoid at all cost!!!!!!
By David E. Harriswon,  Thu Mar 1 2012, 18:36
How do you know that the appraisal is "too low"? Maybe the selling price is too high, and the bank is doing its job of protecting the buyer.
By Steve McEwen,  Thu Mar 1 2012, 18:44
The bottom line is this. Sellers price your home realistically with the help of a trusted real estate professional. Why not get an appraisal if you're not sure. Finally, agents should be at the appraisal to give their CMA to the appraiser. They will appreciate you doing their homework!
By Wendy,  Thu Mar 1 2012, 19:41
quick question, to all of your experienced real estate agents. If the house appraises low and you can't come to a compromise do you lose your Ernest Deposit if the house falls out of escrow?
By Priscilla Hammond,  Thu Mar 1 2012, 20:25
I had this happen just this past December. We renegotiated the contract to remove some of the repairs the Seller had agreed to do and some of the Seller paid closing costs and closed the deal successfully. My client was actually a lead from Trulia, thanks again Trulia!!
By Boyd Custom Homes LLC,  Thu Mar 1 2012, 20:51
Some great comments and suggestions listed in some of the comments above. . I have seen all of the most commons mistakes. There are some really good appraisers in our area, but there are many that should really be fired for poor job performance. Some will take the time to call me as they realize I know the area, and are looking for true comps. They do their due diligence, they strive for the most accurate appraisal to match the current market. They are true professionals in their industry.
Unfortunately, the majority are rather incompetent. I've been told from appraisers that a production home is the same as a custom home as they look the same from the exterior. They take the easy way out and find similar size homes in the area that have sold, even if they are not true comps. A 5th grader could do that. Appraisers should also know constructions costs but when questioned, but most don't. There have been lot's of articles on faulty appraisals over the last 3 years and for good reason. I don't see anyone stepping in to help me with my job. Why do we have to find the comps, show them the contract price, tell them all the upgrades, etc
They are getting full price for their services they have been hired to do. If they need help and assistance, then all they have to do is ask. Their job is to come up with a accurate appraisal of that particular property and what it is worth at that time in the current condition. If they are good at what they do and they are a appraiser by profession , then they should not make any mistakes whatsoever.
I constantly am complimenting professionals in our industry for doing a great job ..... realtors, bankers, mortgage lenders, and appraisers. At the same time, like any profession, the ones who make mistakes all the time, or who provide inaccurate appraisals ( regardless if too high or too low) should be held accountable for poor job performance. I'm just saying
Steve Boyd
Boyd Custom Homes
By David,  Thu Mar 1 2012, 20:57
Tried to refinance and got an appraisor (assigned by appraisal agency) who did it as a second job (works out her apartment at night and weekends). Amoungst her short comings; refused to use the two sold condos accross the street as comps (sold two weeks prior to the appraisal) because they weren't in the same class, even the though the floor plan was almost identical and only three years difference (with less ammenities and higher HOA). She insisted on using comps 5 months old and almost one mile away. She contradicted herself in her rebuttal to my challenge. She even stated that she was insulted that a non-appraisor would challenge her appraisal. Although lending firm agreed with me, they said they didn't want to make waves.
Just biding my time and will try again.
By Jennifer Fivelsdal,  Thu Mar 1 2012, 21:03
I ran into this situation recently and the use of appraisers outside of the area does present an issue. My advice is for buyers to use more local financial institutions.
By Dan & Nan Sojka,  Thu Mar 1 2012, 21:26
A deal I just did had a low appraisal. My buyer came in at asking price of $420k and the appraisal came in at $415k. It was an REO and the bank asked my buyer to come in with his own $5k. We countered and asked the bank to drop their price to the appraisal. None of this "meeting in the middle" with the bank. They want to sell as bad as my buyer wanted the home but I figured the bank can afford to drop the price and not afford to have the house longer in their portfolio. In 24 hours they came down and I saved my client $5k. He was thrilled and we never looked back.
By rsjetton,  Thu Mar 1 2012, 23:06
I have an offer in on a short sale. Don't I want a low appraisal in order to persuade the mortgage holder and/or the buyer to offer some concessions? I can cover the shortfall if the appraisal comes in too low, but I got in a bidding war over the property and am concerned that I offered a price without repairs factored in.
By Victoria Kleber,  Fri Mar 2 2012, 05:26
The other side of the coin is a message to my fellow Realtors - PLEASE don't take those extremely over-priced listings!!!! I am taking a buyer in the $250K range out in my area and I am seeing listings overpriced by $50 or $75K. They have some "dazzling" feature like a cathedral-ceilinged family room or omnistone all over the place, etc, but a 3 bedroom ranch is STILL A 3 bedroom ranch!!! You'll never even get to the appraisal phase guys because I can't waste my customer's time on a home that simply can't appraise. When I ask you for your comps, telling me that there are "$1MM homes down the road" doesn't cut it! C'mon people!
By David Rivero,  Fri Mar 2 2012, 05:34
A great way to avoid this problem is to leave the appraiser your own CMA at the subject home. Most appraisers will probably take a look at it. If you know something they don't then the outcome of their price may be influenced.
By J R,  Fri Mar 2 2012, 05:41
That's some suggestion Vadim. Maybe the homeowner should forego the agent entirely? How far do you think a homeowner themselves would get with 1. convincing the appraiser his comps were too low; 2. convincing the bank to order a new appraisal; 3. convincing the buyer to pony up more money? My last closing the buyer ponied up an extra 80,000 after a low appraisal caused by a bidding war on a house. Guess what? We're the number one county for foreclosures in the US, so it isn't like there's a lack of bargains.

Oh, one other question? At the end of the week when it comes time to get paid, how would you feel if your boss decided just not to pay you.
By J R,  Fri Mar 2 2012, 05:45
Sherry, if there are comps IN your neighborhood, the appraiser is not going to accept comps OUTSIDE your neighborhood. Now tell the truth. . . . isn't "25" a little teeny exaggeration?
By J R,  Fri Mar 2 2012, 05:47
Oh, I see now, reading further. Sherry is putting us all on. :)
By Theresa Vitanza,  Fri Mar 2 2012, 05:53
I had the experience of having the appraisal come in too low and was able to find more appropriate comps that were higher priced and negotiated with the appraiser to bring the appraisal up..... Apparently the bank sent someone from Suffolk County NY to appraise a property in Bay Ridge Brooklyn and he was not familiar with the area at all!!! After some persuasion he agreed and we got the deal done!!!!
By J R,  Fri Mar 2 2012, 05:58
By Jim Somers, Thu Mar 1 2012, 11:24
Another good alternative is to "pre-qualify" the appraiser. He/she has to call the seller to make an appointment. That's when you pre qualify. Ask the appraiser where he/she is from. In my area, it's not unheard of for appraisers to be sent in from another county, sometimes more than 100 miles away. If your appraiser says he/she is from a long distance away, simply refuse to allow the appraiser to come to your home. Trust me; you will get a call from your lender the same day.

JR: HA HA HA!!! Oh Jim, stop stop, yer killin' me.
By Carlos Lopez Rodriguez,  Fri Mar 2 2012, 06:29
Great report. A lot of good info. Both sellers and buyers should heed this advice. Some of the comments also provide very useful information. A must read for anyone in the process of buying or selling real estate.
By Rochelle Beck,  Fri Mar 2 2012, 06:40
I thought the article was good. But, after reading the comments one sticks out to me more than most. Why would you cut the real estate agents commission because the home may or may not be valued at the sale price. They did their job and continue to try to assist you at every turn. Would you ask your dentist, lawyer, teachers, doctors, child care provider to cut their cost after they performed their service? We work for free until the sale is complete which can take months or longer.

There are some bad appraisals out there that I have seen recently because of the amount of foreclosures. I always tell my customers that a home is only worth what someone is willing to pay for it. Why does that not account for anything anymore in the appraisal world? Everyone is so scared (banks) of getting the house back but if the buyer is putting enough down to take on the risk on a home, sees its potential and that it is perfect for them and their family the value is there. We have seen appraisers coming in from out of town who have no clue what our market is like and compare nice homes to foreclosures that had water issues, mold, broken pipes, crooked floors, etc. They hadn't even been in any of the homes and appraisal came in $30,000 too low. Killed the deal. The foreclosures should not have this much of an effect on our market. They should be priced for what they should sell for not for the "great deal" because some unfortunate people lost their jobs, etc. If the agents that take on these foreclosures would do their job and list them competitively and for a correct market price we wouldn't be having these problems. If they are not worth it and are indeed in the shape of the price they are listed at, they are required to do FULL DISCLOSURE (which I am aware about 99% of them do not) on the defects that they are aware of. This in turn would assist the appraiser.

Thank you for letting me ramble. I am so tired of being the one to blame for a sellers home not selling- NOT because it is over-priced. We DO NOT make the type of money people think we do and most of us are living paycheck to paycheck. Blame the banks that allowed the trucks, boats and cars to be rolled into the mortgage creating an inflated value and not the people that are doing their best to help you out.

Let's work on the market, economy and jobs and do the best we can. Our future depends on it!
By Rochelle Beck,  Fri Mar 2 2012, 06:52
P.S. I recently had a couple list with me that were in a divorce situation. The judge orderded an appraisal of the home and the appraisal came in $70,000 higher than I could even think of listing it for. I contacted the appraiser and he said it was a "different" appraisal because it was for a "divorce" Should it matter why it is being appraised? NO. And thank you for being so rude to me Mr. Appraiser when I was sincerely questioning the comparables as they were so far off the mark. I DID NOT LIST IT FOR APPRAISED VALUE. We listed it about $15,000 over what my BPO came in with and am desperately working on price adjustments to get it to where it should be to sell. No showings. So maybe I should ask the appraiser if he would pay that much for the house since no one else will?? Grrrr.
By Jeanne Dominguez,  Fri Mar 2 2012, 07:15
Just wondering how many Realtors have had luck pre-qualifying the appraiser? And if he/she is from another area, refusing to let him/her appraise the home??
By Sandy,  Fri Mar 2 2012, 08:25
I'm buying, or trying to buy a house, $435K.. Loan broker assured us he could loan us any amount we needed - we have no debt and great credit/jobs. Just 2 weeks before closing he informed us there are 'no' comparables for the house, thus he can't get an appraisal and Fannie Mae denied the loan. So now we either pay cash or lose the house and $5K deposit. How can this happen and how will our economy ever recover when even with excellent credit you can't get a loan? Our agent and the loan broker both new going into this purchase that they couldn't find comparables. Should the seller agent have been allowed to put the house on the market w/o comparables? Who should have protected us from this real estate disaster? Since this is not our fault, why would I still lose my $5K if we walked away from the deal?
By Erin Meyler-Taffin,  Fri Mar 2 2012, 08:35
Having your pride and joy of a home fall short when coming to appraisal time is a panic for BUYERS & SELLERS & REALTORS Alike. First, when dealing with the mortgage broker, ask for a new appraisal to be performed by a different company and also use a different appraisal management company. Due to the new changes in the appraisal world as of this past autumn, the appraisers are so insulated from the banks or others that may influence or aid them that even an appeal will not change the numbers in the end and time still ticks. With those changes, appraisers are not likely to be from the direct area so the neighborhood nuances will certainly be missed. ASK FOR A LOCAL APPRAISER WHO WORKS REGULARLY IN YOUR IMMEDIATE AREA.

Next, if you have coorperating agents and sellers/buyers, perhaps if plan A doesn't work with getting a new appraisal, try switching banks/brokers. This can only be done if the credit stands on its own because if one's credit is borderline having another bank draw information will drain the score.

For Agents, checking how much the buyer is putting down may be a good indicator of how much cash a buyer can play with if they decide to they really love the house. Unfortunately, there are mortgage reps out there who still promise to deliver on a loan before they have all the information on a buyer. Further, they will attempt to say "borrow more it's cheap" then 2 weeks prior to closing or worse the week of closing they fail. So, always be sure to check on how much liquid assets a client has before hand, because costs seem to flucuate from appraisals to closing fees.
By Kay Baker Associates,  Fri Mar 2 2012, 09:16
Great Post.
By Kimmy poo,  Fri Mar 2 2012, 09:44
Related issue: As a homeowner preparing to list, I learned that my county has the number of bedrooms at 2, not 3 and some other errors. Fourteen years ago we bought the house remotely and were not physically here to assure accuracy. While now trying to fix errors, could this have impacted our original appraisal, which came in low?
By Robert Hierspiel,  Fri Mar 2 2012, 11:23
I have found it important to be proactive in this situation. I always have the best comps I can find, printed and in an envelopment with my business card. When I meet the appraiser, I hand the envelope to him and let him know that I found some recent sales that may help him. I make sure my comps are really competitive comps and I have found all appraisers to be thankful.
By Karen Steed,  Fri Mar 2 2012, 11:48
In some areas, by the time the appraiser goes out, new comps have come in that show an even lower value than anticipated. What was a good price 30 days ago, is now overpriced.
By Barbara Betts,  Fri Mar 2 2012, 12:47
Great article, good suggestions!!!
By Keli Davies,  Fri Mar 2 2012, 18:44
Hi Tara, This was great information, however, as James Sebert (appraiser) noted above, the best way to work with an appraiser is BEFOREHAND. Listing Agents need to consider the fact that appraisers are overworked and underpaid. Most of them welcome ANY help that a listing agent can provide. I always meet my appraisers at the listing and give them a "neighborhood info" folder that not only contains the current MLS Solds, but I also take the extra step and call Agents of properties that are Pending or just closed that are not yet in the MLS. I print out the entire listing, pictures and all and then make side notes as to "original" countertops verses granite, flooring issues, lack of updating, etc compared to the subject property. I also includes EVERYTHING I can about the subject property, the listing, pictures (with notes), survey, list of updates/renovations - when they were done - what they cost, etc. Maybe I have been very lucky, but I have yet to have a problem with my contract Sales Price including my short sales! In this day and time, we all need to step up and help each other out, then the transaction goes more smoothly.
By darleneyoung11,  Fri Mar 2 2012, 18:55
I had an appraisal done a couple of months ago and they missed an ATTACHED garage! They had to come our again and that added $ 3000 to house value.
By lhadden,  Fri Mar 2 2012, 22:29
Our home will be placed on the market as a "Cooperative short sale". My lender is having the appraisal completed (at no cost to potential buyers) and before the short sale is listed.
By Neena Vlamis - Lender,  Sat Mar 3 2012, 05:50
Very well written, we run into these scenarios all the time. Thanks for posting!
By Fares,  Sat Mar 3 2012, 15:06
If I am looking to buy a house with all cash, is there a need for an appraisal at all?
By Voices Member,  Sat Mar 3 2012, 15:37
Great info. Thanks for the post!
By Nancy Nadler,  Sat Mar 3 2012, 17:29
I'm in escrow now and that very thing happened. Fortunately, we were able to renegotiate the price down. thanks for the post!
By Chris 832-607-8073,  Sat Mar 3 2012, 20:59
Wow. Great data. Thanks for the good advice!
By Helen Oliveri,  Mon Mar 5 2012, 12:07
Great post Tara.
By Grizfan21,  Mon Mar 5 2012, 21:53
In selling my home I have found that often realtors and appraisers sing the praises of an oversized prime location lot in a neighborhood, but then don't count it for any value and then compare it to a subdivision by a highway, local airport, and packed in like sardines with flooding issues. Instead they try to just calculate the price per square foot averages of houses 5-15 years older and in desperate need of updates. (And a new carpet and gallon of paint don't compare to a 2 year old house with nicer cabinetry, flooring, lighting, hardware, etc. with drastically less wear and tear.) Also the short sales and foreclosures is killing home owners trying to sell their homes without going that route and going to make it take a very long time for the real estate market to truly stabilize and be healthy. It is why I kept mine as a rental property and looking at refinancing to make the monthly income above my expenses go from $150/month to $250/month.
By Grizfan21,  Mon Mar 5 2012, 21:58
Sandy if you had a finance or appraisal clause in your offer, then you shouldn't lose the $5000 you put down. You could also ask both realtors what they can find/ do/ call to try and make something happen. Persistence can pay off.

Fares if you are buying a house with an all cash offer you don't have to get an appraisal, but you might want to if you think it might come in for less what your offer is and you want to renegotiate. However if you think you are getting a fair price, then there isn't any reason you have to since the appraisers are mostly banks protecting their part of the investment as far as I know.
By John Marcinik,  Tue Mar 6 2012, 10:37
All I ask from sales agents is after I have measured a 6,500sf high end luxury home with $75K kitchen, $100K in landscaping and pool, $100K basement area with private theater room, custom bar and dance room, and custom marble baths, is please don't say this should be an easy one.

Remember to give yourself credit as a great sales agent if the appraised value is low. Appraisers estimate market value, agents optimize the highest possible sale price. You are not wrong, you are doing your job way too well.
By Stephanie Leon PA 786-574-3928,  Tue Mar 6 2012, 18:37
This is happening right now to one of my deals.. FHA buyer and we are stuck. The seller wants the full contract price and the Buyer does not have the $30k difference. If they did they would not be buying FHA or buying this house they have the contract on. The Buyer is ready to close if the Seller would take fair market value as stated in the appraisal. Looks like this deal will be another one that falls through.. This really sucks.. O' BTW this is the 3 time this happens to me in the last 2 months. Twice I was on the other side working for the Seller and now this last time on the Buyer side... Everyone she should just agree that this is Fair market value and accept it.
By Natasha Nikolaeva, Realtor,  Tue Mar 6 2012, 19:20
What I've learned over the years is that appraisals are always objective. Bring to the property 3 appraisers and they'll come up with different "fair market value". It all depends on comps they choose to use.
What to do: don't give up and order another appraisal. Also, always meet with the appraiser, bring property info, additional paperwork/receipts in cases where improvements to the property have been done recently or house went through remodeling. Spend your time on preparing comps and have a total package for an appraiser - they usually appreciate your help especially when banks send appraisers from another areas who're not familiar with the neighborhood. Neighborhoods defer significantly, do let an appraiser know how fast homes are selling here and how desirable this specific street/location is.

It won't be a "dead deal" if you put every bit of your energy, enthusiasm and hard work into it. Don't give up, fight and you'll win. But in cases if you know that appraisal is right there at the price - make a deal between Buyer and Seller. Logic and facts should make everyone to understand that "It is what It is".
Natasha Nikolaeva, 831.818-6605
Bailey Properties
Santa Cruz , Los Gatos
By Ksapprzr,  Tue Mar 6 2012, 20:06
How about agents research the market, learn appraisal, lender, and secondary market guidelines, then price the home accordingly. How many time have I called an agent "how did you get the asking price" and never once do I hear "address so & so" no I hear well they bought it for $xxx, and then they have receipts for the work they did so A+B=C doesnt it?" No if agents would research the market, and price their subjects accordingly, we would not have a problem. The problem lies is that appraisers are held responsible, and must act accordingly, as where agents are not held accountable one iota. As an appraiser I have never once came in low, I have come in below sales price, but ANY AGENT SHOULD KNOW WHAT AN APPRAISAL IS. IT IS ONE MANS OPINION OF VALUE. I have never in my career been wrong. How can my opinion be wrong? I have a 30 page report supporting my opinion, what do agents have?
By Fares,  Thu Mar 8 2012, 22:08
Thanks Grizfan21 for your reply.
A general question:
What's the best way (besides going to Zillow and searching "recently sold") to get comps without using an agent?
Thanks
By JIM TURANO,  Mon Mar 12 2012, 06:44
I can only speak regarding the areas of Queens, New York with 32 years of experience. Here, if you give an appraisal on a home, with recent comps, you must be accurate, to ensure when and if the home is sold, that the lending institution comes in at the selling price. It may be nice to have such homeowners willing to negotiate down to make the deal happen, and everyones happy, but thats not everywhere. And certainly not here in New York.
After completing over 3,000 appraisals, when I sell a home, I do not have to bring one comp to give to the bank appraiser. In fact, if you have the most recent 3 months of comps there is no issue. Buyers here would only buy if the home is appraised at selling price, and homeowners are reluctant to have to come down at all.
Jim Turano/Broker *DIVERSE REAL ESTATE* MIDDLE VILLAGE,NY11379
GOOD LUCK TO ALL, WE ARE AT A DOUBLE BOTTOM THIS YEAR!
ADJUSTED CURRENT MARKET ASKING PRICES NOW & LOW MORTGAGE RATES!
By Rob88154,  Sun Mar 18 2012, 04:35
Our home was appraised $20,000 less than the agreed selling price. This made our deal fall through and our new buy deal fall through as well. Our home is a modular home on a full finished basement with a egress window. In the appraisal the basement was valued the same as a crawl space, so basically it was appraised as if it was sitting in a trailer park. Our realitor challenged the appraisal but the appraiser wouldn't change anything and now all deals fell through a week before closing. Any advice? I'd also like the appraiser reviewed because she did not do her job correctly.
By Mare,  Tue Mar 27 2012, 22:48
a short sale was listed for sale ar 200000 I made an offer at asking price the bank appraisal came in at 220000 .
the bank then countered my ofer with 209000 is that legal
By Jhcombes,  Sun Apr 8 2012, 16:38
super article , and the comments . Makes me a believer in Trulia .
By Robin,  Wed May 16 2012, 07:43
Here's my problem: I can't think of any other product on the market (yes I think real estate is a product) that is manipulated in such a way by the banking industry that requires a value to be set by the banks to determine the price. And that's really what's happening when an appraisal is made by the bank. If I want to go and buy a Volkswagon, Chrysler, BMW or Mercedes the price is based upon what the market will bear. Period. If I want to spend $250,000 on a Rolls Royce and I have good credit, the bank doesn't go to RR and reevaluate what THEY think this car is worth, they simply loan money to me based upon my credit. If I want to buy it and my credit is good, the bank will take a risk on me. So in that line of thinking, if I have an interested buyer for my home and they're willing to pay what they and I think the home is worth (at least agreed to) and they have good credit, why should the bank be allowed to determine its value. They're manipulating the market and if you think about it and auger down through all the excuses (such as they're protecting their interest), it all seems hogwash. They've become land barrens and aren't hurting by having ousted people who couldn't afford their mortgages in the past.

BTW I live in NY and recently had an appraisal come in 10% low. The appraiser was lazy, didn't count rooms correctly, and didn't know the area (just to name the obvious reasons), he also used comps that were in different sorts of neighborhoods, were in poor condition and were old (our home was totally renovated to the tune of hundreds of thousands of dollars). The bank (Wells Fargo) wouldn't budge. We as the sellers PAID our sellers new appraiser at a different bank. We're waiting for the results.
By Rebecca,  Wed May 16 2012, 18:00
We are currently selling a house and the FHA appraisal has come in 7k lower than asking price. We originally offered to pay 4k towards closing but with a disappointing appraisal value we are longer willing to lose any more on this deal. The buyer has asked their agent,OUR agent, and us to kick in another 1,000 a piece so we can move forward on the deal. This is outrageous!
By Robin,  Tue May 22 2012, 10:57
Yes it is outrageous Rebecca. I'm pretty fed up with this broken system. Our buyer went back to the original lender and they reviewed but wouldn't budge from their appraiser's quote. And I can understand the appraiser not reconsidering based upon what "Laura Bishop" above said, which is equally outrageous . So what we ended up doing was paying for our buyer to go to another lender and we paid for their new appraisal. Thank goodness this second appraisal was exactly what we needed, which just shows how broken the system is and/or how incompetent the original appraiser was. ugh.
By Missy,  Wed Jun 13 2012, 09:50
I need advice. I had a two-bedroom trailer on 2.26 acres of land. I wanted to purchase a modular which is 2100 sqft, 3 bedrooms, 2 baths. Everything was pre-approved for $165,000 and we had an apprasial done in January which valued at 165,000. The trailer was sold for 6,500 and from that we placed 5,500 on the 3.5% downpayment and the $1,000 left over is at a lawyer's office waiting until we get the buyer the title to the trailer. The contruction started in February and ended in March, it was a 3 week process. We were promised several times that we will close 2 weeks after contruction. Time was up and I gave a phone call on the closing date. Apparently without my consent, the loan originator moved me to another lender. This had happened a few times without my consent. Now I am with Wells Fargo which is my 7th bank, and the either 3rd or 4th bank I only knew about. Wells Fargo made a mistake on excepting our appraisal as an update and paid for a whole new appraisal which just came back. The new apprasial came in at $130,000, which is a $35,000 difference from the first appraisal. While all of this occured, my loan originator apparently had two additional appraisals done WITHOUT my consent for other banks. On top of all of this, the modular was set up without a payment from the bank to cover costs and since we have a low appraisal back it seems we are in a pickle. Should a lawyer be consulted about this? Has anyone seen or heard of examples such as this one? After this mess, I just want my trailer back. I want that back, I want the buyer to have his money back and I want those involved lie the originator to pay for the setup of my old trailer again and I want punative damages for the loss of money we have placed into our modular for the pipes and etc.. I am so frustrated right now.
By Missy,  Wed Jun 13 2012, 09:54
Another thing is there are MaJOR descrepencies with the appraisals. The one done in January said the house was built in 2011, energy efficient and foreclosures do not affect the value. The one done just now says the home was built in 2009, not energy efficient and foreclosures do affect our value.
By Chrisp17,  Thu Jun 21 2012, 19:52
The issue is FMV can be determined two ways (1) what a buyer will pay; and (2) by comps. Each are valid ways to value property. A seller's agent should have listed a property at a price if she didn't think the comps justified it. A buyer's agent should haven't counseled her client to make an offer at a certain price if she didn't think the comps justified it/it was worth it. Thus, to say take the appraiser's value as the FMV doesn't make sense.
By Gb Kate,  Tue Jul 10 2012, 04:38
We are in an uncomfortable situation. We used a builder which, typical for our area, offers "upgrades" from the standard model with discounts in the form of an upgrade allowance. We changed ceramic floors to wood in some areas, got a nice kitchen and a few other things and signed the change orders all the way. The builder discounted the upgrades but the home appraisal still came in way over comps. In this new neighborhood, home prices were typically 100/SF at sale with upgrades. Ours was 133/sf. Our next door neighbor order 120,000 in upgrades, received 80,000 in discounts and came in at 102/SF and their home is actually much nicer than ours. In the process, we were offered a 5% discount on upgrades if we paid 50% up front. We did so now the builder has over 40,000 of our money and the house appears way over priced. His base model price turned out to be 113/SF unimproved so we think this is part of the origin of the over pricing. Obviously, we were not minding the store, nor was our real estate agent who happen to be the same agent as our 102 neighbors. So the question is if the seller won't negotiate back down to a fair rate, what is our exposure on the funds we've already paid in change orders?
By Gb Kate,  Tue Jul 10 2012, 17:22
Got an answer of sorts. The contract says that "even if we do not meet lender requirements, we will not be refunded any money for change orders." Anybody know a good lawyer in Houston? The contract also says the seller will see all of our financial data provided to the lender (he knows how much cash we have and is picking our pocket). We signed that. Where was my head? Sheesh. Thanks.
By Sacramento Broker,  Sat Jul 21 2012, 12:24
When appealing errors or bad comps to an appraiser, has anyone ever used an attorney to write a letter pointing out the better comps and listing the damages to the seller, buyer for the flawed appraisal?
By Roger,  Fri Jul 27 2012, 07:42
Oh how I miss the good ol' days of the morgage crisis, when appairers were getting heat for over appraising homes, driving the market up, and creating a bubble. When did all that change??
By Fatboyjohn,  Fri Aug 17 2012, 07:22
Hello
I had an appraisal done the other day I was not home but my wifes was home and I was on skype with her. The appraiser came over at 9am and left by 9:07 I know this because my wife told me on skype when he left. I was informed that he took 3-5 pictures and that is when he left. Is this normal for an appraiser to do this? I thought they take measurements and check water pressure etc.
By Sharon Stover,  Fri Sep 7 2012, 16:35
Just tried to sell my house at what the realtor referred to as the "sweet spot" and agreed to pay sellers closing costs as they were usda. and the appraiser low balled it at $15000 below, basing his decision on 3 comps from our neighborhood that were 2 shortsales and 1 bank owned, each of which were on the market 248-433 days, going over the winter of 2011. Ours was listed late summer 2012 and was 1 day on market. Appraiser had 6 other comps that were more feasible and even supported our price but refused to use those to base his price on. Our realtor sucked and we had to write the letter trying to change his mind, but he wouldn't bend. Note: a smaller house by 3 rooms, in same neighborhood but off of busy street got it's price which was same as ours from their appraiser the next week, and they had to have used the exact same comps. I hate that the appraiser has so much power. Now we are looking to rent the house, as it is vacant and we can't afford more double payments. Oh, and appraisal report about our house sounded great, saying everything was above average etc.
By Skyone2,  Sat Nov 10 2012, 18:48
Greetings all. Uneducated in real estate transactions here ! I found a house i fla i really like. It is with a realator listed at 124k. The house is a short sale deal. It has an apraisal at 55 k. I am seriously confused. What should i offer ? What is generally in line ? Offer less than the apraisal value because it's a short sale ? I thought a good deal for the buyer would be in line because the bank wants to unload it ? Would someone please advise me in laymens terms ? Thank so much ! Douglas
By Robbie Hewitt,  Fri Dec 28 2012, 08:39
Hi Douglas,
I think you need to know who produced it, why they produced it and when they produced the appraisal of $55k you are referring to. Find an agent who will run good comps for you and base your offer on those. If it's a current appraisal (within about three months) then you should understand why it was produced. If for a purchase that fell apart it is worth considering. If for a re-fi, title transfer etc, not so much.
By Jill Jacob,  Fri Mar 8 2013, 12:55
Hi there - thanks for this blog. Any California experts out there? We put in an offer on a home we knew instinctively was above market. Seller countered and we agreed to offer at listed price. Appraisal came back $50K under listed and we have an FHA loan. Likelihood that the seller will meet at the appraised value?? Obviously we're going the FHA way because we can't come up with the conv 20% down. Did we totally screw ourselves because we offered at the listing only to ensure that we would be in contract? Any insight is so greatly appreciated!!
By Heather Tourville,  Wed Apr 17 2013, 13:39
I feel it is so frustrating that one person is solely responsible and has so much power in determining the value of a home. It is all based on one person's OPINION. After all it is just that, an opinion. It seems so arbitrary. If you get a qualified experienced appraiser who knows the neighborhood and does a good job and gets the right comps it's all well and good. But on the off chance you get that guy that doesn't really care to do their job properly and really doesn't care about anything except getting paid then your remedies are pretty narrow. Not the best system.
By torinoscj429,  Fri May 31 2013, 18:25
My home is in rural San Diego County. I knew when the current appraiser arrived, there would be problems, and there were. He spent 20 minutes chewing me out for almost mentioning my perceived value, and 10 minutes looking at my home. He took no notes. My neighborhood is ALL custom homes, and mine is the newest and most featured of them all.

In July 2011, it appraised for $490,000. This time, almost two years later, and supposed 20% increase in values, this new guy appraised it at $390,000. The house across the street, smaller, older, on a steep lot, just appraised for $405,000. I have a flat lot, salt water swimming pool, vinyl fencing, 3 car garage, tile floors, vaulted ceilings, two fireplaces, lots of special things.

How in the world could my custom home be worth less than the smaller, older, plain house across the street? I am livid, as this throws off all my plans to get my ex off the mortgage and to refi while rates are low.

Like I tell everyone, there are NO comps in my neighborhood. Who has a circular driveway? Nobody. Who has a gate across the front? Nobody. Who has hydronic heating in the floor? Nobody. Who has a vinyl fence? Nobody. Who has RV parking? Few. Who has a flat lot? Few. None of these features were taken into account.
By traley,  Thu Jun 20 2013, 16:01
In our case, the appraiser thought we paid $242,900. The purchase price was $292,900. He read it wrong. He used 6 comps, 3 were more than 6 months old. One was a year old. There have been 46 sales in that neighborhood in the past year. 30 of them sold at more than we paid per sq ft. 13 of them for less than we paid. Guess where his 6 comps came from? The bottom 13. He thought he only had to come up w a $242K value, so he looked at the lowest priced comps and stopped. One of the comps is a year old! We submitted several other higher comps (all sold in the subdivision within the last 6 months) and his arguments against them are just inane. The lot is smaller on one of them - doesn't that work in our favor? One of them is farther away than MOST of the comps he used. It's .5 miles away. One of his is .6 miles away. One of our comps is younger (1964) than than our new house (1955). But FIVE of his 6 comps are younger than our house. What? I complained to Wells Fargo - our lender - and they disputed the appraisal, but the appraiser came back and is sticking with his numbers because he doesn't want egg on his face. The house is clearly worth what we paid for it. I think we even got a good deal. But now faced with changing lenders and losing our locked rate AND paying for another appraisal. And this is Wells Fargo, not some internet outfit. I am just livid. Anyone know of any other recourse I can pursue?
By Jog522000,  Thu Jul 11 2013, 09:45
Real Estate agents are not credible. You do not know how to price a house and when it is short it is the appraiser. You actually believe that makes sense. The appraiser has no skin in the game. We all would rather do an appraisal when the home is listed at the right price. It is 25% more work when a sale comes in short. Use your head. Do you think we really want to do deals that are short. You should check with appraiser if you are not sure what number to list at. Obviously there are a lot of agents that are not sure what the number is. It is not an appraisal coming in low , it is an agreed upon number that is not supported by the market. But , you will all keep blaming the appraisers and nothing gets solved.
By Cris Staelgraeve,  Wed Jul 24 2013, 13:26
Too funny that the realtor has to give the comps to the appraiser--isn't that YOUR job, appraiser??
By Allison,  Tue Sep 10 2013, 13:31
I am a buyer in a recent transaction. The appraisal came in lower than the sale price, but it appears as though the appraiser had the wrong sell price in hand when appraising. It's very clearly documented in his report that he wrote down the sale price at $7k below what it actually was. What kind of wiggle room could we expect here, from the appraiser, lender, etc? This seems like a different sort of error than described in the article, which was mostly around home size or comps. I don't want this deal to get cancelled but I don't think we can afford an extra $7k at closing!
By Lynn,  Fri Sep 20 2013, 20:38
I am reporting my appraiser to the state board for the recent vacation home appraisal he performed. The overall appraisal number seemed okayish (there was a bathroom that appeared and reappeared in the paperwork), but the number was in line with the comps he showed and the purchase price. However, he appraised the beachfront land extremely low. When pressured by bank, he would not revise it or provide rationale as to how he came up with the number. The impact to me is a doubled cost in home owners insurance every year and a warning from my insurance agent that no matter the amount of the insurance coverage, they would only replace the existing structure. Somehow I doubt a 900 sq ft house (with a 900 sq foot walk-out) with minimal updates since the 1960s costs $360K to re-build. My only recourse is to pay for another appraisal (hoping the land valuation is done properly). Right now I don't trust my existing bank's selection of appraisers. My other choice is to pay for another appraisal and a refinance. What kind of profession doesn't have any checks and balances?
By betta,  Sat Mar 15 2014, 09:24
I can't believe all of the griping and strategies over "low" appraisals. How about admitting you are over charging for the property?
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By mebmus,  Tue Sep 16 2014, 19:06
Since the first two appraisals were too low (by $20K and $15K), the mortgage was not approved, and technically the contract is void. Can we get our earnest money back, or can the seller just keep it? He has refused to negotiate both times and has been quite difficult to deal with. We made the mistake of allowing his agent to fill out the purchase offer forms, but they are the standard forms used in Indiana.
By Barry Carter,  Sat Sep 20 2014, 16:11
It is a great day for the buyer when this happens. Assuming there is room, now the fun really starts.

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