Financing in 13820>Question Details

Aimee Swan, Home Buyer in Vestal, NY

Appealing an Appraisal: Has anyone appealed and appraisal? Any tips? Did you win? Why did you win/lose? What eventually happened to the purchase?

Asked by Aimee Swan, Vestal, NY Sun May 1, 2011

We are currently under contact to buy a home at $200,000 and no one was worried about the house appraising because the tax assessment done last year was $207,000. Comps were selling for near or more than this that were not in as good condition, not as new etc. We are currently working with our loan officer and real estate agent to appeal our appraisal value of $175,000. There are several comps that we feel should have been used that are not listed and facts that are inaccurate. These inaccuracies aren't as simple or as drastic as missing a bathroom, but are things like stating a garage is smaller than it is, putting the lot for a very low value etc. This appraiser has a reputation for being erratic-hopefully we wont be at the losing end. Any advise would be appreciated! :-)

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Aimee, I've been fortunate in that none of my buyers or sellers have run into this problem, but some of my colleagues have encountered this. In some cases they have been successful in getting appraisals revised or replaced, and in other cases not.

I don't know anything about this particular property or its value, but my question to you as the buyer would be why you want the appraised value to be increased? Do you believe the seller will be unwilling to sell it for the lower appraised price if it won't appraise for more? I don't mean to imply that there is a right or wrong answer, but if I were a buyer in this circumstance I might be more inclined to find away to get the purchase closed at the lower price.

Assessed values for tax purposes are not reliable indicators of market values. Tax assessments are usually based on very old market data, and very incomplete details about the current condition of the property which greatly influences market value. Assessed values lag the market significantly and only very roughly approximate it.

I hope this is at least somewhat helpful. though it doesn't directly address the solution you've asked for. I wish you well and the best of success in resolving this problem to a satisfactory outcome.
1 vote Thank Flag Link Sun May 1, 2011
Hi Aimee,

I am currently a Listing Agent in this situation. The appraisal (FHA) came in $20K low. Bad appraisal. Still waiting to see what buyers are going to do. My sellers are not going to lower their price $20K because like your situation, we all know the value of the home (both myself and the buyers agent did a comparative market analysis and we both came up with the contract price).

Not the first time this has happened. I had another listing last year that had the same thing happen - except that one (also FHA) came in $60K low. The buyers wouldn't pay the difference and there was no way my sellers were going to lower their price by $60K because the appraiser did a bad appraisal. The buyers agent and I even paid to have a 2nd appraisal done (making sure it was done by another FHA approved appraiser). The 2nd appraisal came in where it needed to but the first FHA appaiser wouldn't revise his appaisal. Since it was an FHA loan/appraisal, the bad appraisal stuck with the property for anyone doing an FHA loan - for 6 months. So, the buyers lost their dream home and my sellers sold to buyers not using FHA - for full price.

Good luck!

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
1 vote Thank Flag Link Mon May 2, 2011
First of all, Tax assessed amounts could possibly be the most misleading stat/number to use when coming up with a Real Estate Value. They are usually pretty far from the true market value. It depends on what type of financing my clients are using. If they are going FHA and the appraisal comes in lower than the purchase price there is 2 options. With FHA appraisals they stick with the property for 6 months. No one can do anything to appeal or change this. The 2 options are, Buyer comes up with the difference in cash or the seller comes down to the appraised value.( This is the route you would like your agent to fight for if you are on the buy side of the transaction) If the financing is conventional, then you are able to appeal the appraisal and prove your case as to what the property is truly worth. At the end of the day, a property is worth what someone is willing to pay for it. Moving forward, it is very important for all agents on the listing side to meet the appraiser at the property and discuss the comps they are using and inform them of the current market conditions. Appraisers don't always understand the intricacies between properties.
1 vote Thank Flag Link Mon May 2, 2011
I had clients who were refinancing and had a horrible experience. Unfortunately, with the new banking laws requiring some distance between lender and appraiser, appealing a bad appraisal can be difficult. Definitely challenge his findings. Definitely provide comps and look for any inaccuracies in the data. We tried all of the above and the appraiser did, finally, adjust his opinion but only slightly and it was not enough to help us. Furthermore, when we received the revised appraisal we found 26 inaccuracies, some of them HUGE, (for example a photo of a room with a toilet in it clearly marked "Living Room"). It sounds like you are not that far off of appraised value and may be able to get him to come up enough to save the deal. We couldn't and it cost my clients time and money. We ended up reporting the gentleman to our state licensing authorities for gross negligence. Of course, you may also be able to order a new appraisal. Not a good alternative but something to consider if all else fails.
1 vote Thank Flag Link Mon May 2, 2011
Ask you agent, and his broker to both do comps for you. Ask them to explain completely what or how they came up with the values they did. Ask the Appraisal service that gave you the low appraisal to send you a copy of the properties they used to get your appraisal and to explain in detail how they arrived at the numbers they did, also ask how many comps have they done in your area. Tax appraisals are not written in stone or accurate values, but in most states and counties the estimated value for tax purposes is usually lower than actual market value. If you feel the appraiser undervalued the property then tell the bank that you challenge that value and that you wish a second appraisal done. Of course like the first appraisal it will be you cost for the service even though it is the bank that asks for it. If the first appraisal company refuses to give you written explainatiom. remind them who paid them for the service!
1 vote Thank Flag Link Sun May 1, 2011
Hi Aimee,

My goodness-- usually the tax assessment is much lower than market value so you have good reason to be concerned. I have appealed two recent appraisals and WON both appeals. At the very least your agent needs to correct the inaccuracies and find comps that meet lenders standards--i.e. square footage much be within an acceptable range to the subject property and must within a certain proximity.

Best of Luck,
Judi
0 votes Thank Flag Link Wed May 4, 2011
Given your new information. You have 3 options. Renegotiate with the seller or bring cash to cover the difference. Since its FHA it wont matter if you change lenders the appraisal follows the home for any other FHA financing for 6 months. You will have to change financing products to conventional.
0 votes Thank Flag Link Wed May 4, 2011
Aimee-

Did he have any split levels for comps? If so, how did he treat the square footage on those and also how did he treat the below grade rooms?

I would love to check out that appraisal as well as the other comps that you have that aren't being used.

25k off of a 200k sales price (12.5%!!) is a huge disparity.
0 votes Thank Flag Link Tue May 3, 2011
I really appreciate the answers with past experiences in this situation. Here are some additional facts.

-We are attempting to use FHA so unless this appraisal gets overturned we are stuck
-If this apprasial does not get overturned we need to go with a new lender because the current one will stick with the low ball
-If we push to renegotate for a price lower than what the house is worth, we will lose it to another buyer.

Our current plan is to hope the comps that justify this house is worth at least $200,000 and continue that way. If that doesnt work we will have to go traditional financing with a new lender. Thankfully we have the savings, credit scores and financial stability to do so. This will also give us a second appraisal. If the second one comes back low - then I feel its time to negotiate with the seller because it almost takes other buyers out of the equation. Its no longer one back or one bad document - it then becomes reality.


For all of you worried about us paying more than the house is worth, I assure you this is not a concern. No one was worried about the appraisal because everyone who works in real estate in this area feels we got the house for a steal. Everyone thought it would appraise higher. Our main issue is that this home is a split level ranch. Our third bedroom and family room are on the bottom level, which is only 80% above grade (walk out basement oversized windows, definately not a traditional basement). So our 2000 sq ft, 3 bedroom 2 bath house is being appraised as a 2 bedroom 2 bath house at 1300 sq feet. While we are aware that it is standard practice to do so, usually that extra 700 sq ft is added into the value of the home somewhere because it is fully usable living space. This appraiser is saying that it has no relevance to the value of the home.
0 votes Thank Flag Link Tue May 3, 2011
In this economy, I honestly don't see lenders willing to "renegotiate" the value.

I'm very puzzled by your question. Why would you want to pay more than the home is worth?

While the Realtors involved with your transaction might not agree with the appraiser, very often the value is what it is. Today, appraisers have very strict guidelines they must follow by the lenders. In 13 years of being in the mortgage industry, I'm not aware of anyone going off "tax assessments" for a home value.

Let's say the appraiser brought in the higher value and you thought everything was running smooth..until your appraisal went to the appraisal review department. In the review process, the lender double checks the facts/value and will agree or disagree. Lenders are not willing to lend on over-valued property unless the borrower is willing to bring in a larger downpayment. Honestly, I don't see many borrowers wanting to pay more money for a home than the appraised value.

I wouldn't be so quick to judge the appraiser. He likely did you a favor and saved you a bundle!

Good Luck.

Cheryl Garner, Mortgage Expert
Fairview Mortgage Capital, Inc.
Email: cheryl@cherylgarner.com
(661) 255-3335
Web Reference: http://www.cherylgarner.com
0 votes Thank Flag Link Mon May 2, 2011
In years past I have appealed and won. In the current environment, we have requested that the buyer pay for a second appraisl. Sometimes a seller will also assist. If the two appraisals come in drastically different, then someone will need to pay for a 3rd. If two of the three support the sales price, then the Underwriter will have final say. A lot depends on the strength of the balance of the buyer financing package. Good luck!
0 votes Thank Flag Link Mon May 2, 2011
Tax assessment in my area don't mean anything. The county is trying to make money by keeping values high as the market continues to decline. Have the Loan officer to ask the underwriter if they will accept a second appraisal. That is may cost you some money. You could actually use the appraisal to see if the seller is willing to come down on price if the underwriter will not accept the 2nd appraisal. Another option if you can is put more money down since it has to appraise on the loan value and not the purchase price.

Hope this helped
Dale Frisch
http://www.attractiveRealty.com
0 votes Thank Flag Link Mon May 2, 2011
Keep in mind that appraisal value has no bearing on market value; and not sure why as a buyer, you would want the property to appraise higher--rather, have you tried renegotiating with the seller....
0 votes Thank Flag Link Mon May 2, 2011
David - thanks for asking the question about renegotiating with the seller. While obviously it would be wonderful to get this house for 25,000 less than we thought, we even agree that the value is incorrect. The sellers, bank, our agent, sellers agent and us all believe this appraisal was done inaccurately. There were many offers on this house and the sellers would certainly be able to move on if we pushed to sell at the appraised value. We are hoping that we can get the appraisal up to middle ground and the sellers will meet us in the middle, though this may even be unlikely. Not sure what else we can do. If everyone disagrees with the value, its hard to have that conversation. Thoughts?
0 votes Thank Flag Link Mon May 2, 2011
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