I am impressed with your thorough examination of the appraisal and all of the surrounding rules and regulations. Low appraisals are certainly something that we are seeing a lot of these days and the long and the short of the entire situation can be summed up in one idea - take your business elsewhere.
I personally fought the same battle you are fighting on my house during a recent refinance and in the end, all that I received for many hours of documenting and arguing was a bill for a low appraisal. The reality is that no matter how hard you try, it is highly unlikely that you will change the appraisers mind. They are in a nearly no lose situation. They were hired by the bank to analyze property value, and while you paid for the appriasal, thier loyalty ultimately is to the bank, not to you as a consumer.
I would have one last conversation with the bank and/or the loan officer and let them know your displeasure with the situation and inform them that this appraisal will force you to take your business to another bank.
Three thoughts for you on your analysis:
1. County assessed value is worthless - forget that it even exists.
2. Remodeling adds emotional value but is very difficult to quantify financially since the appraiser doesn't visit the interior of the other homes (they may have the same upgrades). Requiring appraisers to visit the interiors of homes that are sold would be cost prohibitive, and almost impossible to gain access since the house is no longer accepting showings.
3. The value you received is not far off what you had anticipated. Is there an issue with why this appraisal won't work? Do you not meet acceptable ratios? Does it force you to pay PMI?
I am very impressed with your analysis, but my most sincere advice is to tell you to move on.
#1 Trulia Agent in MN
Unfortunately, as I've written in my blog about the new HVCC (Home Valuation Code of Conduct), after the valuation appeal, which you've already done, there is only one action you can take, and that is to take your business to another lender and to start the appraisal process with someone else. While you can always assert problems with the appraisal, the truth is that there is currently no vehicle or mechanism to police the appraisers. The HVCC calls for the formation of a VPI or Valuation Protection Institute, which was supposed to house all of the appraisals completed, to receive consumer complaints, and to check into those complaints, but this was never instituted prior to the May 1 implementation date for the HVCC. It is also the reason that you--as the consumer--have no one who can respond to your complaints about the quality of the appraisal. This is one of the reasons for supporting the new HR 3044 currently making its way through Congress, which will impose an 18 month moratorium on the HVCC.
If you choose to try again with another appraiser make a request of the AMS (Appraisal Management Service) that they assign a local appraiser to complete your appraisal. Unfortunately, we're finding that many of the problems associated with the appraisal begin with the lack of local knowledge by the appraisers who, in many cases, are not familiar with the community. A second issue with HVCC appraisals is the new requirement that the appraiser determine a "trend" for housing prices in the area. This was not something that appraisers had done in the past, so it is not inconceivable that with so many foreclosures across the country, the appraiser's "trend analysis" will tend to be pointed "down" rather than "up."
At this time, the HVCC rules apply only to "conventional loans" with Fannie and Freddie as guarantors or buyers. The HVCC does not apply to jumbo loans or to FHA loans or portfolio loans (without guarantors), so if there are other means to refinancing, you might consider another lender who will not use Fannie or Freddie.
I wish you very good luck and am sorry that you have been victimized by the new appraisal rules, the HVCC.
Grace Morioka, SRES, e-Pro
Area Pro Realty
1) Gross living area miscalculated by 16%. I finished a brand new four season porch/sun room this yearâ€”it's square footage was excluded from GLA though all the guidelines and specs are clear that it this qualifies as GLA. The appraiser said that this would not be corrected because the missed area was accounted for by a $4k offset in the comp adjustments table under Porch/Patio/Deck. If the area were counted as GLA, then with the $30/sf factor used would have yielded a $5k offset. This doesn't account for the fact that it's brand new or that it provides an luxury/utility beyond living space. Essentially, the appraiser is saying that GLA in a new sun room is worth less than any other GLA and that a sun room provides no additional utility.
2) Finished living area below-grade was miscalculated by 7.7%â€”the response was that 5%-8% deviations in area for appraised property and comps was reasonable and there would be no correction. To me, this defies logic because an adjustments was made to account for differences between the comps and my house as small as 6.1%.
3) Four comp sales were chosen. I agree with the validity of the choices except one. My neighbor's house was a recent foreclosure that was purchased by a pair who flipped the place without ever living there. It was a business venture and, indeed, it sold below it's 2009 tax value while all the other comp sales sold a statistically significant percentage above. I made the argument that since this address was sold by a business, not a homesteaded home-owner, the sale does not adequately represent a typical sale between "two disinterested parties" (stolen appraiser best practice verbiage, I don't remember where). The motives and acceptable outcomes of the sale are different than a standard market sale, and thus, per USPAP standard rule 7-3 and appraisal best practice, this sale should only be considered if no better ones can be found. As luck would have it, I was able to find and suggest another comp sale that sold more recently for the same price but the ratio of 2009 tax value to sale price better aligned with market averages and that of the other comps. The only draw-back was this sale was a rambler with a basement walk-out instead of split-entries like my house and my neighbor's. I don't know if that's worse, it's just a little different. I also found comps within a mile that were closer and more recent than all 3 remaining comps (the other 3 comps were 1-2.5 miles away). All my suggestions were rejected.
4) Even though the final comp value analysis produced three similar values ($238K, $242.9K, & $247.8K) that aligned with that of the cost analysis ($239.3K) and one statistical outlier ($222K, post-foreclose flipped home), the final appraised value favors the skewed lower-end of the distributionâ€”below the average of the adjusted comp values, $237.6K. 235 is not representative of the 4 comp values.
5) One of the comps gained an adjustment because it had 2 bathrooms above-grade compared to 1 for the rest of the comps. The house was listed as a 4-level split. I visited the home/homeownersâ€”the home is a split-entry with only one bathroom above-grade. No corrections made.
6) One of the comps gained an adjustment for being 29% bigger than my lot, but no similar decrimented adjustment was made for the other three comps that all had significantely smaller lots than mine (39, 33, and 25% smaller). Percentages are relative, so put it this way: .15 acre bigger than my yard decreases my comp value by $4600, but .14 acre smaller than my yard is negligible-no value added.
7) I have 6 rooms above-grade (2 bedrooms, living, dining, kitchen, and sun room). The appraisal claims that all properties have 5â€”equal.
8) There was no adjustment made for my a full mid-to-high-end kitchen/dining room remodel and bathroom remodelâ€”less than one year old. Also, in the past 3 years, I've replaces all windows, fully resided, fully recarpeted. None of these items were allotted an adjustment, yet one comp sales got a $1K price adjustment for a chain-link fence and one got a $2K adjustment for 50ft worth of a wood fence. Does this seem justifiable? All my home improvements were acknowledged only as justification that the house is well-maintained (same as all the comps). The appraiser only looks at the comp's exteriors, right? Suspicion of "well-maintained" doesn't seem justifiably equal to tens of thousands of dollars in confirmed rennovations/additions. I didn't see any of the comp's interiors either, but I confirmed that they all had inferior siding, windows, and driveways. I proposed the adjustment omission as a violation of USPAP standard rule 7-1. I understand that the value is subjective, but I see omission as an objective error.