Lending answer:

In addition to Mike's comments below, from a lending and underwriting perspective:

1.) It is very rare for any lender to accept sales comparables that have recorded sales dates older than 3 months and/or further than a mile or so from the subject property (distance exceptions can be made for rural dwellings and for unusual properties eg oceanfront).

2.) If you are qualifying for a Government insured mortgage (ie FHA, VA or USRDA) or a Conventional mortgage (ie one which the lender will resell to Fannie Mae or Freddie Mac), the lender is responsible to HUD (in the case of Government insured mortgages) or to the GSEs (in the case of Conventional mortgages) for the quality of the appraisal. The lender is not responsible to the borrower for the quality of the appraisal.

3.) Your post mentions three types of valuations: Value for mortgage financing (which is the relevant value), value for taxation (which is the value determined by the Tax Assessor and is recorded at town hall), and the value for resale purposes (which can be heavily influenced by items such as remodeled kitchen and baths).

Typically in lending, remodeled rooms do not add appreciably to value since such improvements cannot be determined to be common among the selected sales comparables. Tax value has no relation whatsoever to appraisal for lending purposes (you might consider using the lender's appraisal as a basis to reduce your Ad Valorem property tax).

4.) Under the new Home Value Code of Conduct in process of being implemented by Fannie Mae and Freddie Mac, banks, lenders, and mortgage brokers are no longer permitted to use staff appraisers or independent appraisers (motgage brokers are prohibited from ordering appraisals under any circumstance under HVCC).

The lender must order the appraisal through an appraisal management firm and must not permit contact beween the loan originator and the appraiser. Some lenders have already implemented HVCC in advance of Fannie's and Freddie's deadlines.

One of the drawbacks to HVCC is that lenders are discouraged from altering an appraiser's estimation of value unless the appraisal contains obvious faults (such as using single family residences to value a condominium). A second drawback is that borrowers must pay for a brand new appraisal if they switch lenders. (HVCC is the result of an agreement between the Attorney General of New York and Fannie Mae and Freddie Mac as a result of some 250,000 alleged fraudulently influenced appraisals in New York state ordered by Washington Mutual Bank's retail loan division).

Your options, unfortunately, are few... especially if the lender has already implemeted HVCC. You may request the lender to order a second appraisal (which will incur a new fee), request a review of the appraisal (also an additional fee), or withdraw your application in favor of a new lender (which will require a nw appraisal and fee). Under HVCC, some lenders may not permit you to speak with the appraiser as long as your loan application is active with the lender. Bear in mind that lender are under tremendous pressure not to play around with appraisal values from state and Federal regulators.

In the current lending environment, you might be better off ordering your own appraisal before proceeding further (such an appraisal CANNOT be used by the lender, however) or, after receiving a copy of your appraisal, paying for your own appraiser to review the work for possible errors.

I wish I had better news.

Hi Lisa
David makes a lot of valid points. With all the market volatility in real estate these days lenders are very hesitant to use any comparable sales older than 3 months. In addition, if some of the higher sales were outside of your neighborhood or over a mile away, they can usually be disregarded as well.

The appraisal is meant to give a representation of what similar homes are selling for right now, without regard to any improvements or investments you made in the property. Also, it has no relation to the tax assessment either, since those are not really based on the most recent sales data. It's a tool to shield the lender from risk, and these days lenders are being extremely conservative.

You can always ask the lender to do a reconsideration of value, but my gut feeling is that you're S-O-L. The best advice I can give you is to try and use the low appraised value to argue your tax assessment and hopefully get your property taxes lowered

Good luck!

The appraiser should be able and willing to answer your questions pertaining to your appraisal. I would like to know who ordered the appraisal and what the gross compensating factors were. Some banks (it is rumored request a low ball appraisal to better protect themselves. Maybe you should take a copy of your appraisal over to a well known appraiser in your area and ask what they might have done different. If the appraiser is found to have undervalued your home considerably, you can file a complaint with your state's licensing board...I however would give the appraiser a chance to fix his mistakes. Remolded Kitchens and baths play a big factor on value of your property. I would list your improvements along with any documentation that you can prove and ask in writing if these were taken in considerartion. Lately my appraisers have had to do 3 sold properties within 6 months (preferably 3 months) and 2 active listings to prove value and economic stabilization. I would like to know more about this and if I was able to help. Please keep me informed.

Lisa-
Are you in Westford, MA or Westford, VT?

I am not in Vermont but I am a certified residential appraiser here in Massachusetts. One aspect of an appraiser's job is to estimate a property's value by comparing it to the most recently sold, most proximate, most similar homes in the area. Ideally, I like to find homes that have sold within the last 6 months, within a one mile radius (rural areas of Vermont may require extending that range) and within a 25% gross living area range (25% smaller to 25% larger). Appraisers then make adjustments for things like condition, quality of construction, amenities, etc..

Did you get the chance to speak with the appraiser and ask him why the comps (comparable sales) you had in mind were not chosen? When I get calls from homeowners I try to answer as best I can why I came up with what I came up with for a value.

If you want a second opinion shoot me an email at mike at meetinghouseappraisals dot com. If you are indeed right and refinancing can save you $300 (or more) a month, the $300 on the first appraisal may be hard to swallow, but worth it in the end.

Good luck!
Mike

Hi Lisa

A couple of questions regarding the comparables that were ignored by the appraiser: (1) Were these properties closed sales, or active on the market right now?; (2) If they were closed sales, did they close within the past 3 months? My understanding is that appraisers are not relying on closed sales older than 3 months in the current market.

Hope this helps; please let me know if I can assist further.