The market price is the day the appraisal was done, that is the value or opion of the property. It really comes down to the appraiser, the data or recent sales in the market area.
Properties upto 4 - units are usually appraised using comps.
Income approach is used for income producing properties incl multi family, commercial etc. The values are determined by net income devided by
normal (comparable) Cap Rate for similar properties. Cap Rate = value / net income.
The Replacement value is cost of replacing the (new)property less the deprecition for the age of the property.
In your case the comps is general value, varied by income approach.
when they refinanced. Several factors can account for this discrepancy. A refinance appraisal, like a purchase appraisal, should reflect the current market value of a property. But, its accuracy can only be measured in terms of a specific time. Real estate markets are continually changing. If there are more buyers looking for properties like yours today than there were when you refinanced, your property could be worth more now than it was then. However, if there are more properties on the market today, your property could be worth less now than it was then. In addition to current supply and demand factors, actual property values may have appreciated or depreciated since the property was last appraised. An appraisal done as recently as three months ago could be out-of-date in a volatile market place where values are changing quickly. There is also an element of subjectivity in the appraisal process. Refinance appraisals can be more subjective than purchase loan appraisals, so they are more subject to error. When a property sells, the purchase price usually establishes the market value. Market value is the price a willing and knowledgeable buyer will pay for a property. With a refinance appraisal, the critical "willing buyer" component of the valuation equation is missing. Even so, it's relatively easy to establish an accurate value for a property located in a tract development, where plenty of similar properties have recently sold. In neighborhoods with a lot of variability in the housing stock, there's more guesswork involved. Without a purchase price, it's difficult to pinpoint
a market value precisely. There's usually a range of value. Some appraisers tend to appraise on the high side; others are more conservative.appraising the same property and using the same comparable sales data come up with different valuations. REFINANCER'S TIP: The mortgage broker who arranges the borrower's refinance can influence the outcome of the appraisal. Borrowers usually refinance to lower the interest rate on their mortgage, to consolidate debts, or to generate cash. The mortgage amount will need to be a certain size to make refinancing worthwhile. If the property appraises high enough to support the required loan amount, the borrowers refinance. If the property appraises too low, they don't refinance. Lenders have loan-to-value (called LTV) requirements. Most lenders won't lend more than 75 to 80 percent on a refinance. If the lender has an 80 percent LTV requirement and you need a $550,000 mortgage to make refinancing worthwhile, your home will have to appraise for $687,500 ($550,000 divided by .80). Often mortgage brokers check with appraisers before they order the appraisal to see if the property is likely to appraise for a certain price. If the looks like the appraisal could come in low, the mortgage broker might hire an appraiser who has a reputation for appraising on the high side. This will maximize the chances of the loan being approved: the borrowers get the loan they want and the mortgage broker gets paid. It's risky to push the appraisal to an artificially high price, particularly if the borrower is overleveraged. A high appraisal may enable the borrowers to pull cash out of their property. But if
prices decline, the homeowners may end up selling for less than the amount owed on their mortgage.
THE CLOSING: A high appraisal can leave sellers with a false impression of their property's value. Only the market can determine what a buyer will actually pay.
It sounds like you have been in this process for some time. Depending on the escrow terms and your concern with the value you may have some recourse. Any other questions let me know, I'd be happy to assist you
See all OC properties below
Videos at this site on related matters
Chances are , if you are working with a reputable appraiser, the appraiser has taken current market conditions into account when putting together your appraisal. The lender won't fund a loan if the appraisal doesn't "come in".
Click the Web References below to see a post I just did on price per square footage from 2006-2007 in Orange County.
I would actually talk to the county assesors office (ask for the most senior assesor) and have a discussion about your situation. I realize that county assesments have 3/5/6 year cycles depending on the area of the country..but the fact remains that they hold the BIG PICTURE of the area you are investing in.and you need some reference point for your situation. The assesors office should have the up to date sold data. Should you base your investment on a "24 hour window" of what the property is worth in today's market?
Best of luck -- keep asking questions,
In a slower market there may be limited multi-family sales for comparison. If new comparable sales have sold, gone under contract or even been listed since the time of your appraisal, the value conclusion would likely change to reflect the new activity. If no market activity of multi-family properties has occured in the past couple of months, you may benefit from studying statistics that track the decline in sales prices in your "deteriorating" market. Apply the percentage of decline in value (proven through other closed sales in the immediate area from the effective date of the appraisal through today) to the appraised value of your property for a general idea of updated value.
The best thing to remember in a declining market is that there is no way to predict the exact point at which things will turn in an increasing value direction...but you can be assured that it will happen. Don't spend time experiencing Buyer's Remorse. One consistant and proven way to accumulate wealth over the long haul is through home ownership!
If you are leveraging your purchase by borrowing money, your lender will order the appraisal. The entire reason for lender appraisal on a purchase is to determine the risk the lender is taking in lending you the funds to purchase.
If the property isn't worth the purchase price in accordance with the terms of your loan program, the property will not appraise out.