Visualize a series of COLUMNS, probably 4 or 5;
The First Column is the SUBJECT HOUSE and the others are COMP's.
Down the page we list FEATURES or FACTORS; such as # Bedrooms, # Baths, House Sqft, Lot Sqft, Fireplace, Pool, Roof, Garage, Fencing. Got it?
Now, in each box created, there will be a VALUE: Lets say the subject house is 915 sqft it would get --- or 0. And the first Comp house has 2500 sqft, it might get -100,000; which means that the house is WORTH $100,000 more because of the square-footage. (It is a negative number because the Selling price of that Comp house was approximately $100,000 more BECAUSE of the square footage and we have to deduct that $100,000 to bring them to equity.) Got it?
Now, lets say that the Subject house has $5,000 worth of new fencing and the Comp house has 25 year old OK fencing.: Then the SUBJECT house would get +5,000 and the Comp. house would get --- or 0.
When you go down the page, and enter everything, you get total Comparative Values on the two houses, which allows for the DIFFERENCES.
The two houses DO NOT have to be literally COMPARABLE, they MAKE then comparable with the VALUES.
So the house next door is larger, so what? They made up for that with the values.
Now, if you understand what I just did, then you will understand why;
1.) Two Appraisals can come so close together, and,
2.) Why the Bank will not listen to you about the results.
and in fact I will give you a third;
3.) If you hire your own Appraiser, he will end up with about the same numbers!
Also, please do not compare/equate the ASSESSMENT with the APPRAISAL: The ASSESSMENT is based on the LAST SELLING PRICE OF THE PROPERTY which might be last year. five years ago, or thirty years ago.
I hope I've helped.
Good luck and may God bless
Now the other way an appraiser can be picked is if the lender has a roster of FHA approved appraisers that it selects entirely at random, and then in that situation the lender itself should have an internal review and appeal process similar to what I just described above. In my experience lender's want to make sure they have an accurate as appraisal as possible, and appraiser's and appraisal management company's get a little embarrassed when a finished product leaves their hands that had room for improvement, which can explain why there is a bit of animosity in these situations.
Now if it doesn't work out with this lender, the buyer can go to a new one but the appraisal does stick to the property for 120 days (details of that are in the 2nd link below). Now if the new lender reviews it and sees some obvious material deficiencies, they can go out and get a new appraisal (details of that are in the 3rd link below).
Here is the HUD mortgagee letter regarding appraiser independence requirements for FHA loans, adding insight/background on why appraisal management companies or a "round robin" way of selecting FHA appraisers is done today: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi
Here is the HUD mortgagee letter regarding appraisal validity periods for FHA loans (120 days): http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi
Here is the HUD mortgagee letter regarding appraisal portability, including when a new appraisal can be ordered: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi
Shane Milne | Loan Officer in Orange County, CA | NMLS #81195
Direct local #'s: 949-273-4161 or 646-257-4842
Lending in all 50 states, all types of mortgages
Over the last two years we have had a number of deals that had issues on appraisal, but in every instance it was appraiser stupidity caused by being out of area and not understanding our market when choosing comps.
In each case we wrote a rebuttal to the appraisal and the lenders agreed to have a second appraisal. Your agent should be able to help you with this.
My first opinion though, would have you try to visit the homes that were used as Comparables to see for yourself how they compared to your home. If you still believe your home is Superior but wasn't rated as such by the Appraiser, then by all means try for a new appraisal. Good Luck!
Appraisal fraud is actually up 50% since the implementation fo something called HVCC, which was a license for banks to make money from the appraisals, raise the price of them to the consumers and get the cheapest appraiser they can find (Not all companies do this, but the practice is rampant).
Take them to a local court and make them prove that they did their job. Enjoin the buyer, the real estate agents and anyone else connected with the transaction who lost money because of this.
Additionally, name the company he works for, the company that assigned the appraisal and the bank that the buyer was going through.
You should get the court date within a month or the lender will take care of getting the appraisal done right.
You can also report him to the appraisal board in Sacramento and even the state AG office. Neither one of these agencies likes fraud.
This is the only way to stop this nonsense.
I am happy to help and tell you more if you need more information.
Best of luck,