Appraisal Questions
 

Ok we are looking to refinance our house as mortage rates are way lower than the loan we have now. We did a refinance a few years ago and were very unhappy with the appraisal that was done. The guy had the wrong address, and didnt include any of our outbuildings in the appraisal at all, he also "forgot" to add in the addition to the square footage.
Anyway I was talking to the loan officer today and complained about the appraisal. He said that if he had included the out buildings in the appraisal we wouldn;t have gotten the loan. I asked what was up with that?? Didnt seem to make since to me. I was told that if the appraisal included our 2 stall barn with electricity and water and our 10 indoor outdoor kennel building with full kitchen facilities heated and AC, raised grooming tub and deep sink that we would not get a loan because they wouldnt be able to find a comp. :eek:

Now since we live in a rural area, properly zoned for both horses and a kennel that those buildings would only increase the value of the house. The loan officers thoughts were they needed to fit our house into a set of comps, and if it had anything different than other comps that would only detract from the value not add so they should be ignored. So I suggested that they comp it to a 1 bedroom 1 bath house on a lot as there are lots of them not so much 3 bedrooms 2 baths 12.5 acres on the water.

Am I right or way off base???
Alice in Virginia

Think your loan officer was feeding you some BS to try to cover a very bad appraisal. Get to his boss or another company...

It's too bad we all have to know everyone elses job so we don't get taken.

An appraisal is not just based on comps, there is also replacement value and a 3rd that I don't remember.

When an appraiser does comps, they add and subtract value from your property and the house they are comparing it with. IE: If your house has a fire place & the other doesn't, they'll add $1000 to yours (example cost only). Ifthe other house has a garage, and your's has a carport, they'll subtract $1000 from yours. (example cost only)

Research how an appraisal is done, learn! - then, armed with knowledge, go to that guy's boss & loudly complain. A lot of appraisers are self employed, so, good luck.

I've found that refinance appraisals are come in differently (lower) from sales appraisals. Have no idea why, although I have suspicions.

Don't hire your own appraiser as most banks use one from their "approved" list.

Having been in real estate at one time, you were handed a line of 'male bovine end product'. They will do a comp and add to it the value of the extra buildings. Your banker needs an education or you need a new banker.

There have been many changes in the appraiser / loan officer "relationships". This will probably reduce the probability that it will occur again. Even so, I would change bankers. It sounds like the banker was trying to "cover up" the fact that your property was agricultural in nature. There are a lot of lenders that will not do agricultural land.

First of all let me say that there are good competent appraisers, and there are also bad ones, just like in any profession. The appraiser should have taken into account your outbuildings, and it was stupid of the lan officer to say you wouldn't have gotten a loan since the appraiser wouldn't have been able to find a comp.

The appraiser's biggest problem with a property like yours, if there are no good comps, is judging the market's reaction to your outbuildings and other amenities. Seldom will find that full replacement cost equals value. More than likely, local buyers will typically pay "something" for your improvements, but it's typical that homeowners what they themselves want, and not necessarily what the market will pay the most for. So - cost SELDOM equals value. Sometimes the market might recognize 10-20-30-50% of replacement cost of some things, and 0% on other things. And very rarely maybe 80 or 100%. The appraiser needs to be familiar enough with rural properties and the local market in order to estimate the contributory value of these improvements, even if there aren't current nearby comparables to put in the report. Maybe past appraisals will give him that information, and maybe talking about them with local realtors or other appraisers will help him.

The only thing that you are really off base on, is your suggestion of how to "comp" your property. The appraiser must be fully independent and capable of making his own decisions on how to comp a property.

Where are you located in VA? I use a VERY good appraiser! Highly reccomend him, but I am not sure if you are anywhere near me...

When an appraisal is done the bottom line is: is the property as valuable as the loan? I once saw an appraisal on a million dollar home (about 20 years ago in a depressed area) appraised at around $250,000. It wasn't questioned because the owner of the home needed a bridge loan and $250,000 was enough to cover what he needed to borrow. As long as your new appraisal is high enough to allow you to have a loan, don't worry about it. This appraisal will not be used for property tax purposes, unless you bring it into the assessor yourself (in which case the assessor will point out the variances in the appraisal vs his assessment value). My concern at this time would be the reduced value of your property due to the recent economic downturn.

Thanks for all the advice. There are a couple of things. Like he wouldnt be covering up that it is a rural property as over 90% of the county is rural property and only a very small portion is within town limits.And this is with Farm Credit so they specialize in rural loans. I'm not sure why the loan officer said what he did, but he did, I asked him twice since I really didnt believe it the first time!! LOL
We are in Amherst County, and I was told that the rules have changed and the banks use a rotating group of appraisers and I would have no choice of who was used. I guess that is a good thing, unless the one on the rotation is the one I got before!! I dont think there are that many in our area to being with. I do know that not many properties have sold in our area in the last 18 months or so. And the ones that have sold are at the low end of the pricing range.
We are going through with this and we will see where we go. The last time I didnt even get a copy of the appraisal until months after the closing and I demanded it. This time I will demand it upfront. Like Mauras person it was enough to cover what we needed so I didnt question it.
Alice in Virginia

I know from our experience dealing with Farm Credit and other agricultural lenders that they probably were trying to "cover up" what it really was to get you a better deal on a mortgage. When we were dealing with Farm Credit we were told there were 2 programs, 1 for "rural homes" and 1 for "part-time farms, farms, etc." We were told that if the property had a barn that could be classified as being used for animals (ie, dairy or something) then it would fall under the farm category and the interest rate would be 1 to 1.5% higher. Also, they were much much stricter with that type of loan also so they advised that we wanted a property with such buildings on it that we "talk" to the appraiser to not classify any building as a building to be used for farming/animals, etc. This is probably why the appraiser did what he did and why they are saying what they are saying currently.

Most lenders will give you a copy, but they are not compelled to do so. Even though the borrower pays for the appraisal, they are not the client and they are not necessarily entitled to have a copy of it. The lender is the client and they are the only one legally entitled to have a copy of the appraisal.

Sometimes "demanding" something is not as effective as "asking" for it. Esp. in times of tight credit.

You know having read many of the posts I cant help but be pretty disappointed. Sounds like the house owner has no rights and no say on anything that is done for an appraisal.

The appraiser can leave out whole buildings, and that is ok, they can misrepresent buildings or the house itself and that is ok. As long as it conforms to comps in the area. They can list the wrong address of the house but that is ok, cause "everyone knows what house they are talking about!!"

I realize that you must have an appraisal in order to get a loan, or sell or buy a house, but it sounds like everything is on the side of the appraiser and they can due anything or say anything they want to. AND they dont even have to give you a copy of what they said, so you dont know even know how they misrepresented your house.
Very disappointing.

Alice in Virginia

Oh and I just wanted to make it clear I am not asking for anything that isnt part of the house. 3 bedrooms, 2 baths, 1850 square feet, walk out basement, 3 car garage, 2 stall barn, and 10 IN/OUT kennel with full kitchen and grooming facilities. At the correct address (the last appraisal had us located about 30 miles south in a very poor location of the county. located on the wrong river!!)
All I am asking is the house is represented the way it actually is. Is that really too much to ask??
Alice in Virginia

Alice, is it possible that he got the appraisals mixed up? Ask for the pictures that go along with the appraisal to make sure it's your property. From your last post, it sounds that way.

Appraisers can do more than one property in a day, so this may be a possibility. Or he just got the paperwork mixed up on his desk....

By federal law the lender is required to give you a copy of the appraisal. There are some things you must do (ie, request in writing within a certain time period, etc) but you are entitled to a copy of it. You are right, the appraisal is the banks, not yours, but by law you can have a copy of it.

If the appraiser left out buildings, the appraisal is NOT valid. The bank should have the appraisal reviewed and file a complaint with the state appraiser board or commission.

Be careful in regard to how it appraised.....
 

We are currently running into issues getting our home refinanced. We are on approximately 24 acres. Have done significant improvements to the house etc.......Appraiser had difficulty finding appropriate comps, but the house, with the number of acres, would not be picked up on the secondary market, as it is considered a "farm" property, and that is "taboo" with anyone picking up loans on the secondary market. So we have "reappraised" with the remodeled house and 5 acres, to stay out of the "farm" category with the secondary lending market. Still having issues getting anyone to pick it up......but I do agree, for the appraiser not to include your outbuildings etc, would be a mistake.....and questionable.

NWMO, your situation sound much like ours. But I dont understand about the Secondary Market?? What does that mean?? Our house also has quite a number of upgrades and everything in it is just about new. We only have 12 acres, but it is also waterfront property. (For what that is worth!!)
Since we are going though Farm Credit, and we have had the mortage with Farm Credit for about 15 years now, so it isnt something new I would think it being classified as a "farm" would be only normal. We dont grow any crops or have any large animals. Right now we only have the dogs, used to have goats and horses, but not now.
The more I hear about things, the more I think this is a real racket for the banks.
Alice in Virginia

The secondary market is where the mortgage is backed by Fannie Mae or Freddie Mac. They have specific guidelines and your property, financial situation,etc must be within their "box" or you do not get their rates, Which are usually the lowest available. If you do not fit in their box you have to get in house financing or subprime financing. In-house financing is kept with the bank you get it with and is usually an ARM. Subprime is pretty much non existent anymore.

After my father passed away, we got an appraisal done on my Dad's house so we knew how much to sell it for.

Granted, my Dad's house needed work. Since he had bought it in the late 60's, nothing had been done with the kitchen or dining room. We had a smouldering fire in the 80's and the walls had not been fixed from it.

On the plus side, it had 3 bedrooms (2 renovated in the last 15 years), 1 1/2 baths (both renovated in the last 15 years) and the living room had been renovated.

A huge 4 car garage had also been built in the last 15 years around a cost of $30,000.00. 2.5 acre piece of property with 11 established fruit trees and 26 blueberry bushes.

The appraisal price? $33,000.00 WHAT?!?!?

The "comps" consisted of a smaller house on a creek bank, with no garage, no land, and had been flooded several times (in a flood plain). Another comp was of an older house where no one lived, no work had been done on the outside for years, etc.

Now I understood Dad's house needed work, but how can the appraiser say the house and property was only worth $33,000.00 when the garage built less than 15 years ago cost almost as much as that to build?

Disregarding the appraiser's price (and charging us $300.00), we decided to list the house for sale ourselves and start at $80,000.00. Once someone was interested in it (and could see the potential of the house plus they loved the garage), we ended up selling the house for $70,000.00.

Moral of the story - even an appraiser (that is the "best" according to everyone) sometimes doesn't know what they are talking about!

Yep, Appraisers use three approaches to value: Cost, Sales comparison, and the Income approach. They are required to reconcile these. There is another that good appraisers use and average appraisers don't.

The Common sense approach. If the opinion of value doesn't make reasonable sense, ask your appraiser friends for help or admit your not qualified to do this appraisal and refund the fee.:)

This is correct. Just mention, "Regulation B" and you will get your copy of the appraisal.

You do have to request it within, as I recall, 90 days.