Home appraisal question

GenlyAi

Hi everyone,

I've got a question about how home appraisal works, and I'm hoping you can educate me.

I just got my home appraised for a refi, and it came in lower than I was hoping. However, the comparables used (when adjusted for the differences to our house) average out to be more than high enough. I'm trying to understand what factors could have caused this discrepancy, but I can't figure it out from the appraisal document.

To provide more detail (BTW, I've multiplied all these numbers by an arbitrary factor so you can't quite tell how much my home costs):

- I want the value to be above $300,200 for LTV reasons.
- The adjusted sales prices of the comparabes are: $313900, $315400, $283100, $294100, and $330900
- Average $307,480
- The appraisal came in at $291,600

Can anyone educate me as to why the appraised value might be lower than all but one of the comps? Maybe it's right, but I'm trying to figure out if I should try to offer a rebuttal, and I feel like I can't do that if I don't even understand the reasoning the appraiser used.

[As usual, looking back at this, I have a twinge of doubt about whether a video game forum is the right venue for this question, but I'm posting it anyway.]

Thanks for any help!
Genly

Djeet

I would turn it back on the appraiser and ask why the appraisal came in under the average (and only above 1) of the comps. I'm assuming comps came from tax record appraisals so the primary reasons for the discrepancy would be: (1) the local real estate market has gone negative since the tax appraisals occurred so your comps are nominally overvalued from where they are today or (2) there are material defects/issues with your house that the comps don't have (e.g. the comps are all show ready with nice landscaping and newish paint, but yours is in disrepair in comparison).


Basically make them justify their number vs the avg of the comps.

mr_mich

I just went through this exact process, and had the same damn problem (with different numbers).

The appraiser told me to go pound sand, basically that he's not allowed to discuss the appraisal with me since I'm not his client (the bank is). The bank told me I could go pay for another appraisal if I'd like. The appraiser was unable to give me a reason why my value was lower than all but 1 of the comps...and my comps were all a year old, since nothing's sold recently!

The only thing I can tell you is to look over the appraisal and see which of the 5 are currently listed, rather than "recently" sold. I have a feeling that my number was an average of the ones that sold, rather than all 5. The appraisal contained some language about how due to the stagnant market, the currently-for-sale comps were basically ignored.

Quoth

I'm an appraiser so I'll field this one. Averages are irrelevant to us. They may suggest a trend but in the end, we're trying to find sales that are as comparable to your property as possible. We adjust as best we can, but even percentage adjustments can be subjective if there isn't direct mathematical evidence to support them. In the end, we're going to lean most heavily on sales that require the least amount of adjustment, because those are most similar to your property. Is the lower-priced sale closer to your home? Similar in age, quality and condition? Are the other sales less similar? That would point toward the lower-priced sale being the best indicator of value.

I can't see the report and I actually can't review it legally without charging you more money, but that would generally be why such a thing would happen. That said, it is a subjective thing and if you had information that might change the guy's mind, you should offer it. You can also certainly ask why it came in below most of the sales, though it may be why I said. On the report, it should note what adjustments are made for what factors. As I said, the more adjustments made, the less similar the comp. So you can take a look and see if that might be it.

Sorry guys. I know it's frustrating but I promise we aren't usually evil and trying to kill your loan. Some appraisers are crappy and you're always within your rights to get a second opinion or question stuff, and banks often do come back to us. They're the ones who want to get the loan done, after all. They get commission, we get a flat fee.

GenlyAi

Thanks, everyone, and especially Quoth.

I guess at least the explanation Quoth gave provides a reason why the average may be so different from the final value, but I wish there were some part of the document where they explained how they weighted them.

In fact, it is the case that the lowest priced home was the one for which she had to make the least adjustment (in dollar terms), but that one also has a major location factor that she didn't account for -- it is almost a mile away, and is sandwiched between two housing projects. Meanwhile, the second highest priced one is one floor up in my same building (for which she duly subtracted $20k).

I feel like there's cause for argument if she essentially weighted that lowest comp higher than the others. My lender provided me with a dispute form (saying "it rarely works"). Should I use that, or can I contact the appraiser directly? Not sure if that's against protocol...

Quoth

Always go through the lender. The appraiser works for the bank, not you. They are not allowed to talk to you without the bank's permission.