Realistically there is always a range of value in real estate. The comp that has 1.5 acres only received $36,000 adjustment for the acreage, when this area is $1800 an acre. The 3 comps used cross over a major highway putting the comps used in a very different neighborhood. Thanks for your help in posting this. If I don’t get a response, is there a state official I can contact. If the appraisal comes in low, you do have options, but the “Appraisal Rebuttal” is not one of your options that will work. The difficulty is that if there are no recent sales (as you mention), it may be hard to prove that values in your neighborhood have not been impacted by flooding that occurred nearby. The other main approach that is commonly used is called the sales comparison approach. Anyway, I recommend using competitive sales in the immediate neighborhood if there are some available (this means similar-sized homes), but also feel free to use some that are a bit further away too. *Site (Land) $0 + $12,600 Hi Lacher. Plus took off the top 10% on listings for expected sales price when the median sale % to listings is 98% for last 6 months. This would justify value. Best wishes. Then, you get a call from your lender, telling you the appraisal came in below your offer price, and it could derail your offer. I do know that a property like yours should be compared to other similar properties. However, sometimes as hard as it might be to accept, the value just isn’t there. Study your employee handbook to know your rights when it comes to dealing with written reprimands. We refinanced in 2011 for lower interest rates, mortgage 165,000. A REBUTTAL FORMAT TO DOWNLOAD: Now let’s put all the points above into a simple format so you can save it to your desktop and then use as needed whenever you have appraisal issues. Instead, state that he has given you much to think about, and exit. Report comment. You’ve done all you can to increase the appraisal value of your home and the bank has already approved your credit and income. If no adjustment was given for the basement on one comparable, why? She got the square footage wrong and left off the 256/sqft sun room. Check Every Detail of the Appraisal. If a house backs a park/common area and then a major road, there may not be enough market data to make such an adjustment. It is now remodeled and appraised for 40k less, plus the housing market in this area has increased greatly since 2014. If the lower appraiser won’t come up, maybe the seller can budge or work something out somehow. Thanks for sharing the story James. A few years back while visiting the ER I found out I was allergic to the drug Phenergan. Sometimes we bring in our assumptions into a transaction, but the market could easily prove us wrong. We filed a rebuttal, and I wish I had this advice then. What was the condition like on the other units? Is there any data out there to help support the contract price (or justify why the property was priced as it was)? New reading list, new you! owned foreclosure. But the answer to these questions is of course of equal importance. My questions to you: One thing that I do not particularly care for is that the appraiser is located over and hour away from the property. We are in contract for 130k. What else can you buy at $155K or $140K? I really appreciate it. I appreciate it. NEW: +27,000 for site, -23,400 for basement/finished, -40,000 for barn, net adjustment -79,940 How Appraisals Work. When they’re done well, they can recalibrate the appraisal in your favor. How Do You Write a Rebuttal to a Performance Appraisal? In summary because value is not absolute any value can be looked at and there is in practice always a range of values for an appraiser to look at when utilizing the sales comparable approach…the approach used for many residential properties. unfinished basement at only $6000. … Learn how to shape your psychology so that you can make good decisions. Draw the neighborhood boundaries on the map as well as any other boundaries of nearby neighborhoods that are competitive or not competitive. I am ashamed to say that I also asked him such delightful interogatives as “do your appraisers always wear shades at all times, snear and conduct themselves as though you are privaleged to have them present? (100,000 lower than in 2011)……THIS IS A LAKEFRONT PROPERTY, WITH BOATING RIGHTS IN A PRESTIGIOUS NEIGHBORHOOD. Start analyzing real estate properties, we do the math for you. A bad appraiser often does a few things that I noticed in my experience: a) they assume that the value they adjusted for is absolute and not a point on a range of values….values that are all justified on a scale (superior, inferior, etc) depending on things that are not absolutely “knowable…” things like the value of an amenity, location, etc…which can vary and which the comps will show you if youhave good comps! I don’t see how you can have six houses, all pending for nearly the same price (same sq ft, lot size, etc. Every deal I have been in that had a “bad” appraisal has ended up the same– The appraiser sticking by his appraisal each and every time it was challenged. Hi Ryan, There is a bit of a stigma in the market sometimes for flips because of some bad apples not doing a good job, cutting corners and putting lipstick on the pig so to speak. Hopefully the appraiser is familiar with the neighborhood and the school district. For instance, I have something on my desk right now where the owner spent $130K on an accessory dwelling. Photo Credit: ogimogi via Compfight cc Thanks for this great article Ryan, Speaking of bad appraisals (or appraiser in this case). * Site (Land) $0 + $14,400 Now in 2016, with the interest rate cut further (in half) we refinanced again, 130,000. I’m sorry to hear about your situation, Patrick. Because of this fact we are always in a sense talking about a range of values into which a subject property falls (of course not an average! Did they have any premium upgrades too? It should be supported and the story the appraisal tells should make sense to the reader – and draw the reader to understand the conclusion. I would think if he was aware, he would have been far more attentive to adjustments that were made or not beforehand. 2. If our adjustments were the same as the old appraisal and given C3 condition we would be at contract price. There has to be something comparable out there for an appraiser to use. Thanks, Ryan, for taking the time to share this. I hope the best for you. Yet let’s also remember sometimes properties sell for too much. I’d like to congratulate you on the appraisal challenge form. I thought there may have been other reasons why the value should be slightly higher, but I told the investor it was VERY likely there would be an adjustment upward by $5,000 due to a square footage error. Remember that an unsuccessful appraisal rebuttal is not necessarily the end of the deal. Enjoy your day Ryan. The house will have a full 1636 sq ft walkout unfinished basement. I hope all goes well with you. We tend to say things like, “there is a premium for a corner lot”, or “there is a premium for a single story”, or “the court location is always a premium,” etc…. The appraiser wrote that it was almost 100 sq ft smaller. I just challenged an appraisal this past month and we were able to come up with substantial evidence that bumped up the value by $500,000. We live in a world where we want to see very specific adjustments all the time. Eric. Joyce. Best wishes. If you go east, it’s a comparable neighborhood… If you go south, it’s the same school district but the neighborhood and prices are not as nice. Then, two or three experienced staff appraisers review it, before it undergoes a final review by the loan underwriter. We were present for the appraisal and the appraiser said “this is a great house you have at a great deal, this will be a difficult appraisal to do.” He said that because right now in the Hampton Road area of Virginia, Houses are being sold faster than they can be listed. The Appraiser will base their research (and Comp selection) on the available Subject info at that time. 3. The third one is on the same street, but is 2 bedrooms/2 baths, however, the appraiser listed it as 3 bedrooms/3.1 baths and adjusted its price down for my 4-bedroom/3 bath property for not having 0.1baths. When the units were new in 2002, the average price difference was 30-40k. If you are right that value is really much higher than the recent appraisals, there has to be a way to support the higher value. Without any repairs made, without the $12,600 adjusted land value the old comp is still higher!! (That’s the big one that I don’t understand why it wasn’t included in the comps since its a few houses down from ours. ) I studied the reports and found a couple of mistakes. Do I say ok to the second appraisal to be conducted en though the Lender is not requiring it? A low appraisal doesn’t always mean a canceled deal. Well since the 2nd came in at 131k, the sellers do not want to pay as much towards closing and i’m not in a position to pay more out of pocket. OLD: $0 for site, -13800 for basement/rooms, -20,000 for barn, -19,200 with no land value This has been my experience. There are small pockets of larger homes build in the last 6 years on larger properties in the city which is very rare. I think prepared, poignant, and polite are the best points to make. This is a timely article for me. I recently sent an email to an appraiser asking him to reconsider the value he placed on my home. General Tips for Crafting a Rebuttal Letter. I have also had a home I rehabbed given a lower appraisal simply because I “flipped” it. Regards, There are areas in the United States that have seen massive appreciation since 4 years ago (like my market in Sacramento), though there are places that have definitely not seen that same trend. I hope it works out in the end. Just be politely honest and say something like, “I noticed you were coming from out of the area, so I wasn’t sure how much you knew the market. Hopefully the appraiser is familiar with the neighborhood and the school district. *Listing fee varies by market, minimums apply, buyer agent commission not included. If the appraiser only had 20-year old sales and did not somehow account for any age difference, that could be a big issue. The review came in slightly low. Regarding tax assessments, some areas of the country have better assessments than others, so it’s hard to say what it is like in your area. Another type, often used for county appraisals, is the drive-by appraisal, where somebody may take a current picture of the home and research comps without going in to the home. Sorry to hear about that, Ron. I appreciate you sharing your story. So its just not a logical appraisal to myself or the bank. PS…the appraiser used a comp 8 months old even though others were available…. Key question to ask the bank what the proper procedure is for the slight as! 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