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We decided to get a HELOC on our vacation home, because it cost us nothing to apply, and we felt it would give us more financial flexibility if we should have an unexpected emergency. The bank's appraisal on the home came in at about 2/3 of market value! The appraiser is based about 100 miles away from the home, which is not in a rural area. There certainly are plenty of local appraisers that they could have used. Their appraiser compared it to houses that were far inland, on busy major roads, as compared to ours which is on a quiet cul de sac in an extremely desirable location a very short walk to beaches, and to all the amenities of an extremely coveted vacation village/town. It's clear that the appraiser simply searched for houses to justify a ridiculously low appraisal.
It doesn't matter much to us, because we were able to get a comfortable HELOC on our primary residence (which was only appraised at about 10 percent under market, as opposed to 30 percent). I doubt we'll ever even have to use it. But should we say something to the bank? It's our major bank that we use for two businesses, our home mortgage, pretty much all our banking. We have a good relationship with this bank. Considering that they cover all the application costs for a HELOC, I have no idea why they would choose to use an appraiser so far away, and so ignorant of the local market.
I recently refinanced. The bank had the appraiser get in touch with me. I suggested neighboring homes that were of comparable build. And in so doing discovered two things:
1. Appraisal is a very subjective thing. You can frame the price in a large spectrum.
2. You can influence your own appraisal.
I was very vested in my refinance, because I was saddled with rates I desperately wanted out of. So I tried to control as much as I could. You could make a case to the lender that the appraiser was incompetent.
I recently refinanced. The bank had the appraiser get in touch with me. I suggested neighboring homes that were of comparable build. And in so doing discovered two things:
1. Appraisal is a very subjective thing. You can frame the price in a large spectrum.
2. You can influence your own appraisal.
I was very vested in my refinance, because I was saddled with rates I desperately wanted out of. So I tried to control as much as I could. You could make a case to the lender that the appraiser was incompetent.
If appraisers have such a tough time assigning market value to a property, then how can anyone put less than 20% down and not fear they are underwater based on the "real" value of the house?
We decided to get a HELOC on our vacation home, because it cost us nothing to apply, and we felt it would give us more financial flexibility if we should have an unexpected emergency. The bank's appraisal on the home came in at about 2/3 of market value! The appraiser is based about 100 miles away from the home, which is not in a rural area. There certainly are plenty of local appraisers that they could have used. Their appraiser compared it to houses that were far inland, on busy major roads, as compared to ours which is on a quiet cul de sac in an extremely desirable location a very short walk to beaches, and to all the amenities of an extremely coveted vacation village/town. It's clear that the appraiser simply searched for houses to justify a ridiculously low appraisal.
It doesn't matter much to us, because we were able to get a comfortable HELOC on our primary residence (which was only appraised at about 10 percent under market, as opposed to 30 percent). I doubt we'll ever even have to use it. But should we say something to the bank? It's our major bank that we use for two businesses, our home mortgage, pretty much all our banking. We have a good relationship with this bank. Considering that they cover all the application costs for a HELOC, I have no idea why they would choose to use an appraiser so far away, and so ignorant of the local market.
I see no need to say anything, especially if you don't plan on using the line. Even if you do say something to your bank, chances are it won't go anywhere.
Banks don't choose their appraisers anymore. A 3rd party management company does. They charge a large fee and look for the cheapest appraiser they can find. You get what you pay for.
Banks don't choose their appraisers anymore. A 3rd party management company does. They charge a large fee and look for the cheapest appraiser they can find. You get what you pay for.
Not always true. Some banks use Appraisal Management Companies (AMC) that put out broadcasts to a large number of appraisers to see who will do it cheapest and quickest. And, you're right, you get what you pay for.
There are also lenders that use AMCs, but they have a panel of approved appraisers. The jobs are assigned to the panel on a rotating/availability basis. This works better, except when a panel appraiser isn't available and the job gets farmed out to anyone who will take it cheap.
And, there are some lenders who order their appraisals direct. They have a department separate from loan production, usually out of the area, that communicates directly with the appraiser. This is the best scenario for buyers, as they reduce the appraisal fees and are completed by appraisers who have been vetted.
I think businesses are in cover your AZZ mode due to Brarny Frank and his cronies.
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