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Old 03-04-2008, 06:50 PM
 
Location: Michigan
23 posts, read 117,359 times
Reputation: 19

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Hello (sorry in advance for the lengthy post, everything before the smiley face is sort of a pre-face and can possibly be skipped without missing much),

My fiancee and I recently purchased our first house in late January, and in the past week have received both our assessment (for taxes) and appraisal (required by our lender). I didn't even know we had an appraisal done until at the time of closing I noticed the $315 fee we had to pay for it, in which I requested a copy of it. Well, after over a month, we finally received the appraisal (dated January 10th) and have questions...

Background info about the house: We purchased it on a short-sale. From 2007 public records, the house was assessed at an SEV of $104,300; we purchased it at $163,500 (it was originally listed at $199, then dropped to $179 before we put in our offer). It has five bedrooms, 3.5 baths, ~2,000 sq ft above grade (two stories), with a ~900 sq ft finished basement (walkout). We were only able to put down about 8%, so we are paying $100/mo. for PMI until we achieve an LTV of 80%.

2008 Assessment info: Three days ago, we received our tax assessment for 2008. Of course, like many areas here in Michigan, the assessed value went down by around 9.5% to an SEV of $98,900. And, even though the assessed value went down, the taxable value went up by 2.3% ($2,100) because of a lovely Michigan proposal passed when I was in fourth grade in '94 .

ANYWAYS, back to the appraisal we received today. Our house was appraised for $164,000...somewhat disappointing. At the time of purchasing it, we thought we were getting a great deal on the house (more than a $500 break), mostly due to the 2007 assessment of $208,600. We figured the appraisal would be much higher than what we paid for the house, thus lowering the LTV quicker, in order to drop PMI sooner. I know that appraisals and assessments are different, in that appraisals use the market to estimate what the house could sell for, but I feel like we are getting squeezed on both ends right now between paying taxes on a $198,000 home, yet having an LTV based upon an appraisal of $164K.

So, here are the questions:
1) Is there anyone (either assessor or appraiser) that I should/could raise an issue with? I had heard that generally, assessments are lower than appraisal; in our case, the appraisal is $35K lower than the assessment.
2) Our appraisal seems like it may have incorrect information on it, as it states we only have 2.5 bathrooms, and 4 bedrooms multiple times throughout the document...versus the 3.5 bathrooms and 5 bedrooms we actually have. Do they count baths/bedrms that are in the basement (we have one of each)?
3) How does this work out...the adjusted values of the 3 other properties that ours was compared to were: $164.1K, 178.4K, 163K. Why would our appraised value based on comparison of those homes be $164K?

As stated earlier, we were hoping to lower the LTV, at least a little bit, based upon the appraisal; we had thought that the buy we got was a steal, since it was on the brink of foreclosure. Regardless, we plan on working on the home and having it re-appraised once (or if!) the market rebounds, and we definately love our new home!

I am assuming that the appraisal is pretty much right on, since what we paid for the home is its market value and what it should be selling for, but I just wanted to get others' takes.

THanks!
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Old 03-04-2008, 07:05 PM
 
Location: Las Vegas, Centennial Hills
2,013 posts, read 4,620,735 times
Reputation: 836
1. I would contact your local county assessor and raise this issue with them. you should be able to have the property re-assessed, with the appraisal to document your issue and back up your claim.

2. If these are finished rooms that show up on tax records then they should be consistent with the appraisal. I don't think that I would worry about that too much, as it's already done but seems like the appraiser did make a mistake, which they do.

3. Cost approach appraisals use a variety of methods to determine value. For example, a corner lot would be more valuable than a standard lot. There are many variables used and on the basis of exterior and interior upgrades, lot size, etc. one would be more or less valuable than the other.

On a side note, for all intents and purposes the purchase price is the market value of the home for 12 months. Even then it seems like the comps are right around the same value, so trying to lower your loan to value using a value that does not exist would not be viable.
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Old 03-04-2008, 07:40 PM
 
Location: Michigan
23 posts, read 117,359 times
Reputation: 19
Default Thanks

Thanks for the help! We will definately be going to the assessor in the near future to see if we can get a re-assessment and get those taxes lowered .
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Old 03-05-2008, 06:33 AM
 
Location: Palm Coast, Fl
2,248 posts, read 5,907,099 times
Reputation: 969
The appraisal for your loan can differ greatly from an appraisal done for a different reason. This appraisal was done to justify the loan that was given to you to purchase. All they need to do is justify that loan...nothing else. I've had ONE appraisal come in at close to the 'real' value vs the contract price in three years. I'm sure there will be appraisers here that will tell you that isn't correct to do or that doesn't happen but it's been my experience here that they bring them in no more than necessary to justify the contract.
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Old 03-05-2008, 10:45 AM
 
Location: Las Vegas, Centennial Hills
2,013 posts, read 4,620,735 times
Reputation: 836
Quote:
Originally Posted by palmcoasting View Post
The appraisal for your loan can differ greatly from an appraisal done for a different reason. This appraisal was done to justify the loan that was given to you to purchase. All they need to do is justify that loan...nothing else. I've had ONE appraisal come in at close to the 'real' value vs the contract price in three years. I'm sure there will be appraisers here that will tell you that isn't correct to do or that doesn't happen but it's been my experience here that they bring them in no more than necessary to justify the contract.
I'm an LO and I'll tell you that's not true. For all intents and purposes the appraisal is the real value, until the home is sold for what it is sold at which point the purchase price becomes the real value unless purchased under distress and proven with the use of area comps that show an average market value of much higher.

For example, I just funded a short sale purchase where the purchase price was $204K. The appraisal came back at $220K. If they were to try to refi though, the lesser of the two would be used for at least 12 months. Because this home is now the latest comp, the value on the others around it drops a little, so I can't imagine this thing appraising for more than the purchase price in 12 months.

FWIW, every LO in my office would absolutely NOT work with an appraiser that did not do their job correctly, and simply justifying the purchase price is not doing the job correctly.
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Old 03-07-2008, 10:59 PM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 21,039,425 times
Reputation: 2661
Interesting Daddy...Just had a client purchase a REPO for 280K with an appraisal of $350K. Obviously a stress situation...so you would hold that they can use the 350K for an LTV calculation? If not now could they use it in a year?
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Old 03-07-2008, 11:42 PM
 
Location: Las Vegas, Centennial Hills
2,013 posts, read 4,620,735 times
Reputation: 836
Quote:
Originally Posted by olecapt View Post
Interesting Daddy...Just had a client purchase a REPO for 280K with an appraisal of $350K. Obviously a stress situation...so you would hold that they can use the 350K for an LTV calculation? If not now could they use it in a year?
For the lenders to even be willing to look at the $350K, they would have to show a very strong community of comps and listings at or above $350K, at least this is what I've been told by my lender reps and read in the guidelines. Even then, with the state of the market right now I don't know that anyone would want to use that value, and would very likely do everything in their
power (desktop appraisal review, field review) to try and cut that value. According to the letter of the guidelines though, if the appraiser can show an obvious discrepancy between purchase price and true market value, using comps and listings, then the appraised amount may be used for the purposes of refinancing without the 12 month seasoning. It has to be VERY cut and dry though.


However, I can say that if the market stayed relatively stable in this community, and the home appraised for $350K 12 months after close then that is what the home would be worth, and the appraised value could be used for the purposes of refinancing.

And you can call me Terry.
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Old 03-08-2008, 12:42 AM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 21,039,425 times
Reputation: 2661
Quote:
Originally Posted by Daddys///M3 View Post
For the lenders to even be willing to look at the $350K, they would have to show a very strong community of comps and listings at or above $350K, at least this is what I've been told by my lender reps and read in the guidelines. Even then, with the state of the market right now I don't know that anyone would want to use that value, and would very likely do everything in their
power (desktop appraisal review, field review) to try and cut that value. According to the letter of the guidelines though, if the appraiser can show an obvious discrepancy between purchase price and true market value, using comps and listings, then the appraised amount may be used for the purposes of refinancing without the 12 month seasoning. It has to be VERY cut and dry though.


However, I can say that if the market stayed relatively stable in this community, and the home appraised for $350K 12 months after close then that is what the home would be worth, and the appraised value could be used for the purposes of refinancing.

And you can call me Terry.
Hey Terry...Remember though it is the Bank's appraisal. First time I can remember an Appraisal so far from the transaction price. I suspect the comps support the appraisal. Not an area effected by the foreclosures.

Interesting though.
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Old 03-08-2008, 09:52 AM
 
Location: New Mexico
627 posts, read 1,478,130 times
Reputation: 288
I have a house under contract and let the buyer know what it would appraise for, for free & it took me one second to work up the numbers.
He offered much less (25K) than the already fair asking price and the sellers accepted. I wanted him to know it was priced fair to start with and worked up the numbers for him to show him, and I did this because I KNEW the appraisal would come in at his offering and accepted price, which it did.

Of course he had to pay $450.00 and wait 2 weeks for the official report as it's a required exercise for the lender. The appraisal came in to the penny of purchase price. Buyer was of course disappointed since he paid all that money for a BS report which he would not have known if I had not told him what the report would come in at. It got him the loan, but of course he would want to know if he got a steal or not. I think it's BS those appraisals myself.

You probably got a steal. Don't believe the appraisals. They are BS.
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Old 03-08-2008, 11:51 AM
 
Location: Las Vegas, Centennial Hills
2,013 posts, read 4,620,735 times
Reputation: 836
Quote:
Originally Posted by olecapt View Post
Hey Terry...Remember though it is the Bank's appraisal. First time I can remember an Appraisal so far from the transaction price. I suspect the comps support the appraisal. Not an area effected by the foreclosures.

Interesting though.
Technically, every appraisal is the banks appraisal. I imagine that the bank still uses an outside appraiser or an appraisal management company (similar to CW and LandSafe). Most likely, even though it is the banks appraisal, they would still want the individual appraiser that prepared this report to back up their claims, and would very likely put it through the review process.

That being said, if comps AND listings support the appraised value, then the 12 months seasoning may not be needed. I wouldn't count on that though. Like I said, with the market conditions being what they are, lenders are actually looking for reasons to not fund deals. The last few deals I worked on have been uber-clean (FHA, 7008 FICO, $50k in assets, 25 years same line of work, etc.) and have gone through pretty effortlessly. However, I did a Flex 100 purchase in January that 3 lenders tried to kill, even though the deal fit the guidelines. It closed, but it closed 2 weeks late and I did not look good on that one.

If the client would like to try and refi in 6 months or so, I would suggest going to a different lender, and perhaps ask them upfront if they would consider waiving the seasoning requirements because of an obvious distress situation affecting the purchase price in an otherwise very stable neighborhood. Maybe talk to an appraiser beforehand as well, to see if they would be able to rebutt effectively if countered by the lender.
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