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Old 06-15-2010, 08:30 PM
 
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I am in the process of buying a house in Palmer Ranch and I got appraisal report today. It was huge shock and the appraized value for the house was less than 87% of the contract price. Is this rare case or is this pretty common in the area? Thank for your commnents in advance.
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Old 06-15-2010, 09:09 PM
 
Location: Palm Island and North Port
7,486 posts, read 19,934,815 times
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Quote:
Originally Posted by granger123 View Post
I am in the process of buying a house in Palmer Ranch and I got appraisal report today. It was huge shock and the appraized value for the house was less than 87% of the contract price. Is this rare case or is this pretty common in the area? Thank for your commnents in advance.
We this quite often. I usually run comparable properties that have sold within the last 3 months so my buyer has an idea of what might be a logical offer. Appraisals are somewhat subjective. They really depend on what comparables the bank/appraiser decides to pull.

This is how I pull my comps-I go back 3 months and look at the sold properties. I look at homes five years newer and five years older than the subject property. I look at homes that are 20% larger and 20% smaller than the subject property. Then I would look at things like pools, condition, etc. This is how the bank instructs me me to do a BPO (Brokers Price Opinion) on their property.

Good luck with your offer!
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Old 06-15-2010, 09:23 PM
 
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The appraisal on the first house we bid on came in $30,000 too low. We couldn't and wouldn't fork over the difference so we lost the house. Our particular problem was the appraiser was unfamiliar with housing in the area- comps were from outside the area and were definitely not comparable. Our particular appraiser left off a room and a lanai. When we tried to appeal it with Wells Fargo they told us that the appeal would take months going through 2 independent agencies and would end with the original appraiser having to comment on our complaint.It sounded like we would lose and backed out. We refused to deal with Wells Fargo on the next bid and it worked out for us. Our RE agent told us that after the real estate fiasco, appraisers for banks are rotated off an established list so the brokers can't control or influence the results. In regard to Palmer Ranch, we had innitially looked into Village Walk and the Isles and felt the Palmer Ranch brokers of those developments have artificially controlled the listing prices there and are inflated compared to similar homes outside PR.
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Old 06-16-2010, 08:02 AM
 
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I think part of the rules regarding financing were amended to rotate appraisers without RE agents or mortgage lenders being able to "call" certain agents who while they might be familiar with specific areas also might have bent the rules of appraisals to give favorable results to brokers/lenders they "know"...
I do think that areas definitely vary as to what is "comparable" price and values...
appraisers have to provide the houses they use to make their reasoned judgements--
using homes that are out of the legitimate area--like from other subdivisions--or not in same age/size/amenity groups are clues that comps won't be similar and likely to be much lower...

I don't know if that is a desired outcome based on the mortgage lender wanting to come in at bottom price for its money at risk but I have heard people in DFW area complain about the same effects...

what was done to supposedly ensure there was no UP-side price fixing has seeminly resulted in ability to DOWN-side skew prices...which is really only to the mortgage lenders benefits most of the times.
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Old 06-16-2010, 10:23 AM
 
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Thank you for all the helpful comments. The house I am looking had lots of upgrades done during the last two years. For example, tile roof change, bamboo floor installation all over the house, resurface of the pool, renovation of kitchen, etc. What is the typical adjustment for these updates compared with other comps? The house is 15 years old.
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Old 06-16-2010, 01:32 PM
 
Location: Palm Island and North Port
7,486 posts, read 19,934,815 times
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Originally Posted by granger123 View Post
Thank you for all the helpful comments. The house I am looking had lots of upgrades done during the last two years. For example, tile roof change, bamboo floor installation all over the house, resurface of the pool, renovation of kitchen, etc. What is the typical adjustment for these updates compared with other comps? The house is 15 years old.
Normally they will not look at those kind of things. They look at square footage, year built, pool or no pool, location, on water and what kind of water i.e. gulf access. They will look at the overall condition but not usually the specific upgrades. Although those upgrades usually help to sell the home quicker they won't usually be factored in the appraisal.
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Old 06-17-2010, 03:56 PM
 
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With the new HVCC regulations, appraisers are no longer "allowed" to speak with realtors or mortgage brokers directly, but instead have to go through a 3rd party, like and appraisal management company. These regulations have their pros and cons, but overall, it has hurt the appraisal process. These management companies want a share of the appraisal fee, so they hire the apprasier who will take the lowest fee. In order for these appraisers to make money with the reduced fees, they cover a large area geographically. This results in appraisals done without full geographical competency. Had your property been appraised by an appraiser with full knowledge of your market area, your appraisal result may have been different. Local banks tend to use local appraisers more than large corporate lenders.
As to the upgrades, that falls under the adjustments for effective age and overall condition of the property. I plan on buying a residential property in the Sarasota area within the next year, and as an appraiser, I already dread having to deal with this problem.
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Old 06-18-2010, 10:32 AM
 
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I feel for everyone on this subject. Appraisals went from too loose (IMHO) to wildly unpredictable in this market.

Last fall, we had a hit-and-run appraisal, less than 12 minutes from the time the car was in the driveway to the time the husband/wife team left. (10 min inside the house, 2 minutes in the yard)

I believe the pair was based out of Ft. Meyers / Cape Coral, evaluating a property in Nokomis. Needless to say, the appraisal was poorly done, the comps ridiculous, and the value was extremely off base; it took until spring of this year to get around to a redo, which fortunately came back with usable results.

Not that I want to test this, but I wonder if you had 10 independent appraisals done on the same property, just how much of a variance would you see? Herald Tribune expose time?
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Old 06-18-2010, 10:45 AM
 
204 posts, read 518,875 times
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Quote:
Originally Posted by SoFLGal View Post
Normally they will not look at those kind of things. They look at square footage, year built, pool or no pool, location, on water and what kind of water i.e. gulf access. They will look at the overall condition but not usually the specific upgrades. Although those upgrades usually help to sell the home quicker they won't usually be factored in the appraisal.
My wife and I can attest to that ... we did a huge renovation, and our home was compared to similar age/size structures that looked like junk in fall of 09.

It's a harsh reality of the market right now.

I have this theory that the single most dangerous idea to be introduced to the mass market recently (besides leverage) was ... trim items. You know, the last 5% of design effort that makes or breaks whether a house looks average or well-appointed. The last 5% which costs 30, 40, 50% (and beyond), that is. Granite. Cabinetry. Stainless. Tile. Mouldings. Detail work. All the tell-tale traditional signs of luxury and craftsmanship, with none of the reality in an age of Chinese drywall. Anymore, you can only ride the value tide of local comparable homes for better or worse- your home's individual merits aren't considered by the bank.

We were fortunate enough to ride that tide this spring to refi at these rock bottom rates. Despite our monumental efforts in remodeling (gutting), what really saved us in the end? Square footage.
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Old 06-19-2010, 05:45 AM
 
7 posts, read 22,149 times
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Quote:
Originally Posted by SoFLGal View Post
Normally they will not look at those kind of things. They look at square footage, year built, pool or no pool, location, on water and what kind of water i.e. gulf access. They will look at the overall condition but not usually the specific upgrades. Although those upgrades usually help to sell the home quicker they won't usually be factored in the appraisal.
After observing the big difference between the contract price and bank's appraisal, the sellers hired their own appraiser. The new appraisal used similar comps as the bank apprisal, but the new apprised number is $65,000 more than bank appraisal (bank apprisal is $60,000 less than the contract price). The new appraisal adjusted for the all new fixing in many items: the effective year, house condition, quality of construction. For the house built in the same subdivision in Palmer ranch, they added $50,000 for the quality of construction in addition to effective year adjustment $25,000 to $50,000. I don't know how the appraiser say the contracted house's effective year is 5 years (physical year 15), but all the comps's effective years are close to physical year 15. I stronly feel the appriser did his or her own very best to boost the value of the contracted house. I couldn't believe this new appraisal. In my opinion, the second apprisal just try to match the contract price.

I am the potential buyer. I think the bank apprisal is somewhat too conservative in terms of effective year and the seller's appraisal is too inflated. What should I have to do? Should I have to hire 3rd appraiser for more accurate apprisal?
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