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Our house was bought in January 2008 for $235K, and we put in over $100,000 in improvements (all new electrical, plumbing, roof, bathrooms (2.5) and kitchen. It was appraised in August 2008 for $340K. We just got it appraised again for refinancing, and this one came back at $228K! A drop in $112K over a years time. This does not seem right to me.
The appraiser said our property was just average, and thus similar to the properties that sold around here that have not been upgraded since the 1980's/1990's. Is that allowed? To just ignore all of the improvements done on a house?
Sounds like you might have over improved for the neighborhood. Also, depending on where you are, assessments/appraisals have dropped up to 50%. In my area the appraisals are down anywhere from 20%-40%.
Say hello to the problems with the Home Valuation Code of Conduct. This new law changes how appraisals are ordered and has severly impacted the quality of appraisals. Since this law has started, I have seen the lowest quality appraisal done. Do a google search on Home valuation code of conduct or HVCC.
This law is so bad that FHA does not follow the new guidelines due to the problems it has created.
Sounds like you might have over improved for the neighborhood. Also, depending on where you are, assessments/appraisals have dropped up to 50%. In my area the appraisals are down anywhere from 20%-40%.
We didn't over improve per se, it is just the "comparables" listed on the appraisal were never updated since the 80's/90's (if then). Our house didn't seem to be updated since the 1970's when we bought it, and I can't imagine how bringing it up to code, and up to date, would still bring the value down below what we paid for it last year.
And for the two different appraisals one year apart being so different makes no sense.
We didn't over improve per se, it is just the "comparables" listed on the appraisal were never updated since the 80's/90's (if then). Our house didn't seem to be updated since the 1970's when we bought it, and I can't imagine how bringing it up to code, and up to date, would still bring the value down below what we paid for it last year.
And for the two different appraisals one year apart being so different makes no sense.
There may be several issues here. First of all, it would be helpful to know where you are located.
You need to remember that cost does NOT equate value. If your house was the only one in the neighborhood that was NOT updated, the improvements you made now brought your house to "average" level.
It is possible that the appraisal done in August 2008 was too high. It is also possible that the appraisal you just had done is in error.
There are too many questions out there to draw any conclusions. As usual, I am offering to take a look at it free of charge. If you would like me to do this, please DM me for my email address.
Our house was bought in January 2008 for $235K, and we put in over $100,000 in improvements (all new electrical, plumbing, roof, bathrooms (2.5) and kitchen. It was appraised in August 2008 for $340K. We just got it appraised again for refinancing, and this one came back at $228K! A drop in $112K over a years time. This does not seem right to me.
The appraiser said our property was just average, and thus similar to the properties that sold around here that have not been upgraded since the 1980's/1990's. Is that allowed? To just ignore all of the improvements done on a house?
I am very upset about this.
Thanks for your comments, Jamie
I'm sorry but why did you spend $100,000 in improvements on a $200,000 house? Was it a fixer upper? How much are other homes in the area selling for? The appraisal should have provided you with three comparable homes with pictures. Are they comparable to your home? Is the 340,000 based on your upgrades? If so, that does not make sense. If the average comps in the area is $200,000, no one will pay $300,000 for your home. I'm really sorry. How did you finance the $100,000 loan for the upgrades?
Say hello to the problems with the Home Valuation Code of Conduct. This new law changes how appraisals are ordered and has severly impacted the quality of appraisals. Since this law has started, I have seen the lowest quality appraisal done. Do a google search on Home valuation code of conduct or HVCC.
This law is so bad that FHA does not follow the new guidelines due to the problems it has created.
Not to get off topic but the HVCC doesn't cause bad appraisals. The HVCC prevents lenders from direct contact with appraisers which is designed to eliminate lender pressure and promote an "unbiased" opinion of value.
Homeowner35, in this particular case (and I can't pass judgement without seeing the appraisal) I'd say you have a host of things contributing to the current value of your home. First of all, it is extremely unlikely you'd get back "dollar for dollar" what you spent on upgrades and improvements. Second, generally speaking property values in most markets across the country are declining and have been for the past two years. Third, your appraisal from a year ago may have been inflated if the lender was trying to get your $100,000 in improvements plus your $235,000 purchase price refinanced. If you bought the house in 2008 for $235,000 and it was in similar condition as surrounding houses, it it very unlikely it increased to $340,000 six months later even if you did spend $100,000 in improvements.
If your second appraisal (the one for $340,000) was inflated due to lender pressure, it wouldn't happen today because of the HVCC. If I had to bet, I'd say that's likely what happened.
I agree with Victor on the HVCC. When you order a VA appraisal, a rotation system is used within the same county.
What is happening with HVCC is that appraisers from other counties sometimes up to 200 miles away are being asked to appraise a home in an area they are not familiar with.
I just had an appraiser come from South Miami - 80 miles away - to Boca Raton on a townhome/attached/more like a single family and compare it to condos over 4 miles from the subject.
I did fight it and won but it cost us time and the consumer is out of pocket close to $1000.00.
I also had one in Miami done on a high rise condo - purchase price $1,396,000 with a loan amount of $417,000.00. Appraisal came in at 1M - the appraiser would not use comps in the building even though they closed in July 2009 (1.2M and $1.4M identical to the subject. This was a second home for this professional individual. The lender was the same lender who did the financing for the whole project. Bottom line - borrower walked away due to the low appraisal.
There are a lot of us out here that are honest and hard working and did not get caught up in all the craziness.
I don't understand why the lender just can't order the appraisal and do away with the whole HVCC mess.
What is happening with HVCC is that appraisers from other counties sometimes up to 200 miles away are being asked to appraise a home in an area they are not familiar with.
I am not a fan of the HVCC but I do not agree with the above quoted statement.
We just returned from doing an appraisal in a town 250 miles away. Every appraiser has to certify that he/she is geographically competent. This is a USPAP requirement.
So ..... a lender can ask an appraiser to appraise a home in an area they are not familiar with, but the appraiser is required to either decline the assignment OR inform the client that he/she is not geographically competent but will become so. And if the client agrees with that, there should not a problem.
We primarily specialize in rural/small town appraisals and complex assignments. This means that we cover a large part of the state and could cover the whole state if the client is willing to pay our fee. We have the data sources to do the job and if we are not 100% familiar with the area we stay several days and make sure we fully understand the local market.
So, while I strongly disapprove of the HVCC and most AMCs, this is a clear case of appraisers accepting assignments they are not qualified to do.
Of course, if these AMCs would pay full fees they might just get a professional, competent and highly educated appraisal to do the job. As it stands right now, most of us refuse to accept assignments for bottom fees.
Our house was bought in January 2008 for $235K, and we put in over $100,000 in improvements (all new electrical, plumbing, roof, bathrooms (2.5) and kitchen. It was appraised in August 2008 for $340K. We just got it appraised again for refinancing, and this one came back at $228K! A drop in $112K over a years time. This does not seem right to me.
The appraiser said our property was just average, and thus similar to the properties that sold around here that have not been upgraded since the 1980's/1990's. Is that allowed? To just ignore all of the improvements done on a house?
I am very upset about this.
Thanks for your comments, Jamie
Welcome to the housing market of 2009.
Depending on WHERE you live, it is infinitely possible and highly probable. If you lived in Phoenix or Las Vegas it would probably be more.
I'll admit it takes some getting used to.
20yrsinBranson
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Hvcc
