Appraisal is $30,000 less than construction cost (cheapest, foreclosures, banks, property)

[dallasd9]

I own 16 acres of land in the Texas Hill Country 30 miles NW of San Antonio. The land is undeveloped land with a great view of the surrounding Hill Country. We are in the process of getting a construction loan from one of the nations big banks (local branch). The loan officer ordered the appraisal of the new home (plans) and the property. When we received a copy of the appraisal is was $5,000 less then we (the bank and me) figured it should be. Also, the comps used are nothing like the property and house that we are building. We challenged the appraisal and I just found out that it was reevaluated $25,000 less than the original. How can this be? That is $30,000 less than the three bids I have from local builders just to build the house not to mention the property value (paid for already). Did I #@% off someone by challenging the appraisal? Can I file a formal complaint with someone?

Frustrated !!!!

[Silverfall]

Actually I am not at all surprised. Out here very few banks are doing new home construction these days because a new home is like taking a car off the lot, it is devalued the minute it is done.

Usually the reevaluation's are "desktop" appraisals so it may not even be someone in the area. At least that is what I have seen out here. If you think they behaved unethically, then you need to file a complaint with the state board TALCB - Home Page, Agency Information

[BuenoQueHacemohAhora]

We went recently through a similar process.

We had a piece of property in which we wanted to build.

After getting estimates for both contractor build and self build, we found out we could buy an already built house for much less than what we wanted. The issue was finding a house that we REALLY liked.

It all comes down to what can you compromise on. You either pay more for an exact to spec house, or you pay less and get almost what you wanted.

If you want to build something that is not to far from "off the shelf" design and construction you will find what you already found.

[ETex2]

Originally Posted by dallasd9

I own 16 acres of land in the Texas Hill Country 30 miles NW of San Antonio. The land is undeveloped land with a great view of the surrounding Hill Country. We are in the process of getting a construction loan from one of the nations big banks (local branch). The loan officer ordered the appraisal of the new home (plans) and the property. When we received a copy of the appraisal is was $5,000 less then we (the bank and me) figured it should be. Also, the comps used are nothing like the property and house that we are building. We challenged the appraisal and I just found out that it was reevaluated $25,000 less than the original. How can this be? That is $30,000 less than the three bids I have from local builders just to build the house not to mention the property value (paid for already). Did I #@% off someone by challenging the appraisal? Can I file a formal complaint with someone?

Frustrated !!!!

1. Cost does not always equal value, esp. in slow or depressed markets
2. Are you sure that there are much better comps to use?
3. Markets are changing day to day; maybe there was a more recent and better comp that indicated a lower value on the second appraisal.
4. If you feel strongly that the appraiser violated standards (USPAP), you can certainly file a complaint with the Texas Appraiser Licensing and Certification Board. But just because the estimate of market value did not meet your cost, this is not a legitimate reason to file a complaint. Best to have the appraisal reviewed by a third party appraiser first.

[dallasd9]

Originally Posted by ETex2

1. Cost does not always equal value, esp. in slow or depressed markets
2. Are you sure that there are much better comps to use?
3. Markets are changing day to day; maybe there was a more recent and better comp that indicated a lower value on the second appraisal.
4. If you feel strongly that the appraiser violated standards (USPAP), you can certainly file a complaint with the Texas Appraiser Licensing and Certification Board. But just because the estimate of market value did not meet your cost, this is not a legitimate reason to file a complaint. Best to have the appraisal reviewed by a third party appraiser first.

Thanks for the advise. I have ordered an independent appraisal to verify. I will then deal with the results as warranted.

[Lacerta]

As Silverfall said, this isn't untypical right now.

Our building department is, for all intents and purposes, shut down in the current market. We cannot get a new construction home to appraise for what it costs to build it, therefore, we can't build.

If your area is like mine, then the cheapest, cookie cutter houses by large-scale production builders can get appraised, so they will sell, but custom homes will not, if they aren't cash deals. If we had a buyer who was going to put a very large amount down, such that the appraisal didn't matter, we would build for them. Otherwise, it wouldn't be worth it, as their lender wouldn't let them close on the house due to appraised value at the end.

We've had to turn down several build jobs at this point because the appraisals came in so far under construction costs that the buyer couldn't get a loan approved.

I empathize with your situation, but I don't think you are being cheated, it's just what reality is right now.

[thrillobyte]

It's much more expensive to build than it is to buy in this upside down market. Used to be you'd build for about 60% of the cost of new. Now land, labor and materials are sky-high while foreclosures are flooding the market at a fraction of their cost to build.