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Difficulty with appraisals


flipper

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Very timely article. That particular house is a bloock over from my old one, which I sold in 2005 for just a bit less than this guy's 2009 appraisal, and this guy

s house is larger and more updated. Did we really lose that many years of appreciation?

When we went to refinance our current place earlier this spring, we were shocked at the low appraisal, it was almost embarrasing given the updates we have made. That was a BofA appraiser who seemed well-versed in the area, but it didn't seem to matter.

eta: And as usual, the Chron comments crack me up.

Edited by travelguy_73
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We're expecting the appraisal from our recent sale any day now and are very anxious. There are plenty of comparable properties nearby that would support our price, but there are also a couple of distressed sales - one in particular - that I'm terrified are going to get picked up by the appraiser.

I guess we'll see what comes out.

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this was his quote?

"The biggest challenge isn't the economy, or buyers who can't qualify for loans. It's appraisers coming in with ridiculously low appraisals," said Searcy, who is listing DeCristofaro's house.

Part of what's at issue is a new rule that went into effect May 1 prohibiting loan officers, mortgage brokers and real estate agents from selecting appraisers.

Yup - then you get a guy from Spring doing an appraisal in the Heights.

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No home in Idylwood is worth over 185K, given what actually surrounds Idylwood.

Your day of reckoning has arrived.

Glad to hear that some sanity is slowing coming back into the home buying business. There is no better leverage for the buyer than hearing: "the property didn't appraise." Either A.) The seller comes down in price, and gets a fair deal or B.) The buyer is saved from making a terrible financial mistake - and walks away. Any buyer that brings money to the table to make up for the difference is a fool.

Some of the best deals, are deals that never happen.

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No home in Idylwood is worth over 185K, given what actually surrounds Idylwood.

Your day of reckoning has arrived.

Glad to hear that some sanity is slowing coming back into the home buying business. There is no better leverage for the buyer than hearing: "the property didn't appraise." Either A.) The seller comes down in price, and gets a fair deal or B.) The buyer is saved from making a terrible financial mistake - and walks away. Any buyer that brings money to the table to make up for the difference is a fool.

Some of the best deals, are deals that never happen.

There's a whole lot of opinions in here being presented as fact.

flipper

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We did an appraisal the middle of last year for a re-finance, just before the major housing bust..

Chase sent out a gangsta wannabe to do our appraisal, and came in 50K under our current balance, where 2 years before, our appraisal was above 100K our current balance. (And by gangsta wannabe, sideways hat, shorts falling off with boxers.. very unprofessional and a bad reflection on Chase) Naturally we were declined on ONE appraisal.. I asked provide my own appraisal and pay for it myself, they would have nothing to do with it..

BoA sent an appraiser out, and came in 150K over our current balance, and was happy to refinance.

Not sure what the wide discrepancy was.. Nothing changed, and the time difference was within a few months.. Maybe had to do with familiarity with the area..?

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Is it "normal" to get an inspection before or after an appraisal?

My experience has been that the appraisal usually comes through days before closing, i.e., very late in the process. OTOH, the inspection happens during the option period while you can still get out and only lose your option money.

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This house appears to be a flip, as the owner is not registered to the address in HCAD. No need to cry over this one. Hopefully, this will serve as a wake up call to others.

Actually they have lived in the house since at least 2005, and purchased it (I think) from the estate of the original owner. It was in clean, but original shape and looks great now and fits in very well with the other homes on the street.

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You were able to get the lender's appraiser out there during the option period?
I'm interested in this too...

flipper

Well, real estate and all of the hoops required to jump through is certainly not my expertise, so I may indeed have something screwed up. All I know is that the other party's realtor said they wanted it done ASAP and our realtor got her to agree to get it done within the option period (my realtor's words were, "THIS IS AWESOME!"). The appraiser showed up on Monday morning of this week (the inspection was in the afternoon) and the option period ends today.

Now you guys have me scared that something isn't going to go right...

Edited by cottonmather0
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Actually they have lived in the house since at least 2005, and purchased it (I think) from the estate of the original owner. It was in clean, but original shape and looks great now and fits in very well with the other homes on the street.

Interesting. You'd think that HCAD would surely be updated with the correct information by now. When you buy a home in one tax year, it may not show up in your name until the next tax year. But it's been 4 years. What's really going on? Is the chron protecting this man's identity, by giving him some other name, for the story?

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You were able to get the lender's appraiser out there during the option period?

Make the option period expire, effective the last signature of closing, on the closing documents. I wish that were possible. That way, if anything goes awry, at any point in the process, just get up and walk away. That would give the buyer protection for repairs that may not have been done, inspection, appraisal, "we need $200 more - in closing frees for X," other "surprises" at closing, etc. Screw'em.

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Make the option period expire, effective the last signature of closing, on the closing documents. I wish that were possible. That way, if anything goes awry, at any point in the process, just get up and walk away. That would give the buyer protection for repairs that may not have been done, inspection, appraisal, "we need $200 more - in closing frees for X," other "surprises" at closing, etc. Screw'em.

It would be nice, but as a seller I don't know if I'd ever agree to that.

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http://www.chron.com/disp/story.mpl/busine...te/6485592.html

I have also noticed this becoming more and more of a problem. It affected a deal I'm working on right now, but luckily we were able to get the appraisal raised by justifying a value with comparable sales.

flipper

ps. way to go rps!

Bank of America just finished with a ridiculous appraisal on one of my homes.

The home is in midtown and has comparables that sold in the last six months that you can see from the front porch. Instead the appraiser only used homes that sold in 3rd Ward for comparison. When I called to explain (in a nice way) that every buyer, Realtor, and every other Appraiser alive in Houston knows the difference between the two sides of 288 he kept repeating that we are in a declining market. I explained that a declining market has nothing to do with using the wrong neighborhood for comparables and he told me that it has everything to do with it!

Usually in a declining market an appraiser would have a standard deduction to use after finding the current value. Now they just seem to be scared. This guy found the lowest priced homes within 5 miles and only used those to value the home. Good thing it wasn't for a home sale, I would have been livid.

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No home in Idylwood is worth over 185K, given what actually surrounds Idylwood.

Your day of reckoning has arrived.

Glad to hear that some sanity is slowing coming back into the home buying business. There is no better leverage for the buyer than hearing: "the property didn't appraise." Either A.) The seller comes down in price, and gets a fair deal or B.) The buyer is saved from making a terrible financial mistake - and walks away. Any buyer that brings money to the table to make up for the difference is a fool.

Some of the best deals, are deals that never happen.

You are correct BryanS, look at the economic situation and the banks insolvency, there is no way they are going back to high appraisals. It seems reality is still on its way to Houston.

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Call me crazy, but I keep going back to the principle of, "something is only worth what someone is willing to pay for it."

Well, if what people are willing to pay isn't dropping, why should the appraisal (allegedly the market value of the property) drop?

The overall economic situation and the solvency of the banks have nothing to do with the value of an individual piece of property if it has willing buyers at a particular price.

Edited by CDeb
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Call me crazy, but I keep going back to the principle of, "something is only worth what someone is willing to pay for it."

Well, if what people are willing to pay isn't dropping, why should the appraisal (allegedly the market value of the property) drop?

The overall economic situation and the solvency of the banks have nothing to do with the value of an individual piece of property if it has willing buyers at a particular price.

Well...as has been stated already, the house is worth the asking price if someone has the cash and willingness to pay that for it. It's not worth it through the bank's eyes and they're the ones being asked to pony up the dollars, that's the rub.

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Well...as has been stated already, the house is worth the asking price if someone has the cash and willingness to pay that for it. It's not worth it through the bank's eyes and they're the ones being asked to pony up the dollars, that's the rub.

That's all well and good, but then the banks need to be up front with people and state that we aren't going to let you pay full market value for properties, so don't waste your time and money.

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That's all well and good, but then the banks need to be up front with people and state that we aren't going to let you pay full market value for properties, so don't waste your time and money.

If by that you mean banks stink for hiring appraisers who don't know the area and give crappy appraisals, then yes.

If by that you mean just because I am willing to pay $x for that house and I don't have the money to pay $x, then no. The bank, if they get a fair appraisal (IF), is just looking to make sure its loan is secured.

If you want to buy a house for $300k, but everyone else is only willing to pay $200k, and the bank loans you $300k, they're undersecured for $100k from day 1 and that's bad business.

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If by that you mean banks stink for hiring appraisers who don't know the area and give crappy appraisals, then yes.

If by that you mean just because I am willing to pay $x for that house and I don't have the money to pay $x, then no. The bank, if they get a fair appraisal (IF), is just looking to make sure its loan is secured.

If you want to buy a house for $300k, but everyone else is only willing to pay $200k, and the bank loans you $300k, they're undersecured for $100k from day 1 and that's bad business.

I meant the first one. Obviously, if you are willing to pay $300k for a house that everyone else is only willing to pay $200k for, then you are an outlier that the bank is wise not to cover. But if all the recent home sales around you point to the fact that your house is, in fact, worth about $300k, then you aren't an outlier, you are paying market value.

The article that started this thread seems like it is referring to the first one, as well.

Edited by CDeb
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I meant the first one. Obviously, if you are willing to pay $300k for a house that everyone else is only willing to pay $200k for, then you are an outlier that the bank is wise not to cover. But if all the recent home sales around you point to the fact that your house is, in fact, worth about $300k, then you aren't an outlier, you are paying market value.

The article that started this thread seems like it is referring to the first one, as well.

Yes, you are correct. Some times you can't tell what people mean on the internet, lol.

What I have heard from attorney and realtor friends is that appraisers from outside the loop seem to pick some completely uncomparable comparables to base their appraisal on (like the example someone in this thread gave) - a guy from Spring usually doesn't understand how big of a difference only a few blocks can make inside the loop.

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The interesting this is that I had a house appraised in Idylwood around pretty much the same time. (Two weeks ago. Yes, I purchased it.)

Mind you, I never looked at that house, as it was out of the price range I wanted to spend. The one I bought was several hundred sq. ft. smaller, and while it looked great in the HAR photos, let's be honest - it didn't have nearly the upgrades of the one in the article (I saw recessed lighting, better kitchen upgrades, utility room in the house w/ mud room, the 2-car garage is likely in much better condition, known problems with the house I purchased, etc.), and there were numerous issues that need to be dealt with. (Nothing out of the ordinary for a 61 year old house.)

All of that being said, my appraisal came in quite a bit higher than his appraisal. That's a bit disconcerting, since my appraisal was made on comps sold _only in Idylwood_ in the past nine months, and given the current condition of the house.

So, I notice his listing is gone now from HAR, whether it's because it sold or because he de-listed it, I don't know. It does have me concerned that a single bad appraisal is enough to warrant a Chron article? Did he have several bad appraisals? Was he being pre-emptive towards future appraisals, or is it just part of the PR campaign to get the new appraisal rule changes reversed? (A rumour I've heard a few times regarding this article.)

Yes, I do believe the appraisal his buyer got was a bad one. Namely, because I have access to at least one other appraisal done at the same time on a comparable house in the same neighborhood =). Of course, you could always make the argument that my appraisal was bad, but, you know, I've got 20 pages of documentation that goes into exacting detail as to how it was generated, and it all looks good to me and everyone who read it. (We'll avoid pointing out the obvious that at least one of those readers is a non-expert [me] *grin*)

Edited by drone
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Just got my appraisal report for our purchase in Sugar Land. Value came back right at the sale price. Appraiser was from Plano!

Which makes no difference, at all. I would bet that your report had houses, in your neighborhood, as comps, not homes in Plano.

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Which makes no difference, at all. I would bet that your report had houses, in your neighborhood, as comps, not homes in Plano.

It doubt it would make a difference in the neighborhood in which I'm buying, you're right.

But I bet it would make difference in some inner loop neighborhoods, where there can be vast differences from block to block that a "foreigner" wouldn't pick up on.

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It doubt it would make a difference in the neighborhood in which I'm buying, you're right.

But I bet it would make difference in some inner loop neighborhoods, where there can be vast differences from block to block that a "foreigner" wouldn't pick up on.

That was exactly my point - in areas like midtown and the Heights, 2 blocks can make a HUGE difference.

Slightly off topic - what in the residential resale contract protects the buyer if the appraisal kills the financing? Especially if this happens after the options period and financing contingency period have passed?

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what in the residential resale contract protects the buyer if the appraisal kills the financing? Especially if this happens after the options period and financing contingency period have passed?

If you look at the financing section on page 1 (Sec 4A), there is language that says:

If the property does not satisfy the lenders' requirements for the loan(s), this contract will terminate and the earnest money will be refunded to the Buyer.

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If you look at the financing section on page 1 (Sec 4A), there is language that says:

If the property does not satisfy the lenders' requirements for the loan(s), this contract will terminate and the earnest money will be refunded to the Buyer.

Yay! You once again have been helpful and very time saving. Thanks.

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So a few years ago appraisals were a joke (Countrywide was doing drive by appraisals which is what it sounds like). Now banks are freaking out. So appraisers are erring on the low side. If they are having a problem with a apprasial (they cant find comps) instead of working to find out the value they just come in low. For them their is no risk in coming in low but there is a risk in coming in high. We are seeing appraisals below anything that has sold in an area for over 6 years. Appraisers are lazy and coming in low is easy in this environment.

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