Home appraisals are coming in low, how can we get a fair appraisal with all the foreclosures?
February 16th, 2011 | by admin |I purchased my home 3 years ago in a new development and got a 263000 appraisal. Last month I started the process to refinance my interest only loan..The bank assigned appraiser came and said my house was only worth 208000. Since the house was built we have finished the basement and several other projects totaling around $30000. All the houses in development were built for around $300000. The bank said the appraiser used comparable houses that sold recently.Subtracting the property value (70000) from that total the appraiser is saying my can be rebuilt for $60.a sq. foot which in even today’s market would be impossible. What can we do??
Appraisals have nothing to do with the cost of building your house, it is based solely on what your house will sell for if the bank has to foreclose and sell it to get their money back.
Lots of expensive houses were built when the market boomed. Those houses aren’t worth the cost of materials to build them today. People who bought those houses during the boom have lost their jobs and can’t pay for the houses, so their is more houses available than people who can buy them.
Eventually the house surplus will be bought up and the demand for homes will drive the prices back up above the cost of building them. But there is nothing you can do right now, your house is not worth what it cost to build it. It is simply Supply and Demand.
11 Responses to “Home appraisals are coming in low, how can we get a fair appraisal with all the foreclosures?”
By PJ on Feb 17, 2011 | Reply
You can’t do much about. The market is down, therefore your home will appraise for less.
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By christopher on Feb 17, 2011 | Reply
Welcome to Real Estate 101. Property values fluctuate.Foreclosed homes bring down the value of nearby homes. Even with physical improvements, home values can decrease. Homes values were overinflated a few years ago as well. Good luck.
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By Expert Realtor on Feb 17, 2011 | Reply
Let me educate you on how appraisals are done.
When there is only one or two foreclosures or distressed sales in a neighborhood, an appraisal that includes these is not considered a valid appraisal.
However, when all or the majority of the comps in an area are foreclosures or distressed sales…THIS IS WHAT DRIVES PRICES DOWN.
The appraiser, has no choice to use the comps b/c it’s based on MARKET VALUE.
Have you watched the news? The market is DECLINING.
Money in does NOT equal money out…that is the hardest thing to get homeowners to understand…HGTV further misleads owners into thinking that if they invest $5K, they’ll get $20 back out of it.
There isn’t anything you can do…the banks sent out the appraiser.
Your deal is dead, but it is typical. Most homes are declining in value right now.
PS: Homes that are SELLING are NEVER overinflated.
A home is always worth what a ready, willing and able buyer will pay in an open and competitive market, and closes on that deal.
So homes were NOT overinflated if they were selling…it means the market has changed…that is NOT the same thing.
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By LT on Feb 17, 2011 | Reply
Join the rest of us… my house is now worth a lot less then it was even a year ago.
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By ranger_co_1_75 on Feb 17, 2011 | Reply
Appraisals have nothing to do with the cost of building your house, it is based solely on what your house will sell for if the bank has to foreclose and sell it to get their money back.
Lots of expensive houses were built when the market boomed. Those houses aren’t worth the cost of materials to build them today. People who bought those houses during the boom have lost their jobs and can’t pay for the houses, so their is more houses available than people who can buy them.
Eventually the house surplus will be bought up and the demand for homes will drive the prices back up above the cost of building them. But there is nothing you can do right now, your house is not worth what it cost to build it. It is simply Supply and Demand.
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By goz1111 on Feb 17, 2011 | Reply
As stated the current appraisal price of the house does not considered the cost per square feet to actually build but what the current appraised market to market price
in any down market in regard to assets the market to market value represents the today value of an asset trying to be sold in a down market, so its it more likely artificially low? Sure but that the market, you are in no different position then banks being forced to value assets on a market to market when you have no buyers
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By A D on Feb 17, 2011 | Reply
Sounds like the appraiser used a market value approach. This is very typical in this situation, rather than a replacement approach which is more common for insurance value.
Did you get a copy of the appraisal? If not, ask your lender for a copy, you probably had to pay for it and you are entitled to a copy.
Did the appraiser use "good" comps – recent sales in your neighborhood, or a comparable neighborhood within a couple of miles of your home? Same school district? Similar size, age and amenities? Did any adjustments to the value of the comps look reasonable?
Appraisers are not infallable, but they usually aren’t off by $55,000 (or about 21% from your appraisal at purchase). How much do you owe on the loan? You say it’s interest only, but was your purchase price the full appraised price of $263K?
I don’t know where this property is located, or what your local real estate market is like, so my comment is based on MY market area. We saw closed sales volume drop significantly after August 2007. In addition to our typical slower season (Oct – late Jan of any given year), it was the recognized beginning of the mortgage market meltdown. 2008 was even worse and our typical slower season became our almost dead season. Unlike other areas, though, the actual closed sales PRICES did not plummet, but they did go down about 4% overall in my area. Some areas, more than that.
So, if your area is like mine, it is no wonder that the appraisal came in so low. Yet I believe there is reason to think it may get better. The new programs that should be put into effect with the Stimulus package and the help for home owners, you may find that in a few months you will be able to get a loan that you can live with. And if jobs don’t disappear and the real estate "busy" season is active, well, it might not be a terrible year.
I’m sorry that this isn’t going to work out for you now. But, don’t dispair, things may look up in a few months and you can try again.
Best of luck.
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TX REALTOR
By Pat F on Feb 17, 2011 | Reply
Unfortunately, appraiser use the distressed sales for comparables, and there are more of those all the time. If you’re really wanting to sell quickly and get the real value of the house, consider a lease option sale. You don’t have to worry about picky buyers, appraisers, or agent commisions – and you’ll still control the house.
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http://www.From4Sale2Sold.com
By estielmo on Feb 17, 2011 | Reply
You are GETTING a fair appraisal. You over-paid in a too-hot market and got "creative" in your financing.
You can’t fast-talk and use "what seems right" numbers in real estate. What is is. If you had waited until now to buy you would be paying 208 instead of 263.
You’ll need to come up with the shortfall of 55K plus a decent downpayment of another 20-40K.
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By Pengy on Feb 17, 2011 | Reply
You must be living in a bubble and do not read what is going on in the real estate world and the rest of the US. Face the fact home values have been and are declining in double digit increments dependent upon where you are located homes have lost 30-40% of their value. Add the fact you took an interest only loan which means your principle has most likely gone up leads to why you cannot refinance your home. Sorry the interest only was a very foolish move on your part
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By Crosstown Clay on Feb 17, 2011 | Reply
Dude, welcome to the real world. Without beating you over the head with real estate lessons like the other responders, here are two things:
The price of real estate changes every day
Hold fast; most of us wanting to refi are trying to do it with bad market timing. Try again in 6 months – 2009 is already looking up!
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Appraiser 11+ years