I had a property appraised in April of 2020 and then again in January 2021 to refinance. Between the two I converted the back half of the attached 4 car garage to a livable rec room/addition (approx 500 sq/ft) and had the exterior of the house re-painted/landscaped. The new appraisal valued the home $10,000 less than the appraisal in April of 2020. Based off appreciation/market alone without any improvements the house should increase in value ~2%.
I am looking for advise on what investors do when they do not agree with the appraisal of a property. Do banks re-adjust appraisals with additional comps/info provided to them, pay for a second appraisal?
Hi Jake, I had this happen to me where the appraisal came in 10k less than the payoff when I tried to refi. My broker went back to the appraisal co and submitted a dispute request. Come to find out, he missed 2 homes that sold on the same street as mine for 40k more than mine, so we got to bump mine up 45k and everything was fine after that. So to answer your question: You would have to put a dispute request in and try to find your own comps to refute his. I did not have to pay anything to dispute the original appraisal.
Thank you Bob!
Had an issue where our rehab came in WAY low. In our case they forgot to account for ~1500 sqft shop with full bath attached to the garage (they also messed up some other minor things). The broker submitted a dispute and the appraiser added some flat amount. It should have been higher, but it was enough to get a ReFi. Just have some data/info in hand when you send in the dispute.
Thank you Bruce!
@Jake Tilleson Here's a possibility: the removal or reduction of an attached 4-car garage reduced the value significantly more than the additional 500 square feet of extra space. how to test this idea? Are large garages common for properties in your vicinity? If all the comps have larger garages, and yours in now smaller, than will impact value significantly.
Here's another possibility: for refinances appraisers are trained to be more careful with valuing "improvements." In other words, they are careful not to overvalue work done to a property.
And here's one more: refinances don't have a "contract price" associated with them. So unless the appraiser gets a sense of what others (including realtors) think a property is worth, they will be extra cautious and likely undervalue
Lastly, no two appraisals will result in the same value. Unfortunately, appraisers aren't trained the same which means that appraisers will consistently end up with different results, despite the fact that they are all looking at the exact same data.
You can file a complaint with your state's regulatory body (for negligence and incompetence) but if you're going to dispute the value you'll need to present facts and supporting evidence that even the strictest appraiser couldnt argue with.
@Jake Tilleson , in the past, I simply went to the loan officer I was working with. You should be prepared with recent comps that support your value.
In my experience the dispute was fairly simple, but I had comps available that, in my opinion, should have been used. There were more recent sales, which the appraiser used, but these comps were all severely outdated, and lack valuable features our house has. The appraiser chose not to use the fully renovated property less than 1/4 mile away because it sold 4 months prior, where the other comps were all sold within the previous couple months. The bank agreed with our opinion and increased the value they would lend against quite significantly.
Beyond a valuation dispute handled within the lender, you could dispute and ask for a new appraisal. Most banks will allow for a second appraisal, in my experience, and either use the higher of the two or an average.