Appraisal came back with 10% different SQFT than listing

[Yasmin Sharbaf]

Hi,

I'm buying a single family house. Listed as 1,566 SQFT. The appraisal came back as 1,419 SQFT (147 SQFT difference). That's almost 10% and I think it's not negligible. 

Need advice and tips on what I should do next? Should I renegotiate? Is it going to affect me when I sell the house down the line and now I have to list it as 1,419 SQFT. Because when I was shipping for houses I was filtering out anything below 1,500 SQFT. 

If seller doesn't agree to reduce price, should I just back out of the deal and try to get my earnest money back?

[Joe Homs]

@Yasmin Sharbaf the first thing you need to do is is find the source of the 1566 sqft. (assessor, owner, another appraiser etc.)  Could your appraiser have been wrong?  We are all human and make mistakes.

Yes, you will have the same issues when you go to sell it.

Good Investing...

[Bruce Woodruff]

Yes, fix it if you can, but as @Joe Homs said, find out who is wrong and who is right. Since the Appraiser will physically measure the house it's doubtful they are wrong...but it's possible.

But the bottom line is - do you love the house? Does it cash flow? Will it appreciate by 200% in 3 years? Can you add on?

Too many things at play here to worry about 147 SF. Not if that neighborhood booms and price per SF doubles...then who cares? You could also ask the seller for a reduction, he's probably not happy about this either....

[Russell Brazil]

There is no standard way to measure sq feet. Get 10 appraisals, you'll get 10 different numbers.

[Chris Seveney]

@Yasmin Sharbaf

As mentioned how did they calculate square footage? Did they go outside face of stud to outside face of stud or did they just measure square footage of each room as that is not correct

Many ways to measure square footage

[Lynn McGeein]

@Yasmin Sharbaf if it’s not new construction, your agent would usually have shown you current tax records including what they list as square footage, especially if that was a known concern of yours. I usually use tax record sq footage in my listings unless seller has professional documentation like appraisal showing otherwise. But standard contracts in my area state that buyer is not relying on stated square footage. So if you’re past the inspection or due diligence contingency period, check with your agent or attorney before deciding as that may not be a reason to exit without being in default.

[Andrew Freed]

@Yasmin Sharbaf - You can fight the appraisal and indicate that the appraisal has a material error and should be revised. I've fought appraisals on this front, the appraiser misclassifying the number of bedrooms in each unit, the square footage, etc. You can always push back on appraisals, which is always smart in my mind. I've successful overturned most appraisals that I pushed back on. Work with your lender on going back to the appraiser, noting material defects with the report, and also pushing back on the comparables that they used. Preferably the one or two properties with the lowest values so you can increase the overall average for the value of the property. I hope this helps! 

[Nathan M kiefer]

We are also a builder as well as str, ltr investor; old school physical measurements and calculate yourself. We have been successful in getting this overturned.

we upload our measure into our takeoff software and check with digitize it and can present that to the bank, appraiser or whatever is conflicted. There is no way to refute afterwards, this is the best way to revert it, of course unless you are wrong about the footage and the footage reported is accurate.

99.99% of the time the inaccurate information is due to a lazy appraiser gathering that information off of some old public information.

[Jay Thomas]

As the appraisal indicates a lesser value, you might discuss a price reduction with the seller. Present the seller with the appraisal report and clarify the discrepancy in square footage. Request a price reduction equal to the discrepancy between the assessed and market values. Appraisers are human and might make mistakes. You can request that the seller obtain a second measurement from an alternative appraiser. You can choose not to purchase the house if the seller refuses to reduce the asking price and you are concerned about the square footage. Check your contract to see if you may return the money if you decide to cancel. To be fair to purchasers, you must list the house with the lesser square footage if you decide to sell it later.Talk to Your Realtor,your realtor can help you figure out what to do next. They know how to handle negotiations and can tell you about the local housing market.

[Bruce Woodruff]

The appraisers I've seen at work always measure the exterior of the finished building, i.e. the outside of the stucco or brick...

Maybe someone else measured the interior rooms as @Chris Seveney said, and now you have 2 numbers floating around.

It actually could be in your favor if you can get the seller to use the same square footage number and apply it to the smaller SF.... :-)