What Would You Do? Appraisal Gone Wrong...

2 Replies

Hi all- so here’s the short end of it... I have a 100+ acre farm in Virginia. I bought it in 2013 as just raw land for a little over $305k. Since that time I’ve put nearly another $200k into it in the form of infrastructure and a 2000 sq ft house (doing nearly all the work myself).

In the past couple weeks I began the process of doing a cash out refi with a local bank to pay off an owner finance note I have on the property and to put an additional $30-40k in landscaping, a barn, and a few other items like front porch decking.

I was hoping the new appraisal would reflect everything I’ve been doing so that I not only have money to do the above, but also in the near future serve as available equity to use as a major down payment on a 16-20 unit apartment building. Heck, the new tax assessment we received for 2018 puts our property over $450k.

Unfortunately the appraisal came in today at just over $330k. To be honest, I’m crushed. This was largely driven by the fact that a neighbor recently passed away and the heirs to his estate did a fire sale of his home and land which totaled very similar in size to mine. This property sold for *surprise*surprise* just over $330k. And it’s a very old and dated house.

I don’t know what to do. Should I proceed with the cash out refi, make the improvements, and then get a non local bank to appraise it to see if the value is changed? I’m thinking non local in the hopes they’ll just pull numbers on comparable properties that size where they’re from and not this dang fire sale situation.  Oh, did I mention the appraiser also owns a local real estate company and sits on the board of the bank I'm trying to do this refi through?  Should I be concerned?  Is that even legal?

Any input would be appreciated!!!! Thanks in advance.



@Josh Deel

If you are very certain that it should have appraised for more, I would try a few options.  First, you can appeal the appraisal that resulted in the $330k.  You should be able to work with your lender to write up the appeal.  I would focus on providing receipts of the improvements you did as well as comps that you have pulled that you believe are good comparisons to your now-improved property.  

If that doesn't work, I would shop around for a new bank and try to get a new appraisal.  Hopefully they don't hire the same appraiser that came back with the $330k value :) . I don't know anything about how farm land is appraised, but I would likely try to work only with banks that do have a lot of farm properties they lend to.

Josh, I'm a commercial/residential appraiser in So CA. In March, I'll mark 40-years as an appraiser. Unfortunately, in this era, you, THE BORROWER has to know as much, if not more that any appraiser about your market area to protect yourself.

First, get a copy of this report - the law says you are entitled to one. Then, get in your car and drive the Comps the appraiser used to decide for yourself how "comparable" they are. Take photos of the Comps, I assume that these Comps are also large acreage properties.That way, you have documentary evidence about the Comparables. 

Since, again these may be large acreage properties, try to get on each property to have a 1st hand look at what amenities they have, or not have. Were the Comps all close to 100-acres? If not, what kind of a land adjustment did the appraiser use? Did he/she assemble land sale comparables to make a market-derived adjustment, or did the appraiser just throw a dart at a land adjustment on the Land Adjustment Dart Board?

Next, If you're not a Member of the local MLS Board, hopefully you have an Agent friend who is. Have this person print out the listings for all of the Comps the appraiser used to compare the listing data with what the appraiser noted in his/ her report. Are their any discrepancies in the data? What did the appraiser miss?

Also have the Agent (or you) print out all comps the appraiser SHOULD HAVE USED. Don't cherry-pick, print out the Comps that are most similar to your home. If any Comps have a low sales price, determine why - bad condition, smaller lot/house, etc.? Note that to the appraiser

With respect to the neighbors house, you definitely need the sale listing for this property. Be sure to get the photos in the listing also. Hopefully this Agent put many photos in this listing, especially the interior. This way, you can show how inferior the condition of this Comp is. Will the Listing Agent verify that this Comp was indeed a fire sale? If so, tell the appraiser to do his/her own verification about the fact this is a "fire-sale" The appraiser should have verified the Comp in the first place, but in any case, if the condition of the property and the fact it was a fire sale is correct, the appraiser SHOULD NOT have placed most weight on this property. 

Good luck with getting an appraised value you can deal with. 

John C. Carlson

Victorville, CA

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