Hi, I'm currently in the middle of my second attempt at refinancing out of my FHA but seems as if it has gone south with a low appraisal. I've been trying to free up my FHA in order to be able to use it on a larger property in the near future. A few weeks ago I tried to refi with a recommended lender but it did not work out since the lender would only lend on 75% LTV and I needed the property to appraise at $210k but it came in at $200 which meant I would have to come out of pocket $7k and a 4.8 interest rate compared to my 3.9 in order to convert to a conventional. This did not work for me.
My current lender reached out and said they could beat the previous offer with an 80% LTV and a 4.25 rate if the property appraised at or above $200k it would cover all closing costs and nothing out of my pocket.
I was not too worried since a few weeks ago (6/17/19) it appraised at $200k. Today when I got the appraisal report it came back at $176,000. Talk about off!
Please help! Is there anything that I can do to challenge this appraisal?
Thank you in advance for your help and support
What do you feel like the house is actually worth in its present condition?
In its present condition I believe it’s worth the $200k at which it originally appraised at.
You can let the lender know about the problem you have with the appraisal and they should be able to get another appraisal. If you have the contact information for the appraiser, you can even contact them directly and ask why it’s so much lower than the previous appraisal. Perhaps even sharing the other appraisal with them.
Appraisals can be funny sometimes. Almost like a shot in the dark, you never know where it will land.
@Matthew Dennehy thank you for your advise. After speaking with the lender I was thinking of contacting the appraiser but wasn’t sure if that was a way to go also.
Funny thing is the second appraiser was the same guy who appraised the property when I originally purchased it 16 months ago and after all repairs and upgrades he only appraised it 8k above his initial appraisal.
Look at the comps in both appraisals and see what they look like. It is possible that one home sale is dragging down your appraisal.
From my experience, loan appraisals are typically sort of a "flyover". One solution would be for you to pay for a detailed appraisal. These are done in much more detail and take a lot more factors into account besides square footage and comparables. ie, they'll factor in the age of capex items and so forth. Those are usually pretty accurate and will give you a realistic view of the value. If that comes in higher, you could probably arm yourself with that and negotiate with the lender. Keep in mind everyone's goals. You: want a high appraisal so you can borrow more against the property. They: Want protection for a forfeited loan and the confidence they can be made whole in that event. The bank's appraiser is on the bank's team so they may be skewed a bit in that direction.
@Jon A. the comps that he used were of lower quality compared to the previous.
@John Teachout I understand that myself and the lender want the outcome in their beat interest but I will look into my options. At this moment the lender requested the previous appraisal so I guess I go from there.
Thank you guys for your help!
@Gilbert Lugo to challenge the appraisal, you want very specific detail. For example, you give them the addresses of better comparable properties. Or if yours is higher quality, point out all the specifics. Such as my house has granite counter tops and the comparable does not, so +$1500 to my house. Or my house has a fence so +$5000 to my house. You get the point. Make a line item list with dollar values on each comparable, so it adjusts out to the right value. Unfortunately you can't just say "my house is nicer". It is all in the details and if you are being legitimate, most appraisers will listen.
It could even be more simple in this case, you have an appraisal for $200K, so you could send that in addition to other supporting details.
Bottom line is send out three appraisers to look at the same property and you will get three different values. Appraisals are subjective.
Also, remember that investors are looking to the future for their opinion of value and appraisers are looking toward the past (not the future) for their opinion of value. During this boom, investors have been more right than the appraisers.
Having said that, most appraisers are required by their appraisal organization and state real estate commissions to "fairly" evaluate comparable sales presented by the owner or buyer. So, sometimes you have to do their jobs for them. Go out and hire another appraiser to provide detailed, comparable sales data that match your property. This is usually better than having the new appraiser do a new appraisal because then you have a battle of "who" is right an "who" is wrong, never a good position for the property owner or buyer. By getting detailed, verified comparables from the new appraiser, most appraisers will fairly evaluate them, lest they run afoul of the licensing organization's rules and regulations. But, there is still no guarantee.
@Joe Splitrock thank you for your input. First refi and it’s already going into the books as an experience. I’ll dig in a little deeper into the comps and see what I can find.
Thank you again
@Gilbert Lugo You can ask for a reconsideration of value and provide 3 sold comps that you think best represent your property.
@Account Closed thank you for taking the time to help. I will be combing through the appraisal and asking for a reconsideration.
@Chuck Sutherland I’ve already provided the lender with the previous appraisal which came in right. As I go through the appraisal I have already noticed some discrepancies that I will respectfully be updating the lender with.
@Gilbert Lugo why did you have to order another appraisal? If you had one from 6/19 most lenders will transfer appraisals if it's from a major AMC dated within 60 days.
Since another appraisal was ordered though, you can try to challenge the appraisal.
Pull comps that have sold recently in the area, that justify the value.
Also if you can show evidence of improvements with receipts, they may award extra value for those things that they may have overlooked.
In my experience it’s usually tough to get the appraiser to go much higher, so good luck!
@Gilbert Lugo thats what happens when you dont have your own appraiser.
@Jarod Dudley I ordered another appraisal because the lender insisted on ordering a new one even though I was in communication with them during this time. I asked the lender to use the most recent but they just said that they would pay for one at no cost to me.
@Gilbert Lugo sorry to hear that. Many lenders will transfer the existing appraisal if its recent.
You can challenge them. I just had one that was bank ordered and it came in 15k low I thought. The appraiser called us to explain his comps. My wife is an agent and she gave him a CMA she created. The appraiser had an outlier from a few miles away. He ultimately raised it 9k. It gave us some more room, but basically we'll have to provide 6k more toward rehab. We challenged our last appraisal on a rental and got it up. I'm going to challenge every one from now on, if I think it's low. Good luck.
@Clint Shelley That's great that you were able to get the appraiser to change his opinion of value. That is very tough to do.
@Clint Shelley thats awesome hopefully I get as lucky as you.
You can ask for them to reconsider and provide them with recent sold comps. I usually meet the appraiser at the property with my own comps from the past 6 months, a list of notes on them and also a list of anything I've done to upgrade the property. You gotta put the pressure on them. Appraisers don't make much money, have to go through ridiculous hours to get their license and got cracked down on hard after 08 so unfortunately a lot of them come in low. Appraisers and contractors are the bane of real estate investors existence
@Gilbert Lugo look up the episode of Bp with Andresa she’s a female contractor who challenges appraisals and wins them
I'm in a similar position! House hacking a duplex with FHA....
I’m not quite sure of all the rules and regulations of this and it might vary state by state... I’ve heard here in NC the borrower can not have direct contact with an appraiser on a purchase but they CAN on a refinance. I’m thinking of refinancing (admittedly I haven’t yet) and if I were, I’d have the the appraisal scheduled, email the appraiser a week before with a list of everything that is new on the house and a list of good comps. Then for the appraisal itself, I’d walk around with him/her and point out things. Have both units tidied up, lights on, windows opened, yard cut, spiffed up! Hope this helps. An appraisal is a good time for you to “sell it” and highlight everything good about it, you have to show them it’s truly worth 200k or more! Hope this helps. Good luck