Appraisal / Refinance Troubles - Need Advice!

[Nathan Faucett]

Hi -

My wife and I bought a 2700 square foot house (living space) in June of 2019 for $235k in Greensboro, NC (Zip Code:27410). About 1000 SF of that was a below grade, walk-out basement that was in really rough shape. It had 1 bedroom, 1 bathroom, 1 small office, and was completely outdated and gross (Acoustic tile painted black, painted wood-panelled walls, nasty dog-smelling carpet, etc)

We put about $30k into renovating it - It now has 2 bedrooms with new walls, drywall ceilings, a full kitchen, completely new bathroom, new light fixtures, etc - it is essentially a luxury condo that we are now househacking with.

We sought a refinance in July 2019 and an our appraisal came back really low - only $250k. One of the main reasons for this was that time was no "Date of Sale/Time" adjustments made even though the comps went under contract in May 2020, December 2019, and February 2020. Based on form 1004MC2 - Market Conditions Addendum to the Appraisal Report - Median Comparable Sale Price increased from $207,500 to $231,500 over the past year - an 11.6% increase! If you go on Zillow and blindly look at my zip code, the change from September 2019-August 2020, it goes from $248,000 to $262,000 - an 5.6% increase!

We have challenged this appraisal and our bank has told us that we can pay $300 (a $250 discount) for the same appraiser to add new comps (and there are much better comps now), but he seems unwilling to make any changes based on "Date of Sale/Time" OR we can pay $550 for a brand new appraisal to be done.

Is this typical? What would you recommend doing? Why? Any other advice that you might want to provide?

Thanks in advance,

Nathan

[Forrest Faulconer]

Originally posted by @Nathan Faucett:

Hi -

My wife and I bought a 2700 square foot house (living space) in June of 2019 for $235k in Greensboro, NC (Zip Code:27410). About 1000 SF of that was a below grade, walk-out basement that was in really rough shape. It had 1 bedroom, 1 bathroom, 1 small office, and was completely outdated and gross (Acoustic tile painted black, painted wood-panelled walls, nasty dog-smelling carpet, etc)

We put about $30k into renovating it - It now has 2 bedrooms with new walls, drywall ceilings, a full kitchen, completely new bathroom, new light fixtures, etc - it is essentially a luxury condo that we are now househacking with.

We sought a refinance in July 2019 and an our appraisal came back really low - only $250k. One of the main reasons for this was that time was no "Date of Sale/Time" adjustments made even though the comps went under contract in May 2020, December 2019, and February 2020. Based on form 1004MC2 - Market Conditions Addendum to the Appraisal Report - Median Comparable Sale Price increased from $207,500 to $231,500 over the past year - an 11.6% increase! If you go on Zillow and blindly look at my zip code, the change from September 2019-August 2020, it goes from $248,000 to $262,000 - an 5.6% increase!

We have challenged this appraisal and our bank has told us that we can pay $300 (a $250 discount) for the same appraiser to add new comps (and there are much better comps now), but he seems unwilling to make any changes based on "Date of Sale/Time" OR we can pay $550 for a brand new appraisal to be done.

Is this typical? What would you recommend doing? Why? Any other advice that you might want to provide?

Thanks in advance,

Nathan

How much information do you have of the comps in your area? In our area, Appraisers like to see the last 6 months of sales within a mile. Are you able to see pictures and details of the comps to know for sure they truly are "comparable?" Is your basement conforming and was therefore counted in the square footage? 

Perhaps you could have a savvy real estate agent run some more comps for you to ensure you are justified? Could save you some money!

Forrest Faulconer