HELP - the appraisal company gave me a super low-ball appraisal

Elizabeth Rose · 2022-05-11T08:55:55-07:00

Hi BP community! I would love some guidance here... I have been working with a credit union to get a HELOC to allow me to tap my equity to buy additional real estate. As a final step, they requested an in-person appraisal to confirm the value of my current residence. The appraiser ended up valuing my property at a good $50K LESS than I know it's worth given other comps in the area. I pushed back on this and requested a re-appraisal - I submitted comps showing what other less desirable condos in my area have recently sold for - but the appraiser is sticking to his estimate (of course he's not going to admit he made a mistake). The credit union has shrunk the loan amount they're willing to go with to match the appraisal. I've told them I'm unhappy with this and requested an appraisal by a NEW company, and even offered to pay for it... but they are saying no - I need to go with the current appraisal or they can't move forward.I'd love any thoughts/feedback/ideas you may have on what to do here. I like this credit union (Bethpage) as they offer 85% LTV on condos while most other lenders only do 80%... but the final loan amount would be less than I could get from other lenders (even at 80% LTV) if these other lenders accept my condo for what I feel it's worth based on comps. The disadvantage here though is that I'd have to start the loan process all over again with a new lender...Thanks in advance for your help!

Andrew FreedBusiness Member

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

4y

@Elizabeth Rose - Sounds like you're backed into a corner. I would search for another small credit union or bank that goes up to 100% HELOCS and try the process with them. If you are really concerned about the appraisal, you can always purchase one to be done for your property prior to starting the HELOC process and provide it to the bank when they request the appraiser. This worked for me, I had the same situation with a HELOC but did a failed refinance a few months back and had a solid appraisal in hand. I provided it to the bank and they upped my appraised amount by $100K.

At the end of the day, there are a ton of local small banks that offer competitive HELOC products. You just need to search and find them. I'd try investor focused local facebook groups and ask there.

[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money

3 Reply

Kevin Luttrell

Lender · Orange County, CA · Member since 2019 · 299 posts · 255 votes

4y

@Elizabeth Rose All you can do is appeal the appraisal results, and if unsuccessful, proceed with the lower value or start over somewhere else. Lenders are usually not willing to order a whole new appraisal unless there are significant and obvious deficiencies/inaccuracies with the appraisal report. In your case it's just your word against the appraisers regarding the value.

I would definitely NOT recommend paying for your own appraisal and then taking that to a new lender and asking them to use it. 99% of banks will require the appraisal to be ordered by one of their own AMCs and will not accept one provided by you.

3 Reply

Andrew FreedBusiness Member

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

4y

@Kevin Luttrell - I disagree, I have seen lenders accept the report as a reference point during the appeal process. I also have witnessed very serious investors do an appraisal on the property before a refinance or sale to have something in their back pocket in case they need to contest the banks appraisal.

[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money

1 Reply

Kevin Luttrell

Lender · Orange County, CA · Member since 2019 · 299 posts · 255 votes

4y

Sure, if OP wants to spend an extra $500-$1,000 on an appraisal that can't actually be used by her bank just to have as a reference point, she can certainly do so. Seems pretty silly to me.

3 Reply

Andrew FreedBusiness Member

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

4y

@Kevin Luttrell - I can understand your hesitancy. It definitely isn't a sure thing.

[email protected]781-964-3200 Podcast Guest on Show 69 Doors from ONE Real Estate Deal Using Other People’s Money

0 Reply

Elizabeth Rose

OP

Rental Property Investor · Various states · Member since 2021 · 55 posts · 34 votes

4y

Thanks for this @Andrew Freed and @Kevin Luttrell - this is really helpful info! Much appreciated.

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Nate Marshall

Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 738 votes

4y

Sometimes you can get them to add a construction credit and then record it at the clerks office. It costs a little extra because you are taxed on this.

1 Reply

Nate Marshall

Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 738 votes

4y

Also COGO Capital offers a CDNA report for under $30.00 and these are pretty extensive. Well worth it.

1 Reply

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

4y

If you are unhappy with it and they won't let you pay for another appraisal, go to another lender and tell them that you are doing so and why.

1 Reply

Que Tran

Real Estate Agent · Scranton PA · Member since 2019 · 93 posts · 98 votes

4y

@Elizabeth Southall

What helps for next time is: write down all of your renovations and the price you paid. $1 spent doesn't = $1 appreciation. But it helps them compare to nicer comps. And attend the appraisal inspection yourself. Give this sheet to them and talk up your upgrades. At the bottom of your sheet, write the amount of what your looking for. So you don't have to say a word. Doesn't hurt to bring them a cold water bottle. Kill them with kindness and they'll take extra time to help you.

1 Reply

Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

4y

There are, more or less, three things you can do (other than just sucking it up and going with the low appraisal):

1) Try to convince the appraiser to increase the appraisal. First, make sure to ask the bank if you can contact the appraiser. Then go ahead and make your case. I have, for example, gotten an appraiser to drop a foreclosure comp and another to include a bathroom in a finished basement. But the increases have been no more than $5-10,000.

2) Convince the bank to get new appraisals. I did this once and have heard of it. In my case, it was obvious the appraiser took into account none of the repairs we did and just appraised them all at our purchase prices so the bank was happy to wave them. A friend of mine told me one bank was willing to get a second round of appraisals but would split the difference, which didn't make a lot of sense. But it's worth asking the bank (you will need to explain why the appraisal is garbage very persuasively).

3) Refinance with another bank. We refinance in groups so this is easy for us. When an appraisal comes in terrible, we usually just drop it from the portfolio and put it in the next portfolio that we will send to one of the other banks we work with. This might not work in your situation, but is something to consider.

Podcast Guest on Show #121

1 Reply

Patrick Britton

Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes

4y

@Elizabeth Rose ok i'd like to dissect this first paragraph and outline just a few things:

"I have been working with a credit union to get a HELOC to allow me to tap my equity to buy additional real estate. As a final step, they requested an in-person appraisal to confirm the value of my current residence." The appraiser ended up valuing my property at a good $50K LESS than I know it's worth given other comps in the area." OH, LESS THAN WHAT 'YOU' KNOW IT'S WORTH? WELL THEN, WHY DID THE PROFESSIONAL EXPERT IN PROPERTY VALUATION ARRIVE AT A DIFFERENT ANSWER? MAYBE YOU'RE THE ONE WHO'S WRONG?

I pushed back on this and requested a re-appraisal - I submitted comps showing what other less desirable condos in my area have recently sold for. DID YOU BRACKET THE SUBJECT AS PER USPAP REQUIREMENTS? HOW DID YOU RECONCILE THE COMPS? IF YOU DONT KNOW WHAT ANY OF THAT MEANS YOU HAVE NO RIGHT TO COMPLAIN ABOUT THE APPRAISAL PROCESS OR THE FINAL OPINION OF VALUE.

But the appraiser is sticking to his estimate (of course he's not going to admit he made a mistake). RIGHT, BECAUSE THERE'S NO WAY YOU MADE THE MISTAKE. HE'S WRONG. YOU'RE ALWAYS RIGHT.

unbelievable.

0 Reply

Issac San Miguel

Lender · Austin Texas · Member since 2022 · 319 posts · 156 votes

4y

I went through a refi last year with a traditional mortgage bank. had the same scenario, first appraisal came back super low, we argued the valuation and ultimately got nowhere.

we decided to start over with a different lender, and got a 2nd appraisal exactly 16 days after the first one was dated, and the valuation was almost $80k more.

sometimes starting over is all you can do.

I personally don’t like helocs and would look at cash out refi instead, or if this is an investment a hml.

1 Reply

Caroline Gerardo

Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes

4y

Throw money burning in the wind paying for your second appraisal. The credit union will never accept an appraisal you order, it's against the law. The time to provide comps, photos, and details was before appraisal was ordered. Most HELOC lenders use AVM 's which are always lower. The only acceptable comps are ones closed with a loan in past three months, not cash. Go to another lender. HELOC rules are getting tighter and many companies pulled out in the past thirty days. Where are you I can recommend based on location. This is owner occupied right?

1 Reply

Stephanie MedellinBusiness Member

Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes

4y

99.9% of lenders will not take a consumer ordered appraisal. The loan officer may look at it and use the comps and data in a dispute, just as they could independently look up that same data and use it in a dispute. I would not waste the money ordering an appraisal outside of the loan process.

Comps for appraisal disputes typically need to be more similar (size, condition, bed/bath count), more recent, and /or closer in location than the comps used. They need to have closed on or before the date of the appraisal, and typically you'll only get one chance to request a reconsideration. Active and pending sales will not count. Did your comps meet those criteria? If so I would push back, but if not, the appraiser really may have chosen the best comps for your property. Again, they need to be closest in size, condition, location, and the most recent sales available. With condos, sales in the same complex would be most similar. If there are comps with the same floor plan those will usually be selected first.

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Stephanie Medellin, Loan Factory58 Reviews

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1 Reply

Elizabeth Rose

OP

Rental Property Investor · Various states · Member since 2021 · 55 posts · 34 votes

4y

Quote from @Caroline Gerardo:

Throw money burning in the wind paying for your second appraisal. The credit union will never accept an appraisal you order, it's against the law. The time to provide comps, photos, and details was before appraisal was ordered. Most HELOC lenders use AVM 's which are always lower. The only acceptable comps are ones closed with a loan in past three months, not cash. Go to another lender. HELOC rules are getting tighter and many companies pulled out in the past thirty days. Where are you I can recommend based on location. This is owner occupied right?

Hi @Caroline Gerardo, thank you for your feedback. Yes, the HELOC would be on an owner-occupied condo in San Diego. Thank you!

0 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

4y

I have experience with a lot of appraisals in San Diego (but few HELOC). I will state that refi appraisals are more conservative than purchase appraisal and not by a few percentage. They will find comps to justify this lower valuation even over other better comps. In addition, the appeal process is filled with subjective determination. I have had mixed success on the appeals. I did basically push one incompetent appraiser out of the San Diego market because his appraisals were so bad he was getting the reputation he deserved (I won 2 large appeals and he left when I was appealing a third which sucked for me). I had two properties appraised recently, one for refinance and one for other purpose. The difference on each was ~10% and 10% on these properties were 6 figure difference.

To address @Patrick Britton sarcastic reply on why I know the value better than the appraiser in my market is that I deal primarily with small multiplex in my market. Typically there are no more than a few of these hitting the MLS in my market in a month. In a large percentage of the cases I was in the comparable at the time of sell. I know the condition far better than the appraiser of the comps having been inside them. I also know the zoning/permits better than the appraiser on some of them because if they passed initial evaluation I looked up the zoning and permits. The appraisers in San Diego do not typically look up the permits. This is most of impact on properties with ADUs. If they are comped at a true multiplex the value is typically significantly higher than if it was comped as a SFR with ADU. Similarly multiplexes with ADU are by rule not financable with F/F loans, but if the appraiser does not verify the permits and how the units were added (i.e. as ADUs) they obtain their financing the same as if all units were not ADUs. SFH without unit permits get comps as quads. I can write a book on it, but I do not know the solution other than to get rid of the most incompetent of the appraisers. Appraisers do not have the time to go into each property. They apparently do not have time to verify permits (under what criteria units were added or that the work was even done with a permit).

To the OP, I fear your property will consistently appraise low when obtaining HELOC or refinancing and that a re-appraisal will not reflect what you are seeing of homes being appraised with an agreed upon negotiated selling price.

I am not saying this is the way it should work. A property should be appraised the same if being sold or refinanced. I am saying from my experience, refinances typically appraise far below the price the property would sell for in San Diego (they appraise more conservatively).

I also recently had a flake appraiser. I had her assigned once before (a little less than a year before this issue) and she got bit by a dog and cancelled out. Not a big deal. She was assigned one of the two properties I needed two appraisals. She stood us up on the initial meeting. She apologized but did not rebate any of the fees which when I require a second visit I get charged (and she did charge me for a second visit because some railings were down at the powder coat on her first visit). She indicated she would do the second needed appraisal. After a couple weeks with no 2nd appraisal we started to call her and we left messages on her voice mail. We called about every 2 weeks and left voicemail each time with no return call. We finally got a return call. She indicated she was moving out of state and did not have time to do the appraisal. I suspect she had the best intention of doing the appraisal but for whatever reason was not getting to it. She should have let us know earlier (it was over 2 months without getting a reply from her).

Like many professions there are good appraisers and poor appraisers, but my experience is even the good appraisers appraise refinance homes conservatively (but find decent comps to justify their appraisal).

Good luck

1 Reply

Elizabeth Rose

OP

Rental Property Investor · Various states · Member since 2021 · 55 posts · 34 votes

4y

Quote from @Dan H.:

I have experience with a lot of appraisals in San Diego (but few HELOC). I will state that refi appraisals are more conservative than purchase appraisal and not by a few percentage. They will find comps to justify this lower valuation even over other better comps. In addition, the appeal process is filled with subjective determination. I have had mixed success on the appeals. I did basically push one incompetent appraiser out of the San Diego market because his appraisals were so bad he was getting the reputation he deserved (I won 2 large appeals and he left when I was appealing a third which sucked for me). I had two properties appraised recently, one for refinance and one for other purpose. The difference on each was ~10% and 10% on these properties were 6 figure difference.

To address @Patrick Britton sarcastic reply on why I know the value better than the appraiser in my market is that I deal primarily with small multiplex in my market. Typically there are no more than a few of these hitting the MLS in my market in a month. In a large percentage of the cases I was in the comparable at the time of sell. I know the condition far better than the appraiser of the comps having been inside them. I also know the zoning/permits better than the appraiser on some of them because if they passed initial evaluation I looked up the zoning and permits. The appraisers in San Diego do not typically look up the permits. This is most of impact on properties with ADUs. If they are comped at a true multiplex the value is typically significantly higher than if it was comped as a SFR with ADU. Similarly multiplexes with ADU are by rule not financable with F/F loans, but if the appraiser does not verify the permits and how the units were added (i.e. as ADUs) they obtain their financing the same as if all units were not ADUs. SFH without unit permits get comps as quads. I can write a book on it, but I do not know the solution other than to get rid of the most incompetent of the appraisers. Appraisers do not have the time to go into each property. They apparently do not have time to verify permits (under what criteria units were added or that the work was even done with a permit).

To the OP, I fear your property will consistently appraise low when obtaining HELOC or refinancing and that a re-appraisal will not reflect what you are seeing of homes being appraised with an agreed upon negotiated selling price.

I am not saying this is the way it should work. A property should be appraised the same if being sold or refinanced. I am saying from my experience, refinances typically appraise far below the price the property would sell for in San Diego (they appraise more conservatively).

I also recently had a flake appraiser. I had her assigned once before (a little less than a year before this issue) and she got bit by a dog and cancelled out. Not a big deal. She was assigned one of the two properties I needed two appraisals. She stood us up on the initial meeting. She apologized but did not rebate any of the fees which when I require a second visit I get charged (and she did charge me for a second visit because some railings were down at the powder coat on her first visit). She indicated she would do the second needed appraisal. After a couple weeks with no 2nd appraisal we started to call her and we left messages on her voice mail. We called about every 2 weeks and left voicemail each time with no return call. We finally got a return call. She indicated she was moving out of state and did not have time to do the appraisal. I suspect she had the best intention of doing the appraisal but for whatever reason was not getting to it. She should have let us know earlier (it was over 2 months without getting a reply from her).

Like many professions there are good appraisers and poor appraisers, but my experience is even the good appraisers appraise refinance homes conservatively (but find decent comps to justify their appraisal).

Good luck

@Dan H. thanks for this info - it's helpful to know that appraisals are generally lower than the recent sales of comparable properties in the area. In this case, other condos in my complex with the exact same floor plan & square footage but in much less desirable condition and without views (I have an amazing view) are selling for 15% more than my appraisal. Any additional thoughts on that?

0 Reply

Brian LarsonPro Member

Investor · San Jose, CA · Member since 2018 · 313 posts · 230 votes

4y

@Elizabeth Rose - I had the same experience with my own local credit union (Golden1) recently. I canceled the loan and found someone else.

The new appraiser was better but still overly conservative. I am currently using alliantcreditunion.org. They are a huge online-only group and they loan up to 90% of home value. If you are looking for an alternative, try them.

Also, as it should be clear on this thread, appraisers can't be bargained with. Most of my real estate clients have had similar experiences over the years. @Patrick Britton - Has comically proven why it is a waste of your time to discuss comps with them and make logical arguments.

@Patrick Britton - As a realtor, I tried your suggestion about USPAP and other similar tactics in the past. It goes nowhere and is a waste of time because appraisers never admit mistakes.

1 Reply

Dave Skow

Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes

4y

@Elizabeth Rose-1) depending on your needed timing -consider closing on the heloc with the low appraisal and then look for a new heloc to replace this heloc 2) locate another bank / lender that can offer a 85% or higher HELOC and begin the process from scratch

0 Reply

Kris Lai

Investor · Daly City, CA · Member since 2013 · 29 posts · 4 votes

4y

@Brian Larson How was your experience with Alliant CU? Which HELOC product did you end up choosing? Similar to @Elizabeth Rose I'm looking to tap into my equity on my primary residence here in the Bay Area in hopes to fund my next purchase. I've got quite a bit in equity but it seems Alliant charges $1000 for lines above $250k and I'm hoping to max at 80-90% - wayyy above the $250k mark. Silly me didn't take cash out when i refi'd in 2020 at 2.75% - regretting my decision big time.

0 Reply

Elizabeth Rose

OP

Rental Property Investor · Various states · Member since 2021 · 55 posts · 34 votes

4y

@Kris Lai I ended up withdrawing my loan application and went with Alliant Credit Union instead. Thanks for the great suggestion, @Brian Larson! Alliant immediately approved me for a much larger loan than the previous lender... fingers crossed I don't run into the same issue with regards to a last minute request from underwriting to have an in-person appraisal that results in a lowball valuation. I remain positive that everything will work out!

1 Reply

Kris Lai

Investor · Daly City, CA · Member since 2013 · 29 posts · 4 votes

4y

oh wow that's awesome news! congrats to you. i think with how fast values are rising, there's a good chance your value has gone up as well, which should help any last minute valuations.

0 Reply

Brian Garlington

Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes

4y

As others said, with how fast properties are still going up in value it worked out for you.

0 Reply

Brian LarsonPro Member

Investor · San Jose, CA · Member since 2018 · 313 posts · 230 votes

4y

@Kris Lai - My experience has been good. I recommend them. Also, I paid the fee. In the grand scheme, it is a small price for access to capital.

@Elizabeth Rose - Good to hear that your experience is positive so far. Good luck with your future plans.

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HELP - the appraisal company gave me a super low-ball appraisal

HELP - the appraisal company gave me a super low-ball appraisal

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