Need to know how to dispute an appraisal which came 80k lower than the actual apprais

[Buyan Thyagarajan]

Hi Guys,

I need your advice on a situation. I have a 4 bed 1.5 bath property in Norristown, PA around 2400 square feet.  The original arv when I did the hard money loan was 250k and I got the hard money loan.  I fixed the property added new bath, repainted, refloored and new HVAC units also was added. I got a tenant and trying to do a refinance with lendingone . But the appraiser hired by lending one appraised it for 180k which was shocking. My original  loan itself is 180k and I am really screwed up. I appealed the appraisal with options but the appraiser is not backing down. What can I do now? I will have to put more money to do a refinance which is a horrible situation. Have you guys dealt with a situation like this? Do lenders go with a neutral appraiser which is fair on a property than losing money?

Buyan

[Russell Brazil]

1) Switch lenders

2) have your agent meet the next appraiser 

3) Look into whether either appraisal is mistaken or accurate. 

[Chris Seveney]

@Buyan Thyagarajan

I agree with Russell

How did you come up with your original number?

Did the comps used in the appraisal match location, level of finish and approx square footage ?

[Dee Lewis]

Look at the comps that the appraiser used to come to that number.  Review the original appraisal when you got the hard money loan.  

Other things to consider - what neighborhood is it in?  

Appraising is both an art and a science and Appraisers letting their biases get in the way has been making news more and more.

The best way to determine that is to look at the comps that the Appraiser used, look to see if they accounted for your upgrades (research the average additional value each upgrade adds in that areas).

 Look to see if there are other properties in the area that more closely match your property and are of higher value.

Use this information to dispute.  It is harder for an appraiser to "stick by their assessment" when you provide them hard facts.

If none of this changes, go to another bank/lender.  And if you believe it was bias, you can file a complaint.

[Erik Estrada]

Quote from @Buyan Thyagarajan:

Hi Guys,

I need your advice on a situation. I have a 4 bed 1.5 bath property in Norristown, PA around 2400 square feet.  The original arv when I did the hard money loan was 250k and I got the hard money loan.  I fixed the property added new bath, repainted, refloored and new HVAC units also was added. I got a tenant and trying to do a refinance with lendingone . But the appraiser hired by lending one appraised it for 180k which was shocking. My original  loan itself is 180k and I am really screwed up. I appealed the appraisal with options but the appraiser is not backing down. What can I do now? I will have to put more money to do a refinance which is a horrible situation. Have you guys dealt with a situation like this? Do lenders go with a neutral appraiser which is fair on a property than losing money?

Buyan

 Hey Buyan, 

How did you come up with your numbers? The appraiser is going to look at the most recent sales that are close in distance and features of your property. 

Also are sales declining in your market? If there is a trend in declining sales, I have seen appraisers slash the value, and sometimes the lender will slash the value, even if the appraisal is a higher value. 

Most lender's will use a management company to select their appraisers. They cannot have contact with them directly. 

But sometimes you could get a lemon, and the appraiser might not be the most experienced. 

There are a few options to go about this. 

1. Work with a different lender, get a new appraisal and interview the appraiser when you schedule the appointment. Ask them how long they have been in the area, experience level, and what their views are on the market. If you feel that they aren't qualified, you can ask the lender to request a new appraiser through the AMC.

2. Decide whether it makes more sense paying out of pocket to refinance or sell the property as is. 

3. Depending on your lease agreement term, you could ask your hard money lender to extend the loan (if the rents cover the payment) and sell or refinance afterwards. 

[Doug Smith]

I've seen baseball managers have better luck arguing balls and strikes with an appraiser than I've had success disputing an appraisal...even with great comps to back up my case. I can't recall one in my 32 years where I've had a significant change unless there was something that was really, really missed and we were able to help the appraiser save face when they made the update. Someone above mentioned to either change lenders or convince the lender that you should throw that one out and get another one, but you're gonna have to pay for the second one. That's really the only options I see. I wish you well.