HELOC appraisals - why so low?

25 Replies

Hi everyone - is it common for HELOC appraisals to come in lower than conventional mortgage appraisals? Last spring my property appraised for $135k and this past fall it appraised again for $85k. No drastic changes to the community in Chicago that in. What's up with that?

Has anyone had luck with the  HUDA method (Hang Up, Dial Again)?

Thanks,

Jonny

Was the $135k the appraisal upon purchase?

So when you are buying a property, the appraiser has a contract in hand. They start with that price, then work backwards to see if there is justification in the market for that price.  When you are doing a refinance or such, there is no purchase contract setting a starting point.  Also there is no listing agent justifying that price on the new appraisal like there is on a purchase.

Got it. That's helpful. Any way to advocate for a higher appraisal?

Originally posted by @Jonny R. :

Got it. That's helpful. Any way to advocate for a higher appraisal?

My Heloc appraisal was just desktop.  Lender said they will be on the low end and I was fine with that.  I got the heloc just in case, bought years ago and an extra $10k, $20k or whatever in credit didn't matter to me.

The bank offered to order a full appraisal if I wanted to pay for it.  Did someone come out and do a full appraisal?  Did you buy recently and pay retail or something? Value estimate of only $85 on a $135 PP sounds like a turkey operator took someone to the cleaners...  

How long ago did you buy? Did you get a good deal?

Thanks. Bought Feb 2018. Heloc appraisal  (full) was done Nov 2018. Great deal:  duplex, well rehabbed, long term tenants, excellent cashflow, 5 min from proposed site for Obama presidential library and tiger woods golf course.

You can try giving them a document with comps in the area to show market values. If the appraiser doesn't work in your area all the time they may not know how much value certain features add to the property in your area. If you only bought a year ago you can use those same comps. They won't be 100% accurate, but unless some drastic places took place in your market the appraiser will know the price they give shouldn't be too far off. 

I have always given an appraiser a letter of the improvements I made to the property, along with several comps in the area when applying for a refi or LOC. They appreciate it and it works well usually. I'm waiting back on one difficult one right now (fingers crossed for good news).

@Jonny R.   

As you have purchased it recently, it is good idea to the HELOC institution and share the appraisal report when you purchased it. This might help.

Some HELOC lenders would have you pay say $395 or so; to come and do a full detailed appraisal. In that case, the appraiser would also come inside the property. You can even have the realtor who sold the house to provide the comps. You can share that with the appraiser.

Hope this helps. Good luck.

@Jonny R.

When you review the comps used on each appraisal, which one seems to have comps that are more out of line? If you see comps in the latest appraisal that seem way off, I would review both appraisals with your bank and see if they can work with that appraiser. I have had zero success on two attempts to challenge an appraisal in the past, but hopefully your mileage will vary.

You could also try another bank, although that latest appraisal might be public to other appraisers now (not sure how the system operates these days). For once I would like to see an appraiser just own up to it when they don't know the area and choose comps that are drastically out of line!

Originally posted by @Jonny R. :

Got it. That's helpful. Any way to advocate for a higher appraisal?

Half million dollar price range, I had my last HELOC appraisal come in within ~$5k of where I wanted it.

I ran a bunch of comps that included a breakdown of CCCR(1) that did and did not have a certain feature, did median, range, delta, etc, and handed it to the appraiser when he showed up.

CCCR are the things an appraiser will care about:

Close.

Comparable.

Closed.

Recent.

Note that price per square foot is not on that list. No faster way to get an appraiser to throw your data in the trash without even finishing reading it than to have price per square foot anywhere on there. 

@Chris Mason

Thanks - that's helpful. Do you reach out directly to the appraiser or submit this through a lender?

Originally posted by @Jonny R. :

@Chris Mason

Thanks - that's helpful. Do you reach out directly to the appraiser or submit this through a lender?

 LOs aren't allowed to talk directly to appraisers. You hand it to the appraiser in a very low pressure "I'm helping you" way when he shows up in person.

Originally posted by @Chris Mason :
Originally posted by @Jonny R.:

@Chris Mason

Thanks - that's helpful. Do you reach out directly to the appraiser or submit this through a lender?

 LOs aren't allowed to talk directly to appraisers. You hand it to the appraiser in a very low pressure "I'm helping you" way when he shows up in person.

 As agents we do talk with the appraisers, and its an entire skill set on how to work well with the appraiser. Each one is different and our approach needs to be different and tailored to the individual. Is it someone who doesnt want our input, then layoff. Others want to be chatty. Others want us to sell them the house. Basically its just sales skills....read the individual and sell to them the way that works for that personality type.

I always like the guys the best that start the conversation off by saying dont worry, the value is there.

Then there are certain appraisers that are essentially blackballed by some agents. They see that name, they will make sure to pressure the LO to get a different appraiser.

Originally posted by @Russell Brazil :
Originally posted by @Chris Mason:
Originally posted by @Jonny R.:

@Chris Mason

Thanks - that's helpful. Do you reach out directly to the appraiser or submit this through a lender?

 LOs aren't allowed to talk directly to appraisers. You hand it to the appraiser in a very low pressure "I'm helping you" way when he shows up in person.

 As agents we do talk with the appraisers, and its an entire skill set on how to work well with the appraiser. Each one is different and our approach needs to be different and tailored to the individual. Is it someone who doesnt want our input, then layoff. Others want to be chatty. Others want us to sell them the house. Basically its just sales skills....read the individual and sell to them the way that works for that personality type.

I always like the guys the best that start the conversation off by saying dont worry, the value is there.

Then there are certain appraisers that are essentially blackballed by some agents. They see that name, they will make sure to pressure the LO to get a different appraiser.

 Hooman Sultanpour in Oakland. ALL the agents know. Lenders too, because the agents tell us. 

Very helpful. Thanks!

So when you are buying a property, the appraiser has a contract in hand. They start with that price, then work backwards to see if there is justification in the market for that price. When you are doing a refinance or such, there is no purchase contract setting a starting point. Also there is no listing agent justifying that price on the new appraisal like there is on a purchase.

As an appraiser I object. Yes, I have a contract and the "bullseye" that goes with it. But any appraiser worth a **** does not work backwards to hit the price. I search comps by CCC. Or sometimes least of all evils when there are not good comps. Of course nobody wants to overpay so usually the contract price is reasonable and supported by the comps. If that is not the case, I say the deal is DOA, I did not kill it, just pronounce it dead.

When I was staff appraiser at a bank, they used CCC. Close, current, clone.

Close proximity, current / recent closing date, clone / similar as possible. Comps need to be closed sales although many lenders want an extra listing or 2 to show the high side of value. If your sale is at $900k and the same house next door is listed at $800k, that raises questions. For example. Anyway....  ;>)

/soapbox rant

@Jonny R. Did you say this property was in Chicago?? You may want to consider First Midwest Bank. The appraisals are cheap (like free!) and they offer a 6 month introductory rate of 2.99%. I have gotten 3 HELOC's with them and only one came in less than what I expected in 2015.

@Jonny R.

If you don't like what you see don't hesitate to negotiate. I applied for a HELOC last year with chase the first time the appraiser didn't even bother to come in the house. He had done a drive by and had appraised the house at our purchase price and of course never even saw the $40k in updates. I argued with the bank and they sent the guy back and he came up about $30k in value. I disagreed again and they asked me to send some comps myself so I did and they increased the value another 5k whic in was ridiculous so I gave up and applied with wells Fargo. Their appraisal came back at the exact Number I had in mind. Which would be real market value.

So if you don't agree with the appraisal let them know or consider other options.

@Jonny R.

And of course be sure to tell the appraiser the number you have in mind when he/she comes to the property.

That always helps.

Originally posted by @Marzieh Rostami :

@Jonny R.

If you don't like what you see don't hesitate to negotiate. I applied for a HELOC last year with chase the first time the appraiser didn't even bother to come in the house. He had done a drive by and had appraised the house at our purchase price and of course never even saw the $40k in updates. I argued with the bank and they sent the guy back and he came up about $30k in value. I disagreed again and they asked me to send some comps myself so I did and they increased the value another 5k whic in was ridiculous so I gave up and applied with wells Fargo. Their appraisal came back at the exact Number I had in mind. Which would be real market value.

So if you don't agree with the appraisal let them know or consider other options.

 I think it's pretty well established at this point that the banks with the better "quoted" terms/conditions/rates/etc have more conservative appraiser panels. 

IIRC Wells Fargo actually runs their own AMC as a wholly owned subsidiary that they use, so basically they price the rate/terms/risk out where they want, and magically how conservative or liberal the appraisal is just coincidentally always happens to match the risk/reward they wanted from the get-go.

@Jonny R. I’d go to another bank I usually see the opposite. 50k over what I was expecting no appraisal up to 250k at my local credit union.

@Jonny R.

Have you tried other lenders like local credit union? I heard HELOC is not under Fannie Mae, so each financial institutions has their own instructions on HELOC.

I live in Charlotte NC and opened a HELOC with a credit union last year. The process was super smooth. I gave them my comps and estimates on my house. They approved it in 5 days without closing fee or appraisal fee. Actually they never sent any appraiser to my house. I don't know it was just me or they just did it this way, it was my first time doing business with this credit union.

Hope it will help you out.

you can contest it, have damn good comps within 6 mos. also if your old appraisal is within 6mos you can send that as well. maybe they missed something. or reorder another appraisal .. ive switched to a different company that was offering 500$ towards appraisal upon closing so i essentially got my second appraisal free and it came in at right  number that time

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