Appraised Value on Cash Out Refinance Low

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Appraised Value on Cash Out Refinance Low

Joaquin Arizpe
Edinburg, TX · Member since 2015 · 11 posts · 4 votes

I am in the process of Refinance my house to pull some equity and reinvest on RE. The appraisal on the property came low that what I was expecting, after reviewing it realized that for some reasons 1) my house was appraised at $67sq/ft when all the comparables were appraised at $103-$123; 2) mine was appraised on the living area whereas the comparables were on the gross area. I also noticed that the front/back porch and enclosed garage were appraised at $29sq/ft ( considering everything was build as a part of the house by the same construction builder it doesn’t make sense to me) Also: my house was built in 2010 and comparables were 2009-2013 range!

Have you had any similar experiences?

Any thoughts or reasons on why is appraised like that?

Thanks in advance

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

Appraisals on refinances are always more conservative than on a sale. There is no sales price to start the analysis from.

Im not familiar with any place using price per sq foot to price a property outside of Manhattan. And in Manhattan, those are cash purchases with no appraisals. We certainly dont use price per sq foot in the midatlantic.

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  • Jeremy TaggartBusiness Member
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 647 votes
    7y

    @Joaquin Arizpe Every appraiser is going to have a different subjective opinion on the value of the house. Sometimes it is just the luck of the draw with them. When you say that other houses have appraised for amounts higher than yours do you mean to say that they sold for those amounts? And if they did sell for those amounts look at the pictures of those houses and compare them to yours. Do they have more desirable features or updates? More bathrooms? More parking or a garage? You can always challenge the appraisal if you are sure that it's way off. 

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  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    7y

    @Joaquin Arizpe nice to meet a fellow Texan. I'm not sure what type of loan you are receiving but assuming you are receiving a Fannie/Freddie loan then you have the right to file an "Appraisal Reconsideration". The appraisal reconsideration means you can contest the value of the appraisal by showing closer comparable properties than what the appraiser showed. You will need to have access to MLS for this step since you will need to see all the terms of the purchase of the properties (if there were seller concessions, etc.) and in order to see the condition and quality notes (C3, C4, Q4, Q3, etc) So the closer the comparables are to your home in condition, square footage, year built, BR/Ba, ans date sold the better it is for your case.

    And just for a quick info point using comparables that were built around your build date are fine.  But using build dates from 20 years ago is not so fine...unless there are no other comparable to show.

    Hope this helps!

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  • Joaquin Arizpe
    OP
    Edinburg, TX · Member since 2015 · 11 posts · 4 votes
    7y

    @Jeremy Taggart

    Thanks for your time replying. That’s exactly what I meant when I said other houses, one example is my neighbors sold about 8mo ago they used it as the 4th comparable and that house was build by the same builders same time very similar to mine and is over 1000sq/ft smaller than mine and was sold for only $5000 cheaper than mine was appraised. And looking at the other 3 comparables houses are similar but sold at a higher sq/ft value than mine was appraised. I asked the bank to see if we can get a second approved appraiser but said that these are chosen randomly and is against their policy to get a second appraisal.

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  • Joaquin Arizpe
    OP
    Edinburg, TX · Member since 2015 · 11 posts · 4 votes
    7y

    @Andrew Postell

    Yes we are going to present 3 comparables, and the house plans to see if that help. But what doesn’t makes sense to me is that my puse is being appraised at 67sq/ft vs all others on average $103-120!

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y
    Originally posted by @Joaquin Arizpe:

    I am in the process of Refinance my house to pull some equity and reinvest on RE. The appraisal on the property came low that what I was expecting, after reviewing it realized that for some reasons 1) my house was appraised at $67sq/ft when all the comparables were appraised at $103-$123; 2) mine was appraised on the living area whereas the comparables were on the gross area. I also noticed that the front/back porch and enclosed garage were appraised at $29sq/ft ( considering everything was build as a part of the house by the same construction builder it doesn’t make sense to me) Also: my house was built in 2010 and comparables were 2009-2013 range!

    Have you had any similar experiences?

    Any thoughts or reasons on why is appraised like that?

    Thanks in advance

     Hi Joaquin,

    1) If you argue on the basis of price per square foot, any appraiser will simply be politely nodding. Appraisers (& good agents, for that matter) do not use price per square foot as a central metric. It might be done in passing at the very end, but that's after the conclusion was already reached.

    2) Again, use of price per square foot. It's up to the particular home if a specific space is included in gross living area. Typically wonky spaces are treated as a "feature" like a swimming pool or shed, and value can only be given if comps that have this specific feature actually sell for more (same thing for finished basements, which we have threads on a regular basis about... "I put drywall in the basement and the appraiser didn't double the value of my home WTF?!"). You would need to look for other homes with porches and evaluate if they sell for more because they have this feature. 

    I'd suggest throwing out the analysis you have done and start from scratch. Bonk yourself in the head or snap a rubber band against your wrist any time you start thinking of price per square foot; price per square foot only carries weight with consumers trying to fight appraisals, not with appraisers. 

    CCCR. Close, comparable, closed, and recent. That's it. There is no price per square foot. You might have a shot at an appraisal rebuttal, you might not, it's impossible to know since your analysis so far has focused on an irrelevant metric (price per square foot).

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Appraisals on refinances are always more conservative than on a sale. There is no sales price to start the analysis from.

    Im not familiar with any place using price per sq foot to price a property outside of Manhattan. And in Manhattan, those are cash purchases with no appraisals. We certainly dont use price per sq foot in the midatlantic.

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    7y

    We've had low appraisals before. Sometimes we've been able to convince the appraiser they were wrong (but usually only by a little), other times we've convinced the bank to get another appraisal, other times we've had to drop it, ate the appraisal cost and went to another bank to get another loan with another appraiser. 

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  • Jeremy TaggartBusiness Member
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 647 votes
    7y

    @Joaquin Arizpe sounds like you're getting the short end of the stick there my man. Best thing you could do is to show the appraiser solid comps maybe and see if that would help. 

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  • Brendan H.
    Real Estate Agent · Denver, CO · Member since 2015 · 125 posts · 43 votes
    7y

    @Joaquin Arizpe 100% file a rebuttal! If your bank won’t appeal then get a new bank. I’d get a new bank just for the mere fact they’re telling you it’s against their policy to appeal the appraisal. It’s lazy on their part imo. You’re the one that loses, not them. They’re just being conservative (as are a lot of appraisers).

    Even though you’re talking about $/sq ft, it sounds like you have a pretty good idea of what other props have sold for in your area.

    Do your own comps and detail out why the appraiser’s comps were wrong (or the wrong houses to use).

    I just did this three months ago and bumped my appraisal up by 30K on my primary res. All of which I would have had to bring to the table in cash.

    Bottom Line - challenge it!! The more details the better.

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  • Scott Anderson
    Rental Property Investor · AZ · Member since 2018 · 212 posts · 183 votes
    7y

    @Chris Mason

    Not quite it as far as the CCCR comment.

    Appraisers use three models for value.

    They also factor in cost to build/replace.

    They can also use income.

    To the OP; Ask the appraiser what method(s) they used before you figure out how or if you can change their mind. If you’re fighting comps and they aren’t considered as important you’re certain to lose the fight.

    1Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    do you have to refi? what is your current int rate? why not just heloc the equity out instead?

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