Lots of offers but appraised low
Member since 2024 · 12 posts · 5 votes
Lots of offers but appraised low
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Real Estate Broker · Cleveland, OH · Member since 2023 · 49 posts · 32 votes
1yBEFORE THE APPRAISER ARRIVES:
Did you receive multiple offers and/or over asking price? If Yes, send your best 3 offers to the appraiser prior to their arrival.
For a reconsideration of value (ROV), I suggest the following:
Please review the appraisal for any clerical errors regarding the subject property and comparable sales. Here are a few key points to consider.
• Stronger Comparable Sales: Are there better comparable sales that should’ve been used? This is your best opportunity for a successful reconsideration of value.
• Clerical Errors: Are the square footages, bedrooms, bathrooms, and lot sizes accurately reflected? For the subject property and comparable sales?
• Off-Market Sales: Were any off-market transactions missed? Check county auditor sites or Realist’s public records for this data.
• Adverse Features: Do any of the comps have issues not considered in the appraisal, such as proximity to a high-traffic road, sewer plant, or power lines?
• Recent Sales: Have any new, more relevant comparable sales occurred between the date of appraiser’s visit and now? If so, there may still be a chance to include them in the appraisal report.
• Sales Recency: Did any of the comparable sales close more than three months ago? A time adjustment may be needed for accurate valuation.
• Geographical Competence: Is the appraiser familiar with the area? If they're located two or more counties away, their expertise in the local market may be limited. The lender will likely ask how many appraisals they’ve completed in the area of the subject property. If there are too few, the lender may "throw out" the appraisal.
• Lastly, the appraiser likely stated that the market is "stable," but that is worth contesting. We can likely agree that the market has been "increasing" steadily over the past decade.
And as a last ditch strategy, ask the Buyer to work with a different lender (I'll do their loan if they want) and the new lender will order their own appraisal.
26 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes1y
@Michelle Glover, a year or two ago the appraisal rules changes with regard to things like that. So, I don't think you will be able to challenge that appraisal and get it changed.
How about doing some type of owner finance for the rest?
- Member since 2024 · 12 posts · 5 votes1y
That's a good suggestion. I will definitely think about this option! Thanks, Kevin
- 1yPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
I would say challenge it, but sounds like Kevin mentioned it changed with regards to challenges.. what changed?
The McKernan Group4.958 Reviews - Member since 2024 · 12 posts · 5 votes1y
Hi Peter! We are going to challenge it, but we don’t anticipate the ruling will be overturned. We are looking for a strategy to address the issue during our next appraisal. Thoughts?
- Real Estate Investor · Fountain Valley, CA · Member since 2016 · 10 posts · 1 vote1y
Quote from @Michelle Glover:
Hello everyone!
We’re currently flipping a home in Maple Heights, OH, where most homes are 3-bedroom, 1-bathroom layouts with unfinished basements. To maximize the living space, we worked closely with the city to create egress window codes, allowing us to add an additional bedroom, a beautifully finished bathroom, and a family room in the basement. Our remodeled home has received multiple offers at or near the asking price.
Unfortunately, we've hit an issue with the appraisal. Despite the Ohio Building Code recognizing the basement bedroom as a legitimate bedroom, the appraiser did not include the basement in the general living area (GLA) and didn’t assign much value, if any, to the additional finished space.
Has anyone dealt with this challenge before? Any advice on how to address this appraisal issue would be greatly appreciated!
Hello all! We are flipping a home in Maple Heights, OH. The homes in this area are 3 bedroom and 1 bathroom with full unfinished basements. In order to add living space to the home, we worked with the city to develop egress window codes to add an additional bedroom as well as beautifully finished bathroom and family room. We are received multiple offers at the asking price or slightly under for the remodeled home.
Unfortunately, we have run into a problem with the appraisal. Although the Ohio Building Code states the basement bedroom is a bedroom, the appraiser did not count the basement as general living area (GLA) and did not provide much value, if any, for the additional nicely refinished space.
Does anyone have a recommendation how to overcome this barrier?
Thanks!
Michelle
- Real Estate Investor · Fountain Valley, CA · Member since 2016 · 10 posts · 1 vote1y
Quote from @Sherri Orlando-Dominguez:
Quote from @Michelle Glover:
Hello everyone!
We’re currently flipping a home in Maple Heights, OH, where most homes are 3-bedroom, 1-bathroom layouts with unfinished basements. To maximize the living space, we worked closely with the city to create egress window codes, allowing us to add an additional bedroom, a beautifully finished bathroom, and a family room in the basement. Our remodeled home has received multiple offers at or near the asking price.
Unfortunately, we've hit an issue with the appraisal. Despite the Ohio Building Code recognizing the basement bedroom as a legitimate bedroom, the appraiser did not include the basement in the general living area (GLA) and didn’t assign much value, if any, to the additional finished space.
Has anyone dealt with this challenge before? Any advice on how to address this appraisal issue would be greatly appreciated!
Hello all! We are flipping a home in Maple Heights, OH. The homes in this area are 3 bedroom and 1 bathroom with full unfinished basements. In order to add living space to the home, we worked with the city to develop egress window codes to add an additional bedroom as well as beautifully finished bathroom and family room. We are received multiple offers at the asking price or slightly under for the remodeled home.
Unfortunately, we have run into a problem with the appraisal. Although the Ohio Building Code states the basement bedroom is a bedroom, the appraiser did not count the basement as general living area (GLA) and did not provide much value, if any, for the additional nicely refinished space.
Does anyone have a recommendation how to overcome this barrier?
Thanks!
Michelle
- Real Estate Investor · Fountain Valley, CA · Member since 2016 · 10 posts · 1 vote1y
Hi Michelle,
I would check on the rules started by another poster about rules changed for appraisers and basement bedrooms. If it has not changed you can always pay for another appraisal, nothing says you have to go with one. - 1yZachary DealPro MemberLender · Member since 2023 · 465 posts · 425 votes
100% go for an appraisal dispute. Try and find similar houses with similar basements that have sold in the last 6 months or less in your area. Good luck!
- Member since 2024 · 12 posts · 5 votes1y
Thank you for your response. @Kevin Sobilo, do you happen to have additional information regarding the changes to the rules regarding how basements are appraised?
The asking price for the home is $235,000. We received and accepted an offer for $225,000. Then, the home appraised at $205,000 without counting any additional value for the basement space. The buyer was seeking a conventional loan. We discussed asking for an additional appraisal with the buyer, but the buyer wanted a guarantee that we would close for the newly appraised amount so we let the deal go.
We relisted the property 3 days ago and have since received 2 more offers for the asking price. So far, we have received this advise from appraisers in the Maple Heights area: 1) Attach all offers so the next appraiser can better understand the market value, 2) Provide a letter from the Maple Heights Building Department discussing the addition of the egress window making the bedroom conforming livable space, 3) Provide comps for similar properties sold in the Maple Heights area (these do not have egress windows), and 4) Create an itemized list of improvements and cost for renovations to the property.
We are grateful to the Bigger Pockets community for their advice as well. If you have additional thoughts, let us know!
Kind regards,
Michelle
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes1y
Quote from @Michelle Glover:
Thank you for your response. @Kevin Sobilo, do you happen to have additional information regarding the changes to the rules regarding how basements are appraised?
The asking price for the home is $235,000. We received and accepted an offer for $225,000. Then, the home appraised at $205,000 without counting any additional value for the basement space. The buyer was seeking a conventional loan. We discussed asking for an additional appraisal with the buyer, but the buyer wanted a guarantee that we would close for the newly appraised amount so we let the deal go.
We relisted the property 3 days ago and have since received 2 more offers for the asking price. So far, we have received this advise from appraisers in the Maple Heights area: 1) Attach all offers so the next appraiser can better understand the market value, 2) Provide a letter from the Maple Heights Building Department discussing the addition of the egress window making the bedroom conforming livable space, 3) provide comps for similar properties sold in the Maple Heights area (these do not have egress windows), and 4) create an itemized list of improvements and cost for renovations to the property.
We are grateful to the Bigger Pockets community for their advice as well. If you have additional thoughts, let us know!
Kind regards,
Michelle
It has to do with this issue of GLA (gross living area) and how its calculated and included in the appraisal. Here is an article that discusses it somewhat.
https://www.parealtors.org/blog/appraisal-changes-coming-for...
So, some finished spaces are not not counted as part of the GLA based on a standard, which is fine. I think the general idea is that areas like finished basements, or cape cods with sloped ceilings on the 2nd floor have finished space that is not equivalent in value and use as other finished spaces. So, they should be accounted for separately.
However, they still do need to be accounted for. In your case, I would simply point out that they forgot to give a value for that space. It shouldn't be the same value per sq ft as above ground space, but it should have a value. As a realtor, I always used a 50% valuation as a rule of thumb, but appraisers may have a better method.
If the appraiser pushes back, point out that there are old houses in some markets that have NO rooms with 7' ceilings and therefore 0 sq ft of GLA but OBVIOUSLY those houses are still livable and still have a value. So, non GLA living space still needs to be assigned a value.
- Member since 2024 · 12 posts · 5 votes1y
Thanks @Kevin Sobilo! Great information. We will definitely consider this information as we move forward with our business planning into next year!
- Member since 2024 · 12 posts · 5 votes1y
Quote from @Zachary Deal:
100% go for an appraisal dispute. Try and find similar houses with similar basements that have sold in the last 6 months or less in your area. Good luck!
Thanks, Zachary! Michelle
- 1yJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Michelle Glover:
Hello everyone!
We’re currently flipping a home in Maple Heights, OH, where most homes are 3-bedroom, 1-bathroom layouts with unfinished basements. To maximize the living space, we worked closely with the city to create egress window codes, allowing us to add an additional bedroom, a beautifully finished bathroom, and a family room in the basement. Our remodeled home has received multiple offers at or near the asking price.
Unfortunately, we've hit an issue with the appraisal. Despite the Ohio Building Code recognizing the basement bedroom as a legitimate bedroom, the appraiser did not include the basement in the general living area (GLA) and didn’t assign much value, if any, to the additional finished space.
Has anyone dealt with this challenge before? Any advice on how to address this appraisal issue would be greatly appreciated!
Hello all! We are flipping a home in Maple Heights, OH. The homes in this area are 3 bedroom and 1 bathroom with full unfinished basements. In order to add living space to the home, we worked with the city to develop egress window codes to add an additional bedroom as well as beautifully finished bathroom and family room. We are received multiple offers at the asking price or slightly under for the remodeled home.
Unfortunately, we have run into a problem with the appraisal. Although the Ohio Building Code states the basement bedroom is a bedroom, the appraiser did not count the basement as general living area (GLA) and did not provide much value, if any, for the additional nicely refinished space.
Does anyone have a recommendation how to overcome this barrier?
Thanks!
Michelle
I would try an appraisal dispute! I haven't ran into an issue like this before especially if you followed all of the guidelines for it to be a legal bedroom such as bedroom size, entrance size, egress, closet, etc. Hope all goes well!
Jimmy Lieu, Red 1 Realty4.9122 Reviews - Member since 2024 · 1 post · 2 votes1y
As a general rule of thumb, appraisers don’t count a finished basement toward the overall square footage, especially if the basement is completely below ground level. Whether an appraiser includes basement living space ultimately depends on which state you live in. Your local county assessor’s office determines whether appraisers can count the square footage, finished or unfinished, as part of the GLA. For the states that do allow listings to include a basement in the square footage of the overall living space, there must be an egress and ingress.
- 1yCameron GreenPro MemberReal Estate Agent · Cleveland, OH · Member since 2023 · 73 posts · 46 votes
It sounds like you’ve done a great job adding value to the property with the additional living space, but unfortunately, appraisers sometimes have different criteria for valuing finished basements, especially when it comes to bedrooms or family rooms. One reason could be that not all appraisers consider basement space to be "general living area" (GLA), regardless of the building codes.
To overcome this barrier, you can:
- Provide Documentation: Present the city’s approval for the egress window and any other relevant permits or certificates that show the space was done according to code. This can help demonstrate that the additional bedroom is a legitimate, livable space.
- Comparable Sales: Have your real estate agent provide recent comps for homes in the area with finished basements or similar layouts. Appraisers often rely on comparables, so showing them properties with similar square footage and added living space may help justify the value.
- Get Another Appraisal: If possible, you could request another appraisal or hire an appraiser that specializes in valuing homes with finished basements or unique features. I also have some appraisers’ numbers in the Cleveland area if you’d like a recommendation.
Let me know if you want those contacts, and I’m happy to share. Keep pushing through, as appraisers sometimes need extra help to understand the full value of a well-done renovation.
- Real Estate Broker · Cleveland, OH · Member since 2023 · 236 posts · 84 votes1y
- Big-ups on completing a long-distance flip!
- Getting $235K in Maple HTS is a hefty price tag unless it's a brand-new build.
- We've managed to bump up low appraisals by $20k in Maple HTS, but it really depends on the specifics of the deal.
Good luck!
- 1yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votes
Finished basements do not count towards GLA. This is consistent among ALL appraisers. I try to have this conversation with my borrowers when i see finished basements on the scope of work. You can not comp using houses with above grade GLA that match your square footage if a portion of your sqft is below grade. A buyer might look at basement square footage as GLA and the house could command a higher price but with appraisals, it doesn't work that way.
Freedom Capital Funding, LLC523 Reviews - Member since 2024 · 12 posts · 5 votes1y
Thanks, all! @Cameron Green and @Gladimir Lobo, thank you for the insightful information. It's been a great privilege to work with the City of Maple Heights to establish the egress window codes in alignment with the Ohio Building Codes, so the residents can begin to have safe and beautifully renovated properties when there is such a need. We have multiple full price offers on the home so hopefully we will demonstrate the value to the appraiser, but it has been a learning lesson. Since many residents use these basements as non-conforming bedrooms, it's too bad if these guidelines keep investors from completing this type of renovation and offering safe and affordable homes into the community.
Kind regards,
Michelle
- Real Estate Broker · Cleveland, OH · Member since 2023 · 49 posts · 32 votes1y
BEFORE THE APPRAISER ARRIVES:
Did you receive multiple offers and/or over asking price? If Yes, send your best 3 offers to the appraiser prior to their arrival.
For a reconsideration of value (ROV), I suggest the following:
Please review the appraisal for any clerical errors regarding the subject property and comparable sales. Here are a few key points to consider.
• Stronger Comparable Sales: Are there better comparable sales that should’ve been used? This is your best opportunity for a successful reconsideration of value.• Clerical Errors: Are the square footages, bedrooms, bathrooms, and lot sizes accurately reflected? For the subject property and comparable sales?
• Off-Market Sales: Were any off-market transactions missed? Check county auditor sites or Realist’s public records for this data.
• Adverse Features: Do any of the comps have issues not considered in the appraisal, such as proximity to a high-traffic road, sewer plant, or power lines?
• Recent Sales: Have any new, more relevant comparable sales occurred between the date of appraiser’s visit and now? If so, there may still be a chance to include them in the appraisal report.
• Sales Recency: Did any of the comparable sales close more than three months ago? A time adjustment may be needed for accurate valuation.
• Geographical Competence: Is the appraiser familiar with the area? If they're located two or more counties away, their expertise in the local market may be limited. The lender will likely ask how many appraisals they’ve completed in the area of the subject property. If there are too few, the lender may "throw out" the appraisal.
• Lastly, the appraiser likely stated that the market is "stable," but that is worth contesting. We can likely agree that the market has been "increasing" steadily over the past decade.And as a last ditch strategy, ask the Buyer to work with a different lender (I'll do their loan if they want) and the new lender will order their own appraisal.
- Member since 2024 · 12 posts · 5 votes1y
Quote from @Dalton Summers:
BEFORE THE APPRAISER ARRIVES:
Did you receive multiple offers and/or over asking price? If Yes, send your best 3 offers to the appraiser prior to their arrival.
For a reconsideration of value (ROV), I suggest the following:
Please review the appraisal for any clerical errors regarding the subject property and comparable sales. Here are a few key points to consider.
• Stronger Comparable Sales: Are there better comparable sales that should’ve been used? This is your best opportunity for a successful reconsideration of value.• Clerical Errors: Are the square footages, bedrooms, bathrooms, and lot sizes accurately reflected? For the subject property and comparable sales?
• Off-Market Sales: Were any off-market transactions missed? Check county auditor sites or Realist’s public records for this data.
• Adverse Features: Do any of the comps have issues not considered in the appraisal, such as proximity to a high-traffic road, sewer plant, or power lines?
• Recent Sales: Have any new, more relevant comparable sales occurred between the date of appraiser’s visit and now? If so, there may still be a chance to include them in the appraisal report.
• Sales Recency: Did any of the comparable sales close more than three months ago? A time adjustment may be needed for accurate valuation.
• Geographical Competence: Is the appraiser familiar with the area? If they're located two or more counties away, their expertise in the local market may be limited. The lender will likely ask how many appraisals they’ve completed in the area of the subject property. If there are too few, the lender may "throw out" the appraisal.
• Lastly, the appraiser likely stated that the market is "stable," but that is worth contesting. We can likely agree that the market has been "increasing" steadily over the past decade.And as a last ditch strategy, ask the Buyer to work with a different lender (I'll do their loan if they want) and the new lender will order their own appraisal.
So helpful!! Thank you, Dalton! We are going to follow your guidance. I think the home may go under contract today with a full price offer. The other offers have been near full price as well.
Fingers crossed!
Kind regards,
Michelle
- Property Manager · Orlando, FL · Member since 2023 · 109 posts · 64 votes1y
Quote from @Michelle Glover:
Hello everyone!
We’re currently flipping a home in Maple Heights, OH, where most homes are 3-bedroom, 1-bathroom layouts with unfinished basements. To maximize the living space, we worked closely with the city to create egress window codes, allowing us to add an additional bedroom, a beautifully finished bathroom, and a family room in the basement. Our remodeled home has received multiple offers at or near the asking price.
Unfortunately, we've hit an issue with the appraisal. Despite the Ohio Building Code recognizing the basement bedroom as a legitimate bedroom, the appraiser did not include the basement in the general living area (GLA) and didn’t assign much value, if any, to the additional finished space.
Has anyone dealt with this challenge before? Any advice on how to address this appraisal issue would be greatly appreciated!
Thanks!
Michelle
When I bought my first primary we ran into something similar. The house was a 3/2, 1650 sqft, with 2 car garage. The seller converted one of the garages into a bonus room and it added 300sqft under AC. The appraiser listed it as a 1650sqft, 1 car garage... completely omitting that converted garage space. We had to pay for a 3rd party to review the appraisal and either agree or disagree that it was done correctly. They agreed it was wrong and a new appraisal was ordered and done correctly. I was not in the industry at the time, so I am not exactly sure who that 3rd party was, but I would say there is recourse if the appraisal is fundamentally flawed.
- Member since 2024 · 12 posts · 5 votes1y
Hello, @Chris Rich! Thank you for your response and sharing your experience. This information is great and interesting. If we end up following in your footsteps, I will let you know. Thanks for sharing! Kind regards, Michelle
- Member since 2024 · 12 posts · 5 votes1y
Quote from @Matthew Crivelli:
Finished basements do not count towards GLA. This is consistent among ALL appraisers. I try to have this conversation with my borrowers when i see finished basements on the scope of work. You can not comp using houses with above grade GLA that match your square footage if a portion of your sqft is below grade. A buyer might look at basement square footage as GLA and the house could command a higher price but with appraisals, it doesn't work that way.
Hi @Matthew Crivelli! Thank you for sharing this information with your borrowers. It's definitely been a learning lesson for us.
- Architect · Chicagoland · Member since 2023 · 31 posts · 16 votes1y
@Michelle Glover a suggestion for any future flips. I make sure to be there when the appraiser is visiting the home and print out data on appreciation rates and comps and give him/her a personal opinion on where we believe the home should be appraised at. You could also ask your realtor to do this if you are using one. This has helped me tremendously!
- Member since 2024 · 12 posts · 5 votes1y
Quote from @Michelle Simoni:
@Michelle Glover a suggestion for any future flips. I make sure to be there when the appraiser is visiting the home and print out data on appreciation rates and comps and give him/her a personal opinion on where we believe the home should be appraised at. You could also ask your realtor to do this if you are using one. This has helped me tremendously!
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