Real Estate Appraisals

[Drekce]

I'm in the middle of selling/buying a house. So far the entire thing has been almost completely derailed by appraisers, and I'm angry enough that I want to do something to fix the problem in general. This is a field that is completely subjective and has almost no one to actually answer to if their work is incorrect or invalid. The banks don't seem to care, and the consumers and real estate agents have absolutely no power to get anything re-evaluated.

On the house that I am selling I had multiple full price offers after one weekend on the market. The potential buyers all said that there is absolutely nothing available that compares to my house in the price range. It is in a really nice neighborhood, has been completely upgraded (including a $30k kitchen put in last year), etc. The appraisal came back $23k low. The agents simply couldn't believe it, and they shouldn't have. Upon further inspection 2 of the three comparables were taken from an undesirable neighborhood nearby mine. The agent actually went to the homes to take pictures. One was in complete disrepair, yet was compared 1/1 with mine because of square footage. I got zero value increase due to the upgrades (kitchen, hardwood floors, etc.).

On the house I am buying, a different appraiser decided to take $30K of value from the house based solely on the neighborhood. This is a very nice neighborhood in a good location, and is in no way different from the neighborhoods where the comparables reside. There was absolutely no reasoning or explanation given for the reduction. I actually asked for a review on that basis and all they did was say that they stand by their initial appraisal. They didn't provide any explanation. As the buyer there was nothing else I could do.

I'm ready to start writing letters to newspapers and State representatives to see if I can get any traction. We live in a world full of data. There is no reason why such subjectivity should be included in this business. It was bad during the bubble, because appraisers would basically just inflate things to make sales happen, and now the overreaction is killing lots of potential deals.

 

[DougK62]

I approve of your rant.

 

[bignateyk]

Wow, that sucks. Every appraisal I've had done for buying/selling has come in at exactly the same price as the proposed sale price.

 

[Tobolo]

+1

Very nice rant.

 

[Hecubus28]

We just bought our house back in October and the appriasial came in almost to the exact dollar amount of our offer. They had to pull the comps out of other nearby less desirable neighborhoods as this was the first time a house was up for sale in the neighborhood in the last four years.

Seemed shady that it came that close to our asking amount.

 

[Drekce]

We just bought our house back in October and the appriasial came in almost to the exact dollar amount of our offer. They had to pull the comps out of other nearby less desirable neighborhoods as this was the first time a house was up for sale in the neighborhood in the last four years.

Seemed shady that it came that close to our asking amount.

This is part of my problem. One appraiser can pull from the shady neighborhood next door and give a credit becuase of the neighborhood, and another will just do straight up comps. It makes zero sense. It would be very easy to have algorithms automatically classify the quaility of neighborhoods to allow for 100% data driven comparisons. The ONLY subjective part of the process would be evaluating condition and itemizing/valuing upgrades. Rigid guidelines could be created to make it easy to select a 1-10 value that then feeds into the overall algorithm.

 

[jagec]

Yup. People complain about Zillow's estimates, but at least they aren't as subjective as appraisals.

 

[Slew Foot]

Wow, that sucks. Every appraisal I've had done for buying/selling has come in at exactly the same price as the proposed sale price.

This, every appraisal Ive ever had has magically come in at the EXACT amount it needed to be

 

[edro]

I agree. Our house is a fully renovated 1800s farm house. There are no comparables.
We tried to refi and the appraisal came back $20k less than we paid for it before renovations.
The comparables were houses without any updates and were very old and not well kept.

I agree with your rant.

 

[edro]

This, every appraisal Ive ever had has magically come in at the EXACT amount it needed to be

That WAS my experience until our refi attempt this year.
I even told him it was a refi and that we just needed it to appraise for a little more than we paid for it, before tens of thousands of dollars in upgrades and renovations.

 

[Dirigible]

My most recent one was like the OP. Lender insisted on some cheap appraiser who didn't know the area and was pulling comps from a shittier neighborhood. Magically, the appraisal came in high enough to get the loan, but not high enough for the lender's best rate.

 

[skagen5555]

Man i hope this doesn't happen to me. Im in the same exact situation. None of the buyers were cash offers or 20% down?

 

[MiniDoom]

The last guy that did my refi appraisal was like " off the record, what amount do you need for your refi?" shocker that it ended up being that amount.
so it helps to be nice to them.

 

[Drekce]

Man i hope this doesn't happen to me. Im in the same exact situation. None of the buyers were cash offers or 20% down?

Nope, I wasn't that lucky.

 

[TXHokie]

Got screwed twice by appraisals when I bought and sell last year. The house I sold had appraisal 5k lower than what the seller offered. It was an instant discount for the buyer since the bank wouldn't loan the higher amount and it was up to us to walk away or try to squeeze cash from the buyer so we took the hit. Then come time to buy a house that was in a nice hood but needed some work. Was expecting the appraisal to be low due to the condition of the house but it miraculously came in at the exact offer price....hmmmm. I've read up on appraisal issues out there and it's really shady. Suppose to be much better now but still seems shady.

 

[SearchMaster]

The last guy that did my refi appraisal was like " off the record, what amount do you need for your refi?" shocker that it ended up being that amount.
so it helps to be nice to them.

How long ago was that? My understanding is that things changed a bit after the housing crash - prior to that it was pretty much "appraise at sale price or above" but now they are more conservative.

 

[Drekce]

Just got the word back on both appeals. No changes. I bet they didn't even look at the information we provided. Even the mortgage reps at both banks said they should have been adjusted, but without the almighty appraiser's word the whole deal is dead. The results of this are that three total homes won't be bought/sold.

Good way to enable an economic recovery...

 

[waggy]

Wow, that sucks. Every appraisal I've had done for buying/selling has come in at exactly the same price as the proposed sale price.

EVERY one of mine has been withing $10. Same with pretty much everyone i know.

Appraisals are a waste of money.

 

[dbk]

Yeah bought a home last year.. appraisal came $9k lower.. we met half-way. I didn't mind it, obviously, but I can understand the ire of sellers..

 

[PricklyPete]

Wow, that sucks. Every appraisal I've had done for buying/selling has come in at exactly the same price as the proposed sale price.

This has been my experience in the past, but at the house I bought recently, the appraisal came in $20k over.

 

[Xonim]

When we bought our house last winter (offer filed 12/22/11, closed 1/27/12), our agent told us not to worry about the appraisals because they all come in at list price regardless. Sure enough, our appraisal came back at our purchase price, down to the dollar. I mean, based on comps in the area, it was about right, perhaps a tad high based on lot size and square footage, although our house was VERY well taken care of as far as yearly maintenance/records and such, and I'm ok with what we paid.

Some friends had a situation where the appraisal was lower than the purchase price, but that was because they went up 9k over list due to multiple offers. To be honest, the place wasn't even worth list price, say nothing to $9k over. It was a townhome, and within the 6 months following their purchase (spring 2010 I believe), there were similar units selling for $30-40k less in foreclosure, $25k less w/ traditional sales.

TLDR: Appraisals are a joke.

 

[bignateyk]

As far as the banks are concerned, the appraisal process really only exists to make sure no funny business is going on with the sale price, and that it isn't grossly over or under valued.

For example, if the buyer and seller knew each other, the seller could list a $100K house for $500K, making a huge profit on the sale. Then the buyer could foreclose on it, split the profits with the seller, and the bank would have to eat a giant loss.

This is usually why appraisals come in at the exact dollar value of the purchase price - because all the bank is doing is making sure its a legitimate sale.

Anything other than that is a joke. As long as it's not a scam, a house is worth what someone will pay for it.

 

[Greenman]

An appraisal for sale is a complete joke. It's just another way to steal a couple of hundred dollars on a home sale.

 

[cbrsurfr]

Last time I refinanced my 1st house the appraiser flat out asked me "where we needed to be". My new house magically appraised for exactly my offer, even though it should have been higher due to it being a short sale and a great neighborhood.

My first house I ended up pulling from the market and renting out because all the dilapidated forclosures around me were selling for 40-60K. I was trying to get 120K and that was with the 60K I put into the house over 6 years...

And zillow is a joke. The house next to me is the same model as mine but MINE has a finished basement, 3 car garage, and a fireplace. My house is shown as worth $215K - the other house $260K. Same square footage, mine just has more upgrades.

 

[Pray To Jesus]

I guess you forgot to "tip" the appraiser. Which I think is not against the law. Double check to be certain.
YMMV