House appraisal in insane market

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BarbBrooklyn
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House appraisal in insane market

Post by BarbBrooklyn »

My daughter is attempting to buy a house in this insane COVID market; NYC real estate is always nuts, but COVID has added new level of crazy.

Asking price of home was 1.8M. Bargained down to 1.65 something; appraisal came in at 1.485.

How does one challenge this? She is a smart cookie and likely already has a plan in place but I would like the sage advice of you smart people.
Last edited by BarbBrooklyn on Sat May 01, 2021 7:09 am, edited 1 time in total.
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runner3081
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Re: House appraisal in insane market

Post by runner3081 »

You are going to be hard pressed to challenge that. This is what happens in markets like this. What is your realtor doing RE: this?

A few solutions:
1) Seller drops price
2) You pony up a higher down payment to cover the gap
3) You and seller meet in the middle

In our current house, bought 8-years ago, we went with option 3 on a 18k difference.
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BarbBrooklyn
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Re: House appraisal in insane market

Post by BarbBrooklyn »

Thanks, Runner. I am hoping that one of these options works out. Both her dad (my ex) and I have some dry powder that we can float to her.
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59Gibson
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Re: House appraisal in insane market

Post by 59Gibson »

Wow. I didn't know NYC was experiencing the pandemonium this time like some areas. I heard prices and rents were going down with the Covid flee.?? Many areas of the country buyers are eating the diff between appraised and purchase price.
WhyNotUs
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Re: House appraisal in insane market

Post by WhyNotUs »

Appraisers are not going to chase the latest monthly increase in values after the train wreck of 2009. Their latitude was decreased and exposure increased for good reason IMO.

Many people are in the same situation. For those with 20% down, it may become 10%. If the buyer is not bringing much cash to the table, then the deal may die as right now seller are not feeling like adjusting prices to appraisals in hot markets.
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Nyc10036
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Re: House appraisal in insane market

Post by Nyc10036 »

This happened to someone my mother knows in NJ.
The buyer was only able to get mortgage for the appraised value.
My mother's friend was the seller.
I think the two parties met in the middle with the buyer paying the seller cash.
Lexx
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Re: House appraisal in insane market

Post by Lexx »

As a buyer I would have serious concerns about the asking price if the appraisal came back so low. That tells you that folks are chasing the market. If this were the stock market, I bet most advisers would tell you to never chase a stock.
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Re: House appraisal in insane market

Post by AerialWombat »

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vanbogle59
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Re: House appraisal in insane market

Post by vanbogle59 »

My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
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8foot7
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Re: House appraisal in insane market

Post by 8foot7 »

vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
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vanbogle59
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Re: House appraisal in insane market

Post by vanbogle59 »

Just heard the builder is challenging the appraisal.
They don't want someone telling their customers their new homes aren't worth their asking price.
I wonder what happens now?
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vanbogle59
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Re: House appraisal in insane market

Post by vanbogle59 »

vanbogle59 wrote: Wed Apr 14, 2021 3:42 pm Just heard the builder is challenging the appraisal.
They don't want someone telling their customers their new homes aren't worth their asking price.
I wonder what happens now?
10 days till close. The builder still reporting that they are challenging the appraisal and expect it to change.
Very exciting.
Glad it's not my money.
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cchrissyy
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Re: House appraisal in insane market

Post by cchrissyy »

The appraisal gap issue already described is common in hot markets and over-asking prices.

It doesn't really fit with somebody buying a place below list price. I see this as two red flags.
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vanbogle59
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Re: House appraisal in insane market

Post by vanbogle59 »

cchrissyy wrote: Tue Apr 20, 2021 9:06 pm The appraisal gap issue already described is common in hot markets and over-asking prices.

It doesn't really fit with somebody buying a place below list price. I see this as two red flags.
Just to be clear, when they signed and set the price (10 months ago), the market wasn't anywhere near this hot.

Comps taken from 2 years ago would all be substantially lower than what they bought into.
But comps taken from the last 6 months would all be substantially higher than what they bought into.
Any deal struck today would literally be incomparable. Probably 25% year over year.

And, it's a brand new, giant, half-built-out (and currently wait-listed) subdivision. So pricing is relatively transparent. Everybody knows what their neighbors paid (more or less).

But the power lies with the appraiser. At least so far.
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unclescrooge
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Re: House appraisal in insane market

Post by unclescrooge »

vanbogle59 wrote: Tue Apr 20, 2021 9:15 pm
cchrissyy wrote: Tue Apr 20, 2021 9:06 pm The appraisal gap issue already described is common in hot markets and over-asking prices.

It doesn't really fit with somebody buying a place below list price. I see this as two red flags.
Just to be clear, when they signed and set the price (10 months ago), the market wasn't anywhere near this hot.

Comps taken from 2 years ago would all be substantially lower than what they bought into.
But comps taken from the last 6 months would all be substantially higher than what they bought into.
Any deal struck today would literally be incomparable. Probably 25% year over year.

And, it's a brand new, giant, half-built-out (and currently wait-listed) subdivision. So pricing is relatively transparent. Everybody knows what their neighbors paid (more or less).

But the power lies with the appraiser. At least so far.
When I wanted a HELOC on my previous home, the appraisal came in 15% lower than expected. To be fair, it was a subdivision of custom homes which made it more difficult.

I submitted a spreadsheet of recent sales, distance from my house, and cost per sq ft. I also noted special circumstances such as being in rehab-ready condition or on a busy street. Within 48 hours they adjusted the price up to the expected amount.
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vanbogle59
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Re: House appraisal in insane market

Post by vanbogle59 »

unclescrooge wrote: Tue Apr 20, 2021 9:49 pm I submitted a spreadsheet of recent sales, distance from my house, and cost per sq ft. I also noted special circumstances such as being in rehab-ready condition or on a busy street. Within 48 hours they adjusted the price up to the expected amount.
This is the route the builder, the builder's finance company and my son are pursuing.
Let's hope they have the same appraiser you did.
corp_sharecropper
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Re: House appraisal in insane market

Post by corp_sharecropper »

Call me crazy but I don't see a problem with an appraisal coming in below a sharp uptick in prices. Does this sharp uptick seem real & sustainable? Would you yourself lend money based on appraisal done right now that "fits" with this unusual/unique spike in real estate? I wouldn't, I think something closer to a moving average (like a 200 day SMA in equities), smoother, is a more reasonable way than to just think a house is 100-freaking-percent certainly exactly worth what some guy down the block just paid for a similar house 2 weeks ago. That just doesn't make sense if you take self interest out of the equation. If a house is really worth X it will eventually appraise at X, but maybe not ahead of schedule just b/c John Q inherited some money and overpaid for a house down the lane because he was desperate during a global pandemic.

ETA: I recently refinanced and our appraisal came in absurdly high. I would never pay that amount for my own house and I doubt I could get that much. Obviously I wasn't going to complain or anything. I'm very suspicious the appraisal is highly influenced by the refi broker. In the process of opening a new HELOC, should be interesting to see how two independent appraisals done 1 month apart turn out.
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Watty
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Re: House appraisal in insane market

Post by Watty »

Lexx wrote: Wed Apr 14, 2021 3:15 pm As a buyer I would have serious concerns about the asking price if the appraisal came back so low. That tells you that folks are chasing the market. If this were the stock market, I bet most advisers would tell you to never chase a stock.
+1

It went under contract for $100K less than asking an appraised way low.

It sounds like there is no rush to buy there.
dboeger1
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Re: House appraisal in insane market

Post by dboeger1 »

The funny thing is that even high appraisals can be red flags to interested parties such as lenders. My wife and I bought a home last year, and it was early enough that it was still a fairly uncertain market with very few comps and nowhere near as hot as now. We ended up scoring a relative "deal" (I still consider it expensive, but again, nowhere near what homes are going for just a few months later) on a home that had blatant listing errors which probably filtered out substantial competition. Everything was going great until our appraisal came in well above our agreed price. Funny enough, the lender saw that as a red flag and delayed our loan which pushed our closing date back a few days past our original contract date. Thankfully it didn't cost us any extra, but I just thought it was odd that the lender didn't trust the appraisal value from the appraiser they hired because it came in high. In the end, the appraiser just ended up revising the appraisal down to the purchase price, which is pretty pathetic if you ask me, but whatever.

Not long after that, my father bought a home in a completely different part of the country. He put in an initial offer below the asking price, and the sellers didn't accept, so he ended up negotiating a price somewhere in between those figures because the home needed some work. The appraiser then came along and tried to more or less rubber stamp the agreed price, but accidentally wrote down my father's original lower offer amount as the appraised value, which was about $5k less than they had agreed to. The seller tried to get the appraiser to revise it but he wouldn't. They ended up just taking the loss and my father saved another $5k due to the appraiser's error.

I don't mean to criticize the profession as a whole because they're probably good, honest people that follow guidelines, but appraisers sure do wield a lot of power in sometimes silly ways.
VoiceOfReason
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Re: House appraisal in insane market

Post by VoiceOfReason »

8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
Agreed. It’s the definition of market value! Especially when there were multiple offers around the same price for the house.

I experienced a bad appraisal on a house purchase recently in a hot market. We challenged the appraisal bc they ignored two recent sales. They came up a little after the challenge, but still way off. The sellers had no interest in moving price in this market and suggested we use a different lender to get a new appraisal. I didnt want to do that bc of the ridiculously good rate I was getting. Took a step back, restated that a house purchase is not an investment, the amount of $ in question over my lifetime net worth is negligible, that I’ve saved/invested well my entire life for a moment like this so that a bad appraisal doesn’t blow up my deal and that when I go to sell in 10+ years this will not be an issue. So I put more $ down.
chw
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Re: House appraisal in insane market

Post by chw »

runner3081 wrote: Wed Apr 14, 2021 12:35 pm You are going to be hard pressed to challenge that. This is what happens in markets like this. What is your realtor doing RE: this?

A few solutions:
1) Seller drops price
2) You pony up a higher down payment to cover the gap
3) You and seller meet in the middle

In our current house, bought 8-years ago, we went with option 3 on a 18k difference.
+1, or the buyer walks away- which might not ne a bad thing. Sometimes as a real estate market begins to cool, appraisals may be the leading indicator to reveal what is truly going on in the market. A soft market will take several quarters to show up, but will sometimes start with wide gaps in appraisals such as this.

Appraisers are trained professionals, and generally will provide a value that is accurate to within 5% to a properties true value. On a purchase transaction, if the appraiser feels the sale price of the home falls within that 5%, he will usually support the sale price on the appraisal. The fact that there is a nearly 20% gap would be setting off warning bells to me.
inbox788
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Re: House appraisal in insane market

Post by inbox788 »

Too bad you can’t use that appraisal as your property tax basis. They use the sales transaction (i.e. market price). If you look at Zillow estimates, they’ll make a similar sudden adjustments after a sale event. Come back a month later and the same appraiser might do the same thing after all the ink dries.

That low appraisal might help existing homeowners who want to lower their tax, but chances are their basis is below. Things aren’t going to settle anytime soon until the bubble pops or deflates, and everything, not just the housing market and appraisal stabilizes.
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Re: House appraisal in insane market

Post by 60B4E24B »

chw wrote: Wed Apr 21, 2021 4:50 am
runner3081 wrote: Wed Apr 14, 2021 12:35 pm You are going to be hard pressed to challenge that. This is what happens in markets like this. What is your realtor doing RE: this?

A few solutions:
1) Seller drops price
2) You pony up a higher down payment to cover the gap
3) You and seller meet in the middle

In our current house, bought 8-years ago, we went with option 3 on a 18k difference.
+1, or the buyer walks away- which might not ne a bad thing. Sometimes as a real estate market begins to cool, appraisals may be the leading indicator to reveal what is truly going on in the market. A soft market will take several quarters to show up, but will sometimes start with wide gaps in appraisals such as this.

Appraisers are trained professionals, and generally will provide a value that is accurate to within 5% to a properties true value. On a purchase transaction, if the appraiser feels the sale price of the home falls within that 5%, he will usually support the sale price on the appraisal. The fact that there is a nearly 20% gap would be setting off warning bells to me.
What is a properties "true value"?
SlowMovingInvestor
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Re: House appraisal in insane market

Post by SlowMovingInvestor »

Flannelbeard wrote: Wed Apr 21, 2021 7:02 am
In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.
I think appraisers have a thankless job (although they do get well paid for it!)

After the housing crash, they were blamed for overappraisal of properties. Now they're being blamed for under appraisal. I can understand their reluctance to price properties that may be temporarily high because of COVID/low rates and then getting blamed again if prices fall.
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Watty
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Re: House appraisal in insane market

Post by Watty »

60B4E24B wrote: Wed Apr 21, 2021 6:42 am What is a properties "true value"?
It is important to remember that when you are financing a mortgage the purpose of the appraisal is to determine a price that the lender can feel confident that they can sell the house for in a foreclosure. That may be different than what a seller and buyer would agree on if they were under no pressure.
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8foot7
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Re: House appraisal in insane market

Post by 8foot7 »

Flannelbeard wrote: Wed Apr 21, 2021 7:29 am
SlowMovingInvestor wrote: Wed Apr 21, 2021 7:18 am
Flannelbeard wrote: Wed Apr 21, 2021 7:02 am
In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.
I think appraisers have a thankless job (although they do get well paid for it!)

After the housing crash, they were blamed for overappraisal of properties. Now they're being blamed for under appraisal. I can understand their reluctance to price properties that may be temporarily high because of COVID/low rates and then getting blamed again if prices fall.
100% agree, I was just trying to paint the dichotomy as I see it right now. I'm definitely on the side of the appraisers trying to maintain some sanity in their local market. But they're a minority. It's probably futile, as they're fighting against a flood of student loan deferral monies, stimulus checks, FOMO, and buyers willing to max out their DTI at 45%+ of gross income without blinking. But at least they're not all going along with it singing "this time is different."
I agree their job is thankless, though I am not sure how much gratitude they are really due.

Appraisers could simply offer a range of probable market value. "I believe this home is worth between $145,000 and 155,000." "The value of this home is somewhere in the range of $730-$760,000." Give ranges within 1-2-3%. It's absurd that, to use my example from above, these guys think three years later they can put an exact $3,720 loss on my home purchase--as if to say, this is the exact price tag, it's science. Why not $3,715? $4,000 even? $3,500? At what point is credibility lost?

Or when the numbers for a deal you already know is a deal -- someone is motivated, has to sell quick, takes the first offer -- come in exactly at the deal price and no higher. I disliked our realtor experience very much but in talking with the guy while he had our listing, he said the number of times appraisals for aggressive offers came in exactly at the aggressive offer level and not even a grand or two higher, even with the comps to support it, were countless. Is this the best we can do as a system?

Let the lender do some diligence and digging on their overall deal rather than pin the whole thing on a single number from a human being which is very much an estimate and not reflective of several key elements in a market. If I go in planning to put 20% down, and the appraiser comes back with a number that makes my downpayment actually 19.6%, is that four tenths of a percentage point really risky? Does the lender's overall risk really change from that number?
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Re: House appraisal in insane market

Post by prairieman »

Not in a HCOL area, but my relative put her house on the market any got 31 offers, every one above asking price. I don’t think the appraised value matters in such a situation. If you get picked as the buyer, you will find a way to pay.
chw
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Re: House appraisal in insane market

Post by chw »

Flannelbeard wrote: Wed Apr 21, 2021 7:02 am
chw wrote: Wed Apr 21, 2021 4:50 am Appraisers are trained professionals, and generally will provide a value that is accurate to within 5% to a properties true value. On a purchase transaction, if the appraiser feels the sale price of the home falls within that 5%, he will usually support the sale price on the appraisal. The fact that there is a nearly 20% gap would be setting off warning bells to me.
Most appraisers just make up whatever story they can to get the appraisal price to match the sale price so the loan gets approved. They're just a cog in the game of musical chairs known as "pumping the housing market until it breaks because the majority of Americans stupidly view their home as an investment."

In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.

Regardless, it's always been a circus, it just became more obvious when COVID hit.
I wholeheartedly disagree. I worked in the mortgage industry for over 30 years, and IMO the appraisal process is the most scrutinized aspect of the mortgage transaction. Home buying is a very emotional process for the buyers, and to some extent the sellers, but the appraiser values the property with a cold hard eye- this is why the buyers should fully step back from the process if there is a value gap, and assess what premium they are willing to pay for an over-valued home.

There are more data points than ever (because of on-line databases) that go into the value evaluation. Are some values "missed" by a factor of more than 5%+/-?- I would say this occurs in less than 5% of transactions.
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vanbogle59
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Re: House appraisal in insane market

Post by vanbogle59 »

Well, in our case, the appraiser is sticking to their guns.
They reviewed their numbers and said no change.
They added an explanation that the "lot premium" the builder was charging was not something they could easily value (IOW, "we think you overpaid for the pretty lot" :shock: ).
Bottom line, the kids had to come up with 2% more to make the numbers work for closing.
Guess where their stimulus checks are going?
Still set to close in 9 days. Very exciting.
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Re: House appraisal in insane market

Post by Freetime76 »

chw wrote: Wed Apr 21, 2021 3:37 pm
Flannelbeard wrote: Wed Apr 21, 2021 7:02 am
chw wrote: Wed Apr 21, 2021 4:50 am Appraisers are trained professionals, and generally will provide a value that is accurate to within 5% to a properties true value. On a purchase transaction, if the appraiser feels the sale price of the home falls within that 5%, he will usually support the sale price on the appraisal. The fact that there is a nearly 20% gap would be setting off warning bells to me.
Most appraisers just make up whatever story they can to get the appraisal price to match the sale price so the loan gets approved. They're just a cog in the game of musical chairs known as "pumping the housing market until it breaks because the majority of Americans stupidly view their home as an investment."

In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.

Regardless, it's always been a circus, it just became more obvious when COVID hit.
I wholeheartedly disagree. I worked in the mortgage industry for over 30 years, and IMO the appraisal process is the most scrutinized aspect of the mortgage transaction. Home buying is a very emotional process for the buyers, and to some extent the sellers, but the appraiser values the property with a cold hard eye- this is why the buyers should fully step back from the process if there is a value gap, and assess what premium they are willing to pay for an over-valued home.

There are more data points than ever (because of on-line databases) that go into the value evaluation. Are some values "missed" by a factor of more than 5%+/-?- I would say this occurs in less than 5% of transactions.
...and yet, at a shockingly high frequency, the appraisal will match the offer price To The Penny...

[and as the seller, I’m ecstatic that it “came through”...because of shenanigans needing to renegotiate after the appraisal in past experiences :D ]
Please spell out new acronyms. Thank you.
chw
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Re: House appraisal in insane market

Post by chw »

Freetime76 wrote: Wed Apr 21, 2021 8:05 pm
chw wrote: Wed Apr 21, 2021 3:37 pm
Flannelbeard wrote: Wed Apr 21, 2021 7:02 am
chw wrote: Wed Apr 21, 2021 4:50 am Appraisers are trained professionals, and generally will provide a value that is accurate to within 5% to a properties true value. On a purchase transaction, if the appraiser feels the sale price of the home falls within that 5%, he will usually support the sale price on the appraisal. The fact that there is a nearly 20% gap would be setting off warning bells to me.
Most appraisers just make up whatever story they can to get the appraisal price to match the sale price so the loan gets approved. They're just a cog in the game of musical chairs known as "pumping the housing market until it breaks because the majority of Americans stupidly view their home as an investment."

In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.

Regardless, it's always been a circus, it just became more obvious when COVID hit.
I wholeheartedly disagree. I worked in the mortgage industry for over 30 years, and IMO the appraisal process is the most scrutinized aspect of the mortgage transaction. Home buying is a very emotional process for the buyers, and to some extent the sellers, but the appraiser values the property with a cold hard eye- this is why the buyers should fully step back from the process if there is a value gap, and assess what premium they are willing to pay for an over-valued home.

There are more data points than ever (because of on-line databases) that go into the value evaluation. Are some values "missed" by a factor of more than 5%+/-?- I would say this occurs in less than 5% of transactions.
...and yet, at a shockingly high frequency, the appraisal will match the offer price To The Penny...

[and as the seller, I’m ecstatic that it “came through”...because of shenanigans needing to renegotiate after the appraisal in past experiences :D ]
As previously mentioned, the appraiser will develop a value range on the home- if it is in a purchase contract, and the sale price falls in that range, the appraiser will support the value being paid. It is as simple as that. No need to be sarcastic about a process you don't really understand.
DoubleComma
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Re: House appraisal in insane market

Post by DoubleComma »

Shopping for a vacation home in 2017, again in a heated up market in this particular resort area. Found a house we loved, but it went under contract with in 24 hours of listing and a couple hours before we got our offer in. Our agent encouraged us to place a back up offer, we did as we had nothing to lose.

The appraisal for the first offer came in about 15% short of the offer price. Buyer attempted to get the seller to come down. Unknown to the buyer the sellers agent reached out to my agents laid out the situation, absent the offer/appraisal amount, and asked if they cancelled the contact and accepted our offer if we would honor the price if the appraisal was short again. We agreed to honor our offer up to an appraisal that came in >=90% of the asking offer. Everyone agreed, we went in contract, 2 weeks later my lender ordered appraisal came in at the offer and we closed.

Within 2 years we realized we enjoyed having a second home but wanted something bigger. We sold that first home for 25% more than we paid...so the gamble paid off. Covid has taken care of the next home better than we could have expected. It’s increased 30% in the past 15 months, hopefully it’s holds.
Hulu
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Re: House appraisal in insane market

Post by Hulu »

You can also get another appraisal. And give the new appraiser comps. I started doing that after a dismal round of lowball and low effort appraisals. Good results so far
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Re: House appraisal in insane market

Post by 4nickt »

This phenomenon around the country is not new in traditional hot markets like SF where multiple bids come in over asking price. My personal experience in that market was that the bank's contractor/appraiser worked closely with the loan office to get as close as possible to the "right number." We never had a problem buying or selling where the appraiser didn't meet the right number. The bank officer/lender has the most influence by selecting an appraiser who is keenly aware of current market conditions. For example: If an appraisal company routinely undervalues properties the lender/bank will probably find a new appraisal company. If a below market appraisal blows up a deal the lender may lose business if the buyer can't make up the gap in the appraisal. On our most recent real estate deal the comps in the area did not match our purchase price. That said, the appraiser noted that in the report, but used lender/appraiser jargon to justify the purchase price. Voila!
EddyB
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Re: House appraisal in insane market

Post by EddyB »

8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
Forget similar—it happens when there are multiple offers on the *same* property!
Topic Author
BarbBrooklyn
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Re: House appraisal in insane market

Post by BarbBrooklyn »

BarbBrooklyn wrote: Wed Apr 14, 2021 12:17 pm My daughter is attempting to buy a house in this insane COVID market; NYC real estate is always nuts, but COVID has added new level of crazy.

Asking price of home was 1.8M. Bargained down to 1.65 something; appraisal came in at 1.485.

How does one challenge this? She is a smart cookie and likely already has a plan in place but I would like the sage advice of you smart people.
Just to update: New appraisal came back higher, sellers came down, buyer (my daughter) is putting in a tad more cash.

Thanks for all the feedback.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
Freetime76
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Re: House appraisal in insane market

Post by Freetime76 »

chw wrote: Wed Apr 21, 2021 8:35 pm
Freetime76 wrote: Wed Apr 21, 2021 8:05 pm
chw wrote: Wed Apr 21, 2021 3:37 pm
Flannelbeard wrote: Wed Apr 21, 2021 7:02 am
chw wrote: Wed Apr 21, 2021 4:50 am Appraisers are trained professionals, and generally will provide a value that is accurate to within 5% to a properties true value. On a purchase transaction, if the appraiser feels the sale price of the home falls within that 5%, he will usually support the sale price on the appraisal. The fact that there is a nearly 20% gap would be setting off warning bells to me.
Most appraisers just make up whatever story they can to get the appraisal price to match the sale price so the loan gets approved. They're just a cog in the game of musical chairs known as "pumping the housing market until it breaks because the majority of Americans stupidly view their home as an investment."

In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.

Regardless, it's always been a circus, it just became more obvious when COVID hit.
I wholeheartedly disagree. I worked in the mortgage industry for over 30 years, and IMO the appraisal process is the most scrutinized aspect of the mortgage transaction. Home buying is a very emotional process for the buyers, and to some extent the sellers, but the appraiser values the property with a cold hard eye- this is why the buyers should fully step back from the process if there is a value gap, and assess what premium they are willing to pay for an over-valued home.

There are more data points than ever (because of on-line databases) that go into the value evaluation. Are some values "missed" by a factor of more than 5%+/-?- I would say this occurs in less than 5% of transactions.
...and yet, at a shockingly high frequency, the appraisal will match the offer price To The Penny...

[and as the seller, I’m ecstatic that it “came through”...because of shenanigans needing to renegotiate after the appraisal in past experiences :D ]
As previously mentioned, the appraiser will develop a value range on the home- if it is in a purchase contract, and the sale price falls in that range, the appraiser will support the value being paid. It is as simple as that. No need to be sarcastic about a process you don't really understand.
Really?? I guess not every one appreciates the beauty of the language of sarcasm :D

I suppose my experiences differ from yours as an appraiser. C’est la vie.

Perhaps the consumer would be better served if the industry called it what it is: a determination of whether the bank should take the risk, rather than an appraisal of a fair market value number.

FMV would be what a ready, willing, and able buyer is willing to pay at that point in time. And numerous viable offers indicate that value is acceptable, at that point in time for many buyers. Regardless of the info the appraiser has to enter into whatever level of reviews it undergoes, the prices should hold.

Hope the NY sale is smooth sailing after this hiccup!
Please spell out new acronyms. Thank you.
chw
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Re: House appraisal in insane market

Post by chw »

Freetime76 wrote: Sat May 01, 2021 7:57 am
chw wrote: Wed Apr 21, 2021 8:35 pm
Freetime76 wrote: Wed Apr 21, 2021 8:05 pm
chw wrote: Wed Apr 21, 2021 3:37 pm
Flannelbeard wrote: Wed Apr 21, 2021 7:02 am

Most appraisers just make up whatever story they can to get the appraisal price to match the sale price so the loan gets approved. They're just a cog in the game of musical chairs known as "pumping the housing market until it breaks because the majority of Americans stupidly view their home as an investment."

In this market, some appraisers have gone the opposite way, trying to keep the appraisal as low as possible because they view themselves as attempting to prevent a local housing bubble.

Regardless, it's always been a circus, it just became more obvious when COVID hit.
I wholeheartedly disagree. I worked in the mortgage industry for over 30 years, and IMO the appraisal process is the most scrutinized aspect of the mortgage transaction. Home buying is a very emotional process for the buyers, and to some extent the sellers, but the appraiser values the property with a cold hard eye- this is why the buyers should fully step back from the process if there is a value gap, and assess what premium they are willing to pay for an over-valued home.

There are more data points than ever (because of on-line databases) that go into the value evaluation. Are some values "missed" by a factor of more than 5%+/-?- I would say this occurs in less than 5% of transactions.
...and yet, at a shockingly high frequency, the appraisal will match the offer price To The Penny...

[and as the seller, I’m ecstatic that it “came through”...because of shenanigans needing to renegotiate after the appraisal in past experiences :D ]
As previously mentioned, the appraiser will develop a value range on the home- if it is in a purchase contract, and the sale price falls in that range, the appraiser will support the value being paid. It is as simple as that. No need to be sarcastic about a process you don't really understand.
Really?? I guess not every one appreciates the beauty of the language of sarcasm :D

I suppose my experiences differ from yours as an appraiser. C’est la vie.

Perhaps the consumer would be better served if the industry called it what it is: a determination of whether the bank should take the risk, rather than an appraisal of a fair market value number.

FMV would be what a ready, willing, and able buyer is willing to pay at that point in time. And numerous viable offers indicate that value is acceptable, at that point in time for many buyers. Regardless of the info the appraiser has to enter into whatever level of reviews it undergoes, the prices should hold.

Hope the NY sale is smooth sailing after this hiccup!
I’m not an appraiser, but understand the lending process, and the evaluation of risk and lending on real estate- and understand how the FMV of real estate is developed (it is far more complicated than looking at a few comps in the area).
bsteiner
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Re: House appraisal in insane market

Post by bsteiner »

A few things to keep in mind:

1. Appraising is an art as much as it's a science.

2. Fair market value is what a hypothetical willing buyer (not any specific buyer) is willing to pay and a hypothetical willing seller (not any specific seller) is willing to accept. Any given sale could be by a seller who is under pressure to sell and will accept less than fair market value or to a buyer who is under pressure to buy or who wants that particular property (perhaps because he/she owns an adjacent property) and will pay more than fair market value.

3. There's a lag between contracts and recorded sales. If a buyer and seller enter into a contract, it may be a couple of months until the closing takes place and the deed is recorded. If the market moves up or down in the interim, those transactions won't yet be in the public records.

4. You won't get the same level of appraiser or appraisal for a 6-figure house that you would for an apartment building, office building, shopping center, etc.

5. Our ability to influence the appraiser is limited. We can suggest that we would prefer a higher or lower value. We can point out factors that would point one way or the other that the appraiser might not be aware of. However, we can't tell the appraiser what value we want.
nolesrule
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Re: House appraisal in insane market

Post by nolesrule »

8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
Happened to us buying into a new neighborhood. Fortunately our appraisal came in only $5000 under so we only needed to bring an additional $4000 to closing.

We were one of the last 10% of the houses to be built and sold in the neighborhood. Last week I found a site that gives good detailed information on house sales and comps, and discovered that our sale price was $9-10 per sq ft lower than all the other purchases in the prior 15 months, including 3 other houses of the same model. And we had the largest lot in the entire neighborhood.
newyorker
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Re: House appraisal in insane market

Post by newyorker »

I thought RE market in nyc was still slow due to covid. Where is your daughter trying to buy? Manhattan? Brooklyn? Or maybe westchester area?
av111
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Re: House appraisal in insane market

Post by av111 »

In low inventory markets there are very few recent comps. There was this house in San Jose with no recent sales of similar estate homes in the area. It was listed at 2.4m. Listing agent ordered their own appraisal and provided it in the disclosure. Value was 2.6m. After 26 offers and couple of rounds of highest and best home went pending and closed recently for 3.1m.

Moral of the story, appraiser had no way of knowing the hotness of the market and appraisal was extremely below the market value of the house. Next home to sell in that neighborhood would easily appraise to 3m.

Valuation of homes is a complex process when everyone thinks prices are going to rise and appraiser is not equipped with the tools to adjust values to the demand in the market. There is a reason people are writing offers without any contingency
AV111
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Re: House appraisal in insane market

Post by Golf maniac »

8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
The appraisal is for the lender, not the buyer. It protects them from large sharp upticks in prices that may not be sustainable. If the lender needs to foreclose they need a cushion on the value when they foreclose which could be significantly less than these wild temporary increases in value. We have seen this same craziness before and it turned out really bad for the lenders.
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8foot7
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Re: House appraisal in insane market

Post by 8foot7 »

Golf maniac wrote: Sun May 02, 2021 3:12 pm
8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
The appraisal is for the lender, not the buyer. It protects them from large sharp upticks in prices that may not be sustainable. If the lender needs to foreclose they need a cushion on the value when they foreclose which could be significantly less than these wild temporary increases in value. We have seen this same craziness before and it turned out really bad for the lenders.
That's what LTV restrictions are for, not appraisals.
Olemiss540
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Re: House appraisal in insane market

Post by Olemiss540 »

8foot7 wrote: Sun May 02, 2021 3:55 pm
Golf maniac wrote: Sun May 02, 2021 3:12 pm
8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
The appraisal is for the lender, not the buyer. It protects them from large sharp upticks in prices that may not be sustainable. If the lender needs to foreclose they need a cushion on the value when they foreclose which could be significantly less than these wild temporary increases in value. We have seen this same craziness before and it turned out really bad for the lenders.
That's what LTV restrictions are for, not appraisals.
But the appraisal sets the V.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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8foot7
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Re: House appraisal in insane market

Post by 8foot7 »

The V is supposed to be the (wait for it) value, not some adjusted cushion-filled number that would represent or somehow account for an adequate remainder after a foreclosure sale.
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Re: House appraisal in insane market

Post by Golf maniac »

8foot7 wrote: Sun May 02, 2021 3:55 pm
Golf maniac wrote: Sun May 02, 2021 3:12 pm
8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
The appraisal is for the lender, not the buyer. It protects them from large sharp upticks in prices that may not be sustainable. If the lender needs to foreclose they need a cushion on the value when they foreclose which could be significantly less than these wild temporary increases in value. We have seen this same craziness before and it turned out really bad for the lenders.
That's what LTV restrictions are for, not appraisals.
The LTV is based on the appraisal…😂😂😂
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8foot7
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Re: House appraisal in insane market

Post by 8foot7 »

Golf maniac wrote: Sun May 02, 2021 7:15 pm
8foot7 wrote: Sun May 02, 2021 3:55 pm
Golf maniac wrote: Sun May 02, 2021 3:12 pm
8foot7 wrote: Wed Apr 14, 2021 3:39 pm
vanbogle59 wrote: Wed Apr 14, 2021 3:24 pm My son signed a contract 8 months ago for new construction, 400K
The developer is currently selling that model in that same subdivision starting at 460.
They close in 2 weeks. The appraisal just came in at 380. Oops.
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
The appraisal is for the lender, not the buyer. It protects them from large sharp upticks in prices that may not be sustainable. If the lender needs to foreclose they need a cushion on the value when they foreclose which could be significantly less than these wild temporary increases in value. We have seen this same craziness before and it turned out really bad for the lenders.
That's what LTV restrictions are for, not appraisals.
The LTV is based on the appraisal…😂😂😂
And as I already said, 😂😂😂, the V is supposed to be the (wait for it) value.
The bank does not order an appraisal and ask the appraiser to please cushion the value in case the market turns.
The bank does not order an appraisal and ask the appraiser to please make sure in the event of a foreclosure they would still have enough meat on the bones.
A cash buyer ordering an appraisal as part of due diligence does not ask for the "#3 conservative bank special, with fries" -- the buyer asks for an appraisal, which is the...value.
Protection the bank feels it needs are captured in their setting of thresholds of LTV based on the L number against the V, NOT the V.
IT's not an LT85ofV figure.
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noraz123
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Re: House appraisal in insane market

Post by noraz123 »

8foot7 wrote: Wed Apr 14, 2021 3:39 pm
It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.
I'd bet that same appraiser would value your house for $100k more if it were your bank / financial institution issuing the mortgage for a new sale.

One of my biggest pet peeves. When it works in their benefit, the appraisals will come in as needed. When it doesn't benefit them, they become surprisingly conservative.
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Re: House appraisal in insane market

Post by Golf maniac »

8foot7 wrote: Mon May 03, 2021 7:54 am
Golf maniac wrote: Sun May 02, 2021 7:15 pm
8foot7 wrote: Sun May 02, 2021 3:55 pm
Golf maniac wrote: Sun May 02, 2021 3:12 pm
8foot7 wrote: Wed Apr 14, 2021 3:39 pm

It's sort of stupid, isn't it? You get a bunch of people literally agreeing to buy nearly identical somethings, mostly right beside each other, for a certain price -- the very definition of market value, as money (deposits at least) changed hands for a good -- and these numbskull appraisers come in and low-ball you because a comp three miles away didn't have a porch and you do...or similar.

We purchased our home in October 2017. We opened an equity line in November 2019 which required an appraisal, which came in $20,000 below what we paid even though new homes in the neighborhood were closing above our purchase price. We refinanced this past January, same appraisal firm came, and we finally received a value for $3,000 less than we paid. Meanwhile our neighbor just sold a very comparable home five doors down for $50,000 over asking price, which was $100,000 more than their purchase price (our purchase prices per sq ft were similar). That purchase closed, money changed hands, the deal was done at that price. But somehow our similar home in a cul-de-sac a few houses away has lost $3,000 from purchase instead of gained $100-150k.

There is general downward bias to appraisals, I am firmly convinced. Sure, they play a role in making sure your $500,000 mortgage isn't secured by a $50,000 shack. But a corpus of unrelated people agreeing to pay generally the same amount for similar goods in essentially the same spot is by any reasonable definition the market value of that good at that time.
The appraisal is for the lender, not the buyer. It protects them from large sharp upticks in prices that may not be sustainable. If the lender needs to foreclose they need a cushion on the value when they foreclose which could be significantly less than these wild temporary increases in value. We have seen this same craziness before and it turned out really bad for the lenders.
That's what LTV restrictions are for, not appraisals.
The LTV is based on the appraisal…😂😂😂
And as I already said, 😂😂😂, the V is supposed to be the (wait for it) value.
The bank does not order an appraisal and ask the appraiser to please cushion the value in case the market turns.
The bank does not order an appraisal and ask the appraiser to please make sure in the event of a foreclosure they would still have enough meat on the bones.
A cash buyer ordering an appraisal as part of due diligence does not ask for the "#3 conservative bank special, with fries" -- the buyer asks for an appraisal, which is the...value.
Protection the bank feels it needs are captured in their setting of thresholds of LTV based on the L number against the V, NOT the V.
IT's not an LT85ofV figure.
I was in the banking industry for over 30 years so I understand the V. You seem to have a problem with appraisers who set the value for the bank. The bank is not going to believe the seller or the buyer setting up the value. The appraiser protects the bank. Obviously a cash sale a bank is not involved. But if a loan is involved the bank gets to set the value through the appraisal.
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