Hat tip to Susie for sending in this article on appraisals:
http://www.usatoday.com/story/money/personalfinance/2014/12/06/appraisal-real-estate/19906355/
An excerpt:
This past July Janice Charlton of Thousand Oaks, Calif., says she was low-balled on a refinance appraisal with the value coming in at $745,000. “I was completely shocked. I follow the real estate market,” said Charlton.
She appealed the value through the lender with the AMC that hired the appraiser, to no avail. “It’s arbitrary. It’s a real conflict-of-interest,” she added.
Charlton did not give up. She applied elsewhere. Less than a month later another appraiser through a different lender brought the value in at $860,000. Charlton’s perseverance paid off. She completed her refinance, saving $1,397 per month with her new, lower house payment.
Unfortunately for the loan rep, this borrower did the only thing she could to obtain her refinance – go to another bank.
Low appraisals are not as common on purchases because the appraiser is given the sales price and told to hit it. But I never take it for granted – I meet every appraiser on time, and bring several comps to justify the price. It’s a sales job – realtors who send one of their assistants or just tells the appraiser to use the lockbox are asking for trouble. Get Good Help!
Of course, FHA appraisals are different, in that they involve an FHA case-number that “runs with the property” for six months. Going to a different lender, and applying for an FHA loan, where a recent FHA appraisal has been done, circles the property back to the case-number, and the existing FHA appraisal. I believe VA is the same situation.
Jim, it’s great to hear your sage advice. I’m probably mentioning stuff you already know but thought I would chime in to see if I can at least add something useful for others from my experience investing in LA/IE. If the buyer is comfortable with it, experienced, and IF (and I emphasize IF) the buyer goes about it right way, the buyer can usually communicate with the appraiser on either purchase or refi to make sure they have the information they need. Obviously if the buyer is not too familiar with dealing with these interactions and steps on toes, it has the potential to go badly too.
On refi’s the appraiser needs the owner to open the door to get in the house since it is not on lockbox and this is a great time to communicate anything you would like to communicate.
Likewise, on a purchase, the buyer could try to meet the appraiser when they come over the house. If this cannot be arranged, the buyer could call the appraiser. Some appraisers may not be as familiar with the area and may be going in without much information about the property. The buyer should not pressure the appraiser but it’s important the appraiser has the relevant information to make an informed and accurate appraisal. Obviously the above would need to be done before the appraisal report is issued. Once the report is out, it’s a losing battle.
Some examples of issues an buyer may want to communicate to an appraiser in my experience include any discrepancies between the property and county records that would adversely affect the appraisal, school district boundaries that may make this house worth more, non-obvious but expensive upgrades that were done (e.g. electrical, HVAC, plumbing, roof), rights to views, zoning issues that would raise the price of the property, additions that are in fact permitted, or providing other more appropriate comps that match the house particularly given these above less apparent issues). Obviously I am not a professional and the above is not professional advice. It’s just my 2 cents of an opinion (which should be disregarded if anybody feels uncomfortable with it).