Low appraisal-what to do?

17 years ago

Our listing agent recommended an appraisal even though we've been on the market for less than 2 weeks. The listing price is $499K, and it appraised for $430, which is devastatingly low! We don't agree with many of the comps that she used, and especially with comps that she chose to exclude. Case in point: The house next to us sold and appraised in Feb 2007 for $485. It is about 700 sq ft smaller than ours, so we really thought that we'd appraise for at least $485. She excluded it because it sold "too high". But she used a foreclosure and another distressed sale due to a divorce in the comps. She included the house on the other side of us, which is also currently for sale, and almost exactly like ours, but a bit smaller and on a smaller lot. It's listed for $487, and the first thing the appraiser did was deduct $50k because it's on the market, not sold. Another comp that was very similar to our home in size, age, amenities, etc, she deducted 30K because it had "superior upgrades", but didn't list them. I've seen pictures of the interior of that house, and it's almost exactly the same as ours!

So our choices seem to be, do nothing and act like we never had the appraisal. Or reduce the price to something (what?), or take the house off the market.

Does having a signed contract have a lot of weight in the eyes of an appraisal?

What happened to a house is worth what someone will pay for it?

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Comments (9)

sparksals
17 years ago
Sounds like you need a new realtor.

Appraisals are subjective. Did you use the appraiser she recco'd? If so, I recco you get your own and see what it comes at.

It's quite likely she knows the appraiser and wants you to reduce to get a quick sale and commission for her.
minet
17 years ago
Are you saying this was a real appraisal, done by a separate licensed appraiser, and not a current market analysis done by the agent? The appraisal is usually done for the buyer or for the buyer's financing company, not for the seller. The appraisal would have cost a few hundred dollars - did you pay extra for that?

Some of what you said happened sounds odd, especially this:
"the first thing the appraiser did was deduct $50k because it's on the market, not sold." An appraiser never uses houses that are currently for sale as comps. Never, at least in areas I'm familiar with. It must be a closed deal, not something that's in the process.

The choice of comps sounds a little off too. Excluding one is not unusual, if it is seriously out of whack with the rest of them, but using a foreclosure is not usually done. The distress sale due to divorce - the appraiser wouldn't have known about the divorce, probably, so it might have been a good comp, even though you think the price is low.

Can you give us more info?
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OP, I'm not sure that I understand part of your original post -- Wells is currently your lender and is likely to be the buyer's lender because they "[are] the only lender for this [manufactured homes?] anymore"? I know it's a huge company, but do you happen to have any contacts from your purchase or refi who you could reach out to? I'm sorry I don't know the details of how this transpired, because it was more the sellers' issue, but I purchased a home which appraised for less than the agreed purchase price (and I had a contingency). The sellers' agent provided the additional comps to the appraiser (my agent and I didn't, as I had nothing to gain!). The appraiser amended his report -- in my case, it was still (IMO) under-appraised (this wasn't unusual in my area, as an overreaction (again IMO) to the inflated appraisals of the bubble; we also had to deal with a depressed market, so there weren't as many comps as would be ideal), so I had to come up with some of the difference and the sellers agreed to a lower price. We were fairly informal so I believe that the agent sent the comps directly to the appraiser. Especially since the buyer's agent may be unreliable, I'd ask your agent to ask if s/he can send the proposed comps directly to the appraiser (copying you). I would send comps for the $190k price -- i.e., what you think the comparables for your home actually are -- not for the $135k appraisal. Also, if there are any deficiencies or amenities that were missed, I would be sure to point that out so the numbers are adjusted accordingly (# of baths, condition, etc.). As you know, the appraiser works for the lender, so I'm not sure how much more you can do. I personally wouldn't pay for an "independent" appraisal because, frankly, it doesn't matter what you or your buyers think the property is worth if they cannot buy your place unless it appraises out. Giving both your agent and the appraiser the benefit of the doubt (I assume everyone thinks they know the appropriate market price), obviously they are incentivized differently -- the agent to make a profit and the appraiser to minimize his client's (the lender's) risk. Maybe the right number is somewhere in between. I would take another look at comparable properties which have sold in the past 6 months or so, just to make sure you're as educated in this process as possible. Good luck!!
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Linda
17 years ago
A couple of things stand out in your comments. 1st. Why did your realtor suggest you get an appraisal after only being on the market for two weeks? 2. An appraiser using a house that is currently on the market and deducting $50k makes no sense at all. They base the values on 'closed' sales.

Who paid for the appraisal? Generally, if I have a seller that is unrealistic about the price of their house, I will suggest that they get an appraisal done. It doesnt matter to me if they want to pick their own of if they want me to recommend one. The bottom line is to get the true value of the home.

It's quite likely she knows the appraiser and wants you to reduce to get a quick sale and commission for her.

It is ridiculous to suggest that the realtor knows the appraiser and they are working together to get you to lower your price for a quick sale and commission. Both could lose their license for something like that. Its hardly worth it for one sale.

What happened to a house is worth what someone will pay for it?

Unfortunately, the bank pays for it and they won't pay more than its current appraised value.
User
17 years ago
This sounds more like a CMA than an appraisal. And, this summer isn't last summer, so that analysis may be a little high even, depending on your area. It isn't a seller's market anymore.
cathycdk
Original Author
17 years ago
It was definitely an appraisal, not a CMA.

Our agent paid for it. She suggested it because of a home they sold where the contract price was about 50K more than the first appraisal. They paid for another appraisal that was still 20K less than the contract price. So they got nervous and suggested that we have one now to avoid that scenario.

The reason that homes currently on the market were used was because of the lack of sold comps, I guess. We have a 2 story house, and there are more single story homes in than 2 story in our area. However, we don't agree with how the appraiser picked and chose between both sold comps and listed homes to justify her result. I told my agent it looks like circular reasoning.

We are just listed, with no sales contract or offers. Apparently, with a signed contract, according to the appraiser, she could go up $20K, which is still 50K from our asking price.

Single stories in our area are selling for $425-490. The biggest single story is 3100 sqft, and our house is 3500. Our lot is one of the biggest in the area. I understand that square footage on the second story is discounted but how can our house appraise less than a 2500 single story on a smaller lot?

No one had mentioned that we were unrealistic about our price. In fact, our agents originally had said we could list a bit higher if we wanted to. We are 30K lower than another house of same floor plan, and 12K higher than a second house like ours. We had two agent's tours, and out of 40 agents only 2 commented on the price possibly being high. The rest rated the price as "good".
triciae
17 years ago
cathycdk,

You're being too vague & general in the information you're providing for us to offer much of anything useful. For instance, yes a small home on a smaller lot may be worth more if it's built better, in a more desireable location, has more expensive fit/finish, better landscaping, on and on.

Another thought...

It's now May 6. So, your agent's office is closing out their April sales numbers. They've got another month of "trend line" in &, possibly, that trend line indicates falling prices in your neighborhood. If so, then your Realtor may be trying to get ahead of the curve rather than attempting to catch the falling knife.

I think it's odd that your Realtor paid for an appraisal. Did you refuse to pay? To some extent, there is always a tension between a Realtor & a seller. The seller wishes to sell at the highest possible price with the fewest contingencies. The Realtor wants to sell the house. They do want the higher price because it benefits them as well but the Realtor is out looking at dozens of homes every week. A good one knows their market well. It's very hard for some sellers to view their own property objectively. They will, to one degree or another, always find little & not so little things that they believe is "better" about their place. The price difference you're looking at now is quite large based on a percentage basis. If you could provide a link to your MLS listing here; there are many people who can give an objective view.

Tricia
sparksals
17 years ago
It is ridiculous to suggest that the realtor knows the appraiser and they are working together to get you to lower your price for a quick sale and commission. Both could lose their license for something like that. Its hardly worth it for one sale.

I don't believe it is. The fact the realtor paid for the appraisal and is encouraging one when the home has been on the market for two weeks is ridiculous. My opinion is not.

Many times realtors have their own contacts in terms of HI and other services. It is not ridiculous to assume the realtor would have an appraisal contact.
cathycdk
Original Author
17 years ago
here is our virtual tour

Here is a link that might be useful: Photo Show Listing
cathycdk
Original Author
17 years ago
Here is our mls listing

Here is a link that might be useful: MLS Listing

Low appraisal-what to do?

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