What area/State are you in? We've been shopping for a house in Florida which has a lot of short-sales/foreclosures. We've had 2 appraisals done and neither used short sales nor foreclosures. We objected to one appraisal which included an active listing (made no sense to me) but we didn't follow through because we had other problems with the property.

I suppose you could pay for another appraisal or complain to the bank.

Sorry, couldn't be more helpful,
Jane

We are in Washington, near Seattle.

Short sales and bank owned properties ARE your comps. They are the "solds" that establish the overall values. You cannot say that your home is "worth" more than what is selling, even if there is not much for sale. There is no "fighting" a bank about an appraisal. They cannot cherry pick an appraiser to bring them back a certain number anymore. All appraisals must be at "arms length".

This isn't the smart time to do a cash out refi for any home project. If the house needs work, it should be done on a cash purchase basis with the savings that you will realize from the lower mortgage rate. Accept the appraisal for the refi, get the lower note, and move on. There are only two appraisals that really matter in the life of your home. One has to do with the taxes you are assessed, and the other has to do when you go to sell the home.

We have 400 sq feet of unfinished true second story space to finish out. When we are finished, we will have increased our square footage by 30%. For us, it makes sense to do the cash out, even if for the average homeowner it might not (I could see not taking cash out for improvements without additional square feet. This is an addition to the house that is already here, just needs to be finished).

We would rather take the cash out now, and use it to refinish (at this nice low rate) than to pay cash for it, and refi at the end when the rates might be higher. Though, I am not sure they will actually go up that much in the next year...

Thoughts?

The problem with these "arms length" appraisers is that they now get selected from a "random" pool of appraisers, many of which come from areas that are pretty far away from the subject property. They don't know the towns and why one street is worth more than others. We recently refinanced and if we decided to sell today and price the house at the appraisers number we would be giving away about $500K. We went from one bad appraisal system to another with its own flaws.

Don't even get me started on appraisers.
Here in FL, distressed sales are not supposed to be used as comps. Because of the very low number of recent sales, our latest appraisal last year, did list a few extra homes, including distressed, in the appraisal package; they just weren't used for the comp. She also threw out a normal sale for a normal home that sold for quite a bit above the norm ($460K - quite a bit less than 2008 prices - vice average prob $350K). There was no justification for throwing out this sale, the latest one, just an arbitrary throw-out. Also one of the short sales would have helped our appraisal because it was about $30K higher, but couldn't be used.

He just did an awful job of actually doing his job. He didn't look into anything. And, now, I get to do his work for him. I will only hope that my comps are reasonable enough for him to "admit he was wrong" and adjust the appraisal. I think I will be really lucky though to get this "Ken" to accept he was extremely low. (I am calling him Ken because he looked just like Ken of Ken/Barbie... that is what I am up against.)

Good luck, never got either of them to admit a mistake. Somehow, they justify their numbers with a lot of other numbers. Its really a 'crap-shoot.'

Jane

Literally the house behind or next to the house he used which is really bringing down our numbers sold for 100K more just a month previous. I don't know why he didn't use THAT one (or why it was omitted). It is the exact floor plan, in reverse. But, it wasn't a "hoarder's house painted green and red with red shag carpet that smelled and with pictures glued to walls and appliances." (That is what the listing agent said about the low ball house). He took every low house he could find, including 2 pendings instead of actual solds.
Grr.

If there are a lot of foreclosure in the area the bank is NOT going to get as good a price it they foreclose on you.

The bank wants to know what THEY are going to get if they foreclose.

from his appraisal:
REO are not � a driving force in value for the subject�s neighborhood.

We had nothing to lose (no out of pocket costs or anything) to have the bank request a review of the appraisal.

We had to provide the bank with at least 3 additional comps in our neighborhood that sold in the last 6 months, ideally 3 months (I provided 5 or 6). We had to include in our letter, as completely as possible, any errors we found.

Well, our appraisal evaluation came back (took about 1 month instead of the 3 days the first one took). He raised our valuation by 40,000. Which puts it to within 5000 of what I had told the bank I thought it was worth based on an appraisal from 2009.

I am shocked, but very thankful. We will sign all our documents in the next week.

Wow, good job!

Jane