We went with a local credit union bc we have had great experience with them in the past, and we have good hx with them (2 paid off car loans, and a refinanced mortgage on our current house). In fact, when they appraised (different appraiser though) our current house last year, they assessed it at $25K higher than we paid 2 yrs prior to buy it. We have put a few improvements in, but no where near that amt. We did appeal the initial appraisal bc the comps they used we felt were not even close to our new build. AND they did not do ANY comparisons to new builds. There is actually a new build right around the corner from us, but he is using private funds and insurance money, as his previous house burned down. So even though he is building upwards of a 750K home (much higher than our proposal), they did not take that into consideration. Most of the recently solds were on less than 1/2 acre in a tract, whereas ours is 2 full wooded acres in a substantially more upscale "development." (Not really a true development, but a large area that used to be undeveloped and farm land that is slowly being parcelled off and built, all by various contractors. None of the comps had higher than standard 8ft ceilings. None had wood stained trim or upgraded windows. All were vinyl siding. None had any built-ins....we have several throughout. Ours has increased insulation (closed cell foam and blown in versus mainly fiberglass), high quality windows, 2x6 construction, stone around the entire foundation, etc. I found several recent sales in the $140/sq ft range but they said they "comped" the same, and really did not seem to take the price per square footage into consideration. They only gave us $17/sq foot for our 1590 sq ft basement, even though we pointed out that we were roughing that in now and finishing it (probably ourselves) within the year to include a media room and in-law suite. I was also very confused by several adjustments they made to the comps prices. For instances adding $2200 to the value of one bc it was on a 0.9 acre tract, when ours is 2 acres. ADDING $32000 to the same one bc it was 7 years old and not new?? Adding $44,650 to it bc it was 3 bed, 2.5 baths and 30000sq ft where ours is 5bes 4 baths and 3893 sq ft. Very confusing. We did find one comp that is still for sale in a price range close to our cost to build (actually a bit higher) and similar in upgrades, etc they had this response: "The above listing is a perfect example of an atypical over improvement for the area. The marketability is greatly affected. Price is discounted, marketing time is abnormal." The house has only been on the market for 30 days, so not sure how that is abnormal. Yes, the price is about $100K higher than the assessed price, but I thought the assessed price was very low for the upgrades they had done, and wonder if they did it on the "down-low" - i.e. not pulling permits, etc and never had it reassessed. While the real estate market IS slow here (where is it not) there are still a fair amt of sales, and definitely NO WHERE near 50% of them being bank owned or short sales. Here is a direct quote from the appraiser in response to our appeal with higher comps and pointing out all of our upgrades: "The proposed construction is an over improvement for the area (super adequacy). It suffers from regression being the most expensive home in an area without a high degree of conformity to support the value. The cost approach may support the construction price, however due to the area and lack of supporting sales, the sales comparison approach will not support the construction cost." The bank liason actually seemed quite surprised with the initial appraisal AND appeal. He also said due to industry regulations, they are no longer even allowed to order a 2nd appraisal. I think part of the issue (why we are building in the first place) is that we have such specific needs and have found NOTHING existing that would satisfy those. We have NO plans of selling this house any time in the near (and by that I mean at least 15-20 years) future. But of course, the bank doesn't care about that. So, we are looking into how we can redesign our dream plans into a cheaper design. I will definitely post the plans here for input. I have posted them piecemeal up until now, but never the entire project. The original design had a steep A frame roof which we knew was a large chunk of the cost, so simply redesigning that would help, though not $100K of help. We are also going to sit down with our builder and find out what he suggests. Thanks for your input so far.

We are in the same boat. We are building on 5 acres and the area is rural with mostly older homes that are much smaller. Have been talking with the bank for the past several months and they said the appraisals are getting better but you never know. Have spent alot of time building the budget getting as accurate as possible ... to try and minimize the future overages. Was supposed to turn in permits this week but looks like we are going to switch it around. The bank wants us to submit for construciton loan first with a conditional on permits being issued. So, if the appraisal comes back at a number that is far off then the permits will never get issued (because I wont submit). That way, I'm only out the cost of an appraisal vs all the upfront fees on the permit. If this happens, then we will have to delay build until we can save up more money and try again next year (ugh)

Mary, You're trying to "read the tea leaves"! The financing could have fallen through for dozens of reasons & maybe none had anything to do with the value of the property. /tricia

I'm a retired appraiser. The first thing an appraiser asks when assigned an appraisal is what is the purpose of the appraisal? Is it for a lender to make financing decisions? Is it determine a valuation for an estate? Is it to determine a valuation in the case of divorce. Is it to determine a value for a potential sale? Ordering an appraisal for the purposes of setting the price of a property for both parties is entirely appropriate, but unusual. The majority of real property appraisals are for the purposes of determination of valuation for a lender. The reason an appraisal for a private sale price is unusual is because the respective parties can usually determine an agreeable price by using the more informal and cheaper brokers price analysis without incurring the charges of an appraiser. It's to save money. Someone has to pay for an appraisal. BPA's are mostly free. They don't have to meet the more stringent USPAP standards and ethics that bind appraisers. Also, if you were to order an appraisal, it could not be used by the lender to authorize financing because the purpose of the appraisals are different. Remember, the first component of determining valuation is purpose. The purposes are different. Therefore, the valuations may be different. I suggest you have a neutral agent create a BPA and negotiate from that point. Each of you could get your own BPA and negotiate. An appraisal will still be ordered when financing is required. I hope this helps the process.