Real Property Appraisals/Bad appraisal?

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Question
Our home is listed for sale at $335K.  We accepted an offer for $331K.  Our appraisal just came in at $305K to the astonishment of all parties/agents.  The three comps the appraiser used were less than a mile from our home, but not similar in the least.  For example, our home is a one story 2211 sq. ft home in a cul-de-sac.  The three comps were all two story homes on busy street corners.  Our 30 year old home was completely updated eight years ago; the comps had no updating.  Also, the comps sold for $158/sq. ft, $150/sq. ft, and $140/sq. ft.  If our home sold for $305K, as appraised, it would be for $138/sq. ft,--less than all the comps!  The appraiser did not note any factors with our home that would lower its value.  Two months ago, a home on the next street over from ours sold at $183/sq. ft and another around the corner sold for $218/sq. ft, albeit that one was 10 years newer than ours.  The neighborhood behind ours, from where the comps were taken, is notably more "run down" and older than ours.  So, do we have reason to challenge this "low ball" appraisal?  Why did the appraiser not use comps from our neighborhood and instead used ones from a more run-down neighborhood...is this normal practice or is this "fishy"?  I know there are comps available in our neighborhood because our Realtor used them to recommend the $335K asking price. Lastly, we are considering filing a suit against this appraiser as our buyers have lost confidence in the value of our home and are now demanding we lower the purchase price.  We fear that even if we challenge the appraisal and come out with a better number, the buyer's underwriter will still go with the lower appraised value.  Do you think we have cause to file suit since we will be losing money due to this appraisal?  Thanks for any insight you can give!!

Answer
Rebecca,

I assume that you have gone thru all of the steps with the buyers lender to rebut the appraisal. You have a right to submit comps that you think are better than the ones the appraiser used. If you haven't submitted a rebuttal, I would have your agent print out what are called "client copies" of all of the better comps and ask the buyer's lender to submit them to the appraiser for reconsideration.

If he/she refuses to consider them, it will give you a stronger case if you decide to litigate. Have the Agent print out ALL OF THE better comps, even if there were 32 of them. If there were a considerable number that "should" have been used, it will also give you a better case.

As to why the appraiser used the lesser comps, who knows? Goggle the agency in your state that licenses appraisers and look up the appraisers contact information. Is the appraiser located close-by your area? If not, he/she may not have had access to your local MLS.

You will also need your agent to print out "client copies" of the comps the appraiser did use so you can categorically show why these were not comparable to your home.

Now.....with regard to a litigation --- any legal case is expensive. You need to find an attorney experienced in this type of case and find out how much it is going to cost you. Then you can make a decision whether to sue, or go on & find another buyer.

I would certainly file a complaint against the appraiser with the state agency that licenses appraisers. If you go to the site, there will be a complaint form to fill out. If the lender did not allow any reconsideration of the comps, you can file a complaint with the State Department that oversees lenders.

Best of luck to you. It might be better to just go out and chop down a tree to release some stress over this & move on to get another buyer. This time you & your agent should be prepared to show the "client copies" of those comparables that support your sale to the new appraiser.

John C. Carlson
Victorville, CA
www.jccrea.com

Real Property Appraisals

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John C. Carlson

Expertise

Any questions regarding commercial and/or residential appraising, appraisals or real estate valuation such as: appraising as a profession, valuation techniques, comparable sales selection & analysis, the new HVCC and how it affects appraisers & Borrowers. Also, questions like: "Why did my appraisal come in low & what can I do about it?" I cannot answer questions about comparable data in areas in which I do not practice. I have expertise in most areas of So. California.

Experience

31-years both commercial and residential valuation experience. State of CA Certified General Real Estate Appraiser, licensed to appraise all property types. FHA Approved. Specialized expertise with historic, architectural & luxury residential property valuation. Experienced in industrial building and small commercial property valuation. Experienced Reviewer of appraisal reports and expertise with intensive forensic reviews to uncover fraudulent appraisal reports. Expert Litigation and Expert Witness experience.

Organizations
Associate Member of the Appraisal Institute. Associate Member of the Certified Fraud Examiners.

Publications
Numerous posts to Blogs. Please "Google" "John C. Carlson Real Estate Appraisals" where a list of responses I have made will show up.

Education/Credentials
Numerous classes by the Appraisal Institute since 1978 in the practice areas in which I specialize

Past/Present Clients
First Republic Bank Wells Fargo Bank California Bank & Trust Preferred Bank Numerous Attorneys.

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