Contesting an Appraisal?
We are trying refinance our Bed Stuy brownstone and our appraisal came back with an absurdly low number (37% less than 2006 purchase price). Property values in our section of Bed Stuy have held up well with recent sales on our block 7% less than our 2006 purchase price. Our neighbor across the street has…
We are trying refinance our Bed Stuy brownstone and our appraisal came back with an absurdly low number (37% less than 2006 purchase price). Property values in our section of Bed Stuy have held up well with recent sales on our block 7% less than our 2006 purchase price. Our neighbor across the street has their house appraised 3 months ago and it came in a 6% below our 2006 purchase price. Not bad considering the economic situation. We have given the broker/bank a list of recent comparable property sales to support a higher value, but have not heard back. Has anyone been in a similar situation and had the bank make the loan eventually? We are trying to decide whether we should give up with this application and reapply with another broker or keep waiting. It seems getting an accurate appraisal is a game of chance. Thank you for sharing any of your experience.
HI-I am a certified NYS appraiser. The only thing to think about is what is your house’s competition. No one is going to pay more for a house than they have to. Finding comps is pretty easy sometimes. Close, Current, Clone. Bed Stuy has been completed slammed in the past couple of years due to the foreclosure activity. What matters is , where is this house located. A busy road, next to a commercial building, school, etc.
To those who ask if the appraiser is familiar with the area-that is the most over-hyped media driven crap I’ve seen in a while. It doesn’t take long to figure out a market area when we have all the internet tools, and sophisticated databases that the general public doesn’t use on a regular basis. Don’t get me wrong, I am certainly not defending a good bunch of the rotten crooked appraisers out there who have destroyed the public’s trust along with a bunch of mortgage brokers.
As far as red-lining, there is no way for anyone to prove it. Markets rise, markets fall. Bed Stuy was a hotbed for flipping, speculation, greed and developer fraud. This is possibly the path on the way to a long hangover.
The person getting their house appraised, I feel badly that you may be underwater. You may have done the right thing all along. It is possible that homes may have sold for more on your block or immediate area recently. How do those comps match up with your property, and how do you verify information such as condition, bedroom count, construction quality, renovations, etc. There may be model matches on the market right now that sell for 30-40% less than what you paid back in 2006. Also, there may be active listings and pending sales nearby that have asking prices lower than the closed sales that you are talking about.
Median values can be skewed in the wrong direction. Areas that were highly speculative markets probably have significant short sale, foreclosure and REO activity. Foreclosures show up as recorded sales, usually with the buyer being the bank. Keep in mind the $ of the sale is the first lien, or mortgage on that property in most cases. There could 1 or 2 more mortgages after that. In most cases, these mortgages were juiced, 100-106% financing that had brokers pushing the appraiser to hit values so they could collect there huge commission checks. These mortgages were made in the heights of the bubble. Now, the recorded sale is what is owed to the bank . Alot of times, the mortgage owed is higher than asking prices of similar homes. So in effect, median values are too high. These sales should be taken out of median value calculations, and you will see that median values in the speculative areas are actually lower than stats are showing. On top of that, there is tremendous supply on the market, no credit available and people losing their jobs. Smart money is waiting on the sidelines with a big catchers mitt right now.
Anyone care to add to that ?
BHO, prices in Bed Stuy have not dropped nearly as much as you imagine. Just like prices in Park Slope have not dropped nearly as much as you would like.
Isn’t all of New York redlined now? Whereas six months ago, it was only the subprime areas. Right, Adam?
“Red-lining” is exactly what’s happening in BS. Very sad.
@ Grand Army- It takes some appraisers years to build a book of business. They’re clients are mostly mtg brokers and bankers.. and this could potentially ruin all the effort they put in to this point…even if they ran by the books. But i guess that’s just the state of the industry as a whole.
Y’all should read this article from yesterday’s NYT. Lenders are now controlling the process and they’re hiring appraisers who not only lack highly local expertise but often aren’t even from the borough. Makes for sobering reading.
http://www.nytimes.com/2009/08/19/business/19appraise.html?_r=1&scp=1&sq=mortgage%20appraisals&st=cse
Call the appraiser down the block.
This is disturbing. Part of the appraisal process is connected to subjective thinking. An example of this is “There is no way that a house in this neighborhood should cost so much.” Was your appraiser familiar with the neighborhood. With your comps in hand, go to your bank. If they don’t budge, start again with a broker.
“Property values in our section of Bed Stuy have held up well with recent sales on our block 7% less than our 2006 purchase price.”
All cash deals? If not, use the lenders involved with those purchases. Care to list these comps that have somehow escaped the NY Case-Shiller blanket drop of -21% from peak? Some would argue that Bed Stuy has fared worse than this -21% average/mean.
***Bid half off peak comps***
That is absurd, I’m so sorry. And I have seen it happening more in Bed-Stuy, I think it is a take on red-lining (but of course nothing could be confirmed!). Definitely try a broker sooner rather than later – no need to close with them if other comes through but you may be pleased what they find for you. And give them your comps up front to work with. Good luck!