Sale Appraisal versus Refi Appraisals
Hey, It’s a muddy, somewhat subjective and unscientific process so I’m wondering what your experiences or opinions are on the following. Namely, I’m curious to know whether there’s a difference in the way appraisals are done by banks for a new purchase versus a refinance. My background is that I’m in contract for a home with an FHA loan, but the MIP being what it is, would love to attempt to refinance in the 3-6 month period after I close. Given comps, I’m pretty much on the border of the 20% equity mark. I just got the appraisal back for the purchase, and it came back slightly above the sale price (but below what some houses are selling for in the area and below that 20% mark). The reason why I’m even asking this question is because I assumed the appraisals would be the same for a sale and a refinance. But I’m told by some in the industry that the sale appraisals tend to turn out *closer to the purchase price most of the time*, while the refinance appraisals can come in at a value more in line with comps since they won’t be looking at the contract of sale. That’s confusing to me because a comp is a comp, and I thought appraisers cared about comps in the area. If they seek fair market value, why would they care what the sale price was. Any thoughts?
soundhoner
in Appraisals 9 years and 11 months ago
3
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3 replies
mt_molehill | 9 years and 11 months ago
My experience is that sale appraisals and refi appraisals came out very similar, and appraisers were not trying to stand in the way of the deal. One notable exception: I once did a cash out refi, and the appraisal came in very low.
resident2 | 9 years and 11 months ago
Appraisers really just justifie the price that their job requires. If you got three appraisers to apprais the same building in the same week, without any indication of sale price or needed refinance price, they would come up with three completly different prices. I did this a few years ago to make a point with a Bank that will remain nameless, but is actual no longer in Business. The real market price at the time in my opiion was $1,250,000\. It was apprised for as lttle as $795,000 and as high as $1,350,000 and in both the highest and lowest appraisal the “comps” they used were not really even in the same neighborhood, zip code yes, but not neighborhood! The clsest one was $1,175,000 but could not adjust for condition, because they cannot see the inside of the comps. In your case, waite a year and refiance in the early summer, when the spring market is pushing sales through.
mortgagepro | 9 years and 11 months ago
While the appraisal analysis, both purchase and refinance, relies primarily on Comparable Closed Sales, the one notable difference with a purchase appraisal order is that the appraiser does see the Purchase Agreement as they do need to cite a few factors reflected in the contract (i.e. Purchase Price, whether there is a Seller’s Concession, etc). While the appraiser would not publicly state it, one must assume that when the appraiser can see the purchase price it must have some psychological impact on the final valuation (especially when the final adjustments result in a figure in the range of the actual purchase price). Just my .02 Adam Roberts South Shore Mortgage NMLS# 1310