Low Appraisal for home re-fi

[Michael Shuell]

My plan had been to pull some cash out from my house to both pay off student loans and get started in investing.  

I assumed that:

- all home prices have gone up roughly 30% since my purchase (per zillow and the newspaper)

- Since the MLS had our home listed as a half basement vs. full, correcting this would add some value as well.

- finishing 900 sq. ft. of the basement, including a 4th bedroom w/ egress window would add substantial value

Apparently these assumptions were false as the appraisal just came back at $235,000.  Purchase price at the end of 2013 was $213,000.  Obviously not what I was expecting.  Does anyone have any suggestions?

The house is 1700 sq. ft, 3 bed, 2 bath at grade.  900 sq. ft. of the basement is finished with the 4th bedroom.  Total finished sq. ft. is 2600.  Appraisal at purchase (2013) was $219,000,

Any insight would be appreciated.  Thanks!

[Michael Seeker]

@Michael Shuell - Zillow and the newspaper are not generally good sources for area-specific home pricing information.  Either might say "house prices in Detroit are up 30% since 2013", but that completely ignores the fact that every city is made up of different pockets of more and less desirable areas.

Separate from that is how appraisers value houses.  Any bank lending money wants to make sure their loan is secure: enter appraisers.  When you purchase a property, the appraiser has the answer before they start and just needs to determine if that answer (i.e. the contracted purchase price) is reasonably accurate or not.

When you go to refinance, an appraiser does not have any "answer" or target in mind other than to give their fair assessment of the market value.  In my experience, refinance appraisals tend to come in more conservative than my personal opinion of what the property is worth.

You can try to get a second opinion which might mean going to a different bank for the loan.  You can also review the appraisal in great detail and make sure that nothing is missing from the analysis and that the comps are in fact comparable.  If the appraiser made any fundamental mistakes, you may be able to get them to make an adjustment or get the bank to order a new appraisal.