Refinance Borrower Poor Appraisal Rant

[Eric Auslander]

TLDR - The Appraiser blew up my refinance and valued my house at $385K (currently have $405K of loan balance). I purchased the house for $426K 16 months ago and was recently appraised for $433K 9 months ago.

Super frustrating... I was looking to take advantage of the current low-interest-rate environment and lower my mortgage rate from 4% to 3.5% on my primary residence. I set up my loan, had an appraiser come to my house (who told me he knew the area and had a friend live a few blocks away), and a weeks later the appraisal comes back to blow up my loan.

I purchased my house in August 2018 for $426K (Philadelphia Metro). The prior owner purchased the house for $112K in November 2017 (as a flip - was vacant for years), gutted the property down to the studs, and renovated with luxury finishes. Keep in mind that both of these sales are within the three-year window that an appraiser needs to analyze as part of the USPAP Standards. The house appraised for market value when I purchased it and also appraised for $433K when I refinanced from 4.25% to 4.0% in April 2019 (10 months ago).

In my opinion, I think the appraiser forgot (at some point in producing his report) that I purchased the house only 16 months ago for $426K. It seemed like the appraiser picked the best 3 comps he could find within the past 9 months and threw a dart on the dartboard to determine value. The appraiser ended up valuing my house at $385K, 10%, or $41K lower than what I purchased it for.

As a former state-certified appraiser myself, I understand the ins and outs of appraisal as well as the sweat-shop mentality of producing residential appraisals (commercial appraisals have much more time spent on them - which was my area). The problem here is that in my area, I would classify my home as a top 5% home in the area. The chances that another top 5% home in the area sold in the past 9 months (what appraiser looked at) are slim. These top 5% of home sales happened to be in the time range during my purchase (8/2018) and refinance (4/2019) and weren't an issue. The appraiser should have gone outside the time range of 9 months if needed to determine market value.

My lender filed an appeal for the appraiser to quantify certain adjustments (lack of condition/curb appeal, lack of adjustments for bedrooms/bathrooms, lack of adjustments for other desirable features in my market such as porch + deck + Single-Family Detached Home (used twins/townhouses as comps with no adjustment). The appraiser then came back with the same value and noted that all given variances were included in the final estimate of value already.

Does the appraiser have too much pride to admit the initial valuation mistake? After receiving the updated appraisal, I asked if I overpaid by $41K when I purchased the home or if real estate values have dropped 10% in my area (in which I received no response).

Thank you for listening to my rant!