Just received a low appraisal on a cash out refinance

[Justin Moon]

I don't know if this is the correct subforum to post this in, but I can re-post it if needed.

To preface, this conversation, I am located in Houston. It's boom time right now in this city, and property values are on fire. I purchased a condo as my primary residence in July of 2013, and I am looking to complete an 80% LTV cash out re-finance. I purchased the property for $254,000 with a 4.125% interest rate. It's a three bedroom, 2.5 bathroom unit with 2,127 square feet. I just received the appraisal back at $305,000 with an offer to re-fi at 3.875% with no closing costs.

What really peeves me is how inaccurate the appraisal is. Two of the comps on the appraisal are for the two units next door to me in the same condo complex that both sold within the past 6 months for $179 a square foot for 1,402 and 1,370 of living space. On top of that, both of these units are 1 bedroom, 1.5 bathroom units. As I stated before, mine came back at $305,000 which places the value at $143 per square foot, but I also have 3 bedrooms and 2.5 bathrooms. How can there be a $36 dollar per square in the appraisal value?

[Jerry Ta]

@Justin Moon price per square foot is really not the deciding factor when doing an appraisal.  An appraiser will look to see where the neighborhood tops out in terms of total price before ever looking at price per sq/ft and make the adjustment accordingly.  

At the end of the day, the appraiser's goal is to determine the fair value of your condo unit, or what it could sell for if it were to go on the market today by using comparable sales.  I would find it hard to believe that you could actually sell your condo at $179 sq/ft or ~$380K when nothing in the complex has even come close to it.  Your scenario is not only used for condos, but I have seen it a lot in the suburbs of Houston.

Personally, I think he's actually being generous with his appraisal coming in at $305K based on my own experiences.