Appraisal turned down due to no recient comps

[Marc Lyman]

I was supposed to close on a triplex tomorrow but just found out that the secondary review of the appraisal by the bank was turned down. They didn’t like the appraisal because there were no mulit-family comps in the area this year, only last year. Not sure how to get them more comps if none exist. Anyone ever run into this before and have a creative way to convince the bank the appraisal is accurate?

[Don Konipol]

With the aftermath of the subprime mortgage meltdown, appraisals in some parts of the country have gotten unrealistically low. In houston, appraisors for Bank of America are working on the basis that the 25-30% nationwide decline in SFR prices applies to the Houston area as well, although prices in Houston have declined very little if at all. As a prime example, I purchased my current residence in 2007 for $515,000. We spent $275,000 on updating and renovating, not quite a gut renovation but extremely extensive. In the last 2 months we received 2 unsolicted offers in the $800 -$850K range, although our home is not on the market and we have no intention of selling. I did however wish to refi, so I applied for a refi loan with B of A, who also holds our current mortgage. The first appraisal performed appraised our house at $592K, with our extensive improvements ($275K) valued at prox $25K price increase. If not for the two unsolicited offers, I might think that I had made the worst real estate investment ever. However the bank was unable to close our refi within 90 days due to their incredible volume, so the house needed to be reappraised. this time the appraisal came in at $530K, with 2 or the comps being from a very less desirable development 4 miles away although our community consists of 400 + homes with plenty of resales. the appraisor's excuse for using comps from a completely different area was that most of the houses in our development are traditional while ours is modern so it would not be comparable. apparently the fact that buildable lots in our development sell for $300k and lots in the comparable development sell for under $100K required only a minor $25K adjustment! But here's the clincher. B of A told me I can protest the appraisal and submit my own comps. that would delay closing approximately three months and they could not guarantee to hold the rate agreed (4 7/8 interest). Or i could pay 1/4 point more origination, and close the loan this week.! this is a perfect example of why i moved to doing only commercial investment deals