Appraisal Question

[Leo A.]

After finally getting my first short sale(buy and hold) in escrow, the appraisal result came back. Need some advise from fellow BP members:

- Appraiser did not include the permitted partial garage conversion. Based on the report, appraiser describe that the public records indicate the subject property as 1,3xx sqft of living area, however during the inspection it was found to have only 1,1xx sqft. The partitioned area have been included in public records but causes a functional obsolescence, therefore adjustments were made.

Due to above findings, this will hurt my ARV if appraisers will only use the lower square footage. I asked to renegotiate the price but due to short sale, looks like a slim chance that bank will adjust.

Any input is greatly appreciated.

[Bill Gulley]

Living area is the heated and cooled living space, if you have a small addition that isn't connected to the main heat/cooling source, it may not be seen as the main living space, functionally obsolete. However, it should be noted with some value if it is attached to the main structure as storage or a less functional space. 

I do not agree that the way to adjust the value was by reducing the square footage under roof, it should be included and then adjusted due to its obsolescence and a comments as to why the adjustment was made, that was a lazy way out in my opinion. Lenders will not overturn the opinion of an appraiser, they may not influence the appraiser's opinion in any way.

What you can do is to ask for a review appraiser's opinion, you can also file a complaint with the AIA as to the practice of making the adjustment. 

Reality, the value probably won't change, only the manner in which the adjustment was made might be corrected. 

And, remember, you said this was a short sale, in this transaction, the property is appraised in its current condition as a distressed sale, why would you want a higher valuation now as a buyer or seller?

If you are buying to add lipstick and flip, you'll be showing the value of the lipstick, the labor and materials plus reasonable contractors profits and that will be under different market conditions at that time. 

You may or may not be able to cure the functionality of a floor plan, cutting a wall out might not be so expensive integrate it into the main structure, don't know. Might be some HVAC work. Find out why it is less functional and cure it if you can. Good luck :) 

PS, this is in the wrong topic area, it's not about a specific appraiser or lender. :)

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