All Forum Posts by: Todd McFarland

The appraisal is their opinion of value. I would suggest disputing it, but in a dispute you have to show an error or something that they missed or didn't know to have a chance of winning. You can never just dispute that you disagree with value, as they will never accept that. In some cases they will make changes to the appraisal and it doesn't actually change their opinion of value. Very frustrating I know, but would recommend running a dispute. If it doesn't work you could switch lenders and order a new appraisal (if it is fha the appraisal will stay with the property). Considering the difference isn't great, I would suggest paying the difference if the dispute doesn't help. 

Good Luck! Aaron

No, I got you the first time. If there is an appraisal contingency, both parties are allowed to back out if either party is not willing to go with the appraised value. 

Happened with my recent purchase where the appraisal was more than 10% below the agreed upon price because it was tough to find good comps for both the listing agent and the appraiser. There was a bit of a stalemate where the seller was in shock and supposedly wouldn't budge, so I offered to cover ~25% of the gap and they went for it. Seller fatigue is a thing. 

Now if there are easily verifiable flaws, you have a chance, but you are still relying on the appraiser to acknowledge their mistake. Otherwise, your only option is to start over with another lender. 

That would be difficult. Reason is: this particular block PSF max is $119. With your house size, the max 'normal' valuation is only $143k. This particular block has a neutral rating in terms of appreciation. Even if it's C2 it's still can't go beyond $119 PSF.

 C4 is 128-135k

Is that what your appraisal says ?

You always need a certain percent down. If it appraised for $500k they wouldn’t borrow you $400k (80%) if you we’re buying it for $130k. The most you can borrow is a percent of the purchase price or that percent of the appraisal, whichever is LOWER. That percent should be in your loan dox. 

The only time the appraisal matters is when it’s lower than the purchase price. Then you need to bring that difference in “cash” in addition to your downpayment. 

If I know the address, I can guess the appraisal. The C4 is usually at the low 30-40% percentage of the range. These days most appraisals are just almost likely following automatic software valuation, automation valuation software has a range and C4 definitely is low to medium. 

Nowadays higher bids happen not because of the quality of the house but to get selected from the competition. Now since most appraisal uses list/sold value from 6-12 months ago, that's where the potential gap is. That's why expect to wait for at least 13 months to catch up with the market.

it’s always worth appealing but at the end of the day, you are telling someone they did their job wrong and hoping that they will acknowledge that and rule in your favor. Good luck with that. 

Otherwise, the seller will probably try to hold their ground but if the property has been listed for a while, there is a good chance they will give in for the sake of closing the deal and not having to go through the whole process again. If they really seem stubborn, offer a few K so that they feel like they are getting something. 

@Todd McFarland there's several nuances to what you are asking.  Let's cover a couple of things:

1. Loan Type - Do you know what type of loan you are getting? Meaning, a Fannie/Freddie type of loan will require a down payment no matter what the appraised value is. So if your down payment requirement is 15% down - that's 15% down whether the home appraises for $147k or $155k. Most "permanent" loans are structured in this fashion. A loan like a Hard Money Loan (HML) will be based on the ARV of the property. Those usually lend 75% of the ARV. So if you can buy and rehab at 75% of the ARV, then you could come out of pocket with $0. It's kind of hard to do it like that but that's the concept of it at least. Your loan type will determine what the right course of action here is.

2. Value - this is something that is very important to understand.  In your appraisal there should be some "definitions" or "key" that will define certain ratings.  Usually C3 means that SOME of the parts of the property have been replaced.  C2 = ALL have been replaced.  C1 = entire property is brand new.  So if your comps are all C3 and the appraiser is giving you that same condition rating, that's pretty good.  The only way to get value higher is if your comps show higher value.  To formally contest the value you would need to show comps that are more similar to your property than the comps in the appraisal.  

3. Lender - Now, it sounds like you in are process of a loan with a lender - do I have that right?  Your lender should be able to answer all of these questions better than any of us can because they can see the information that I am asking you about.  Lean on them for these answers...hopefully they know what they are doing.

The time to submit information, comparables is BEFORE the appraiser goes out. You should have supplied a list of three to four sales in past three months with same square footage and condition. Residential appraisers do not look at ARV so your loan officer failed you when they did not ask enough questions.

Average condition means average materials used appropriate for the market. Paint zero value. Carpet zero value add. Now maybe if your comps have old linoleum counters that are peeling vs gorgeous quartz there might be a $1000 adjustment up there. Remodel costs do not equal adding to value.