From the Forum – Question about Appraisal for Refinance

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Question about Appraisal for Refinance:

“Have any of you ever successfully challenged the appraised value from an independent appraiser? I thought I was right on track to refinance my home (of just under a year – but that’s another story), but instead the appraisal came in 3% lower than it did last year. Should I just drop it? Or, does it seem unlikely that given the steady increase in DC housing prices that the assessed value is offbase. What would you do?”

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23 Comment

  • When you say “independent appraiser”, do you mean that they were not sent by the lender? You hired them directly?

  • It really depends on what has happened in your immediate area since last year. Were there any foreclosures or short sales? That can affect your property value negatively.
    If that’s not the case, then perhaps you can get a second opinion. There are also some tools online you can use to estimate your property value based on comps in your neighborhood. Redfin has one for example.

  • It’s hard to say without knowing more specifics, but pull comp sales from the past three months and see how they line up with what you think your property should appraise for. If properities comparable to yours are selling for more than the appraisal value then you might have a case.

  • Doesn’t your tax assessment increase when you get a higher appraisal too?

    • No. Appraisals are generally for lending decisions, assessments are generally for property taxes. Unless a property changes hands, its taxable assessment can only change by 10% per year from its current assessment towards its new assessed value. (Roughly.)

    • The assessed value for taxation purposes is completely separate from the appraised market value.

    • I asked the question in the forum. My tax assessment is already higher than the *lender’s* appraiser.
      * StevenInLogan -my mistake, you are correct the appraisal was ordered by the lender.
      For additional details – I’m in NE (Atlas/Hill East area) and from what I can tell from online there have not been any nearby foreclosures nearby within the last three months.

      • lenders hire appraisers who aren’t always familiar with the area. Particularly a place like Hill East, where prices are skyrocketing quickly, and who aren’t always well versed in why an attached home on a postage stamp lot in a sought-after city neighborhood might be worth much more than a shoddily constructed SFH on a 1/2 acre in Charles County.

        Push back, find out how many appraisals this person has done in the city and how frequently the appraisals are amended. Are you working with a local lender? A national lender that has people on the ground here in DC?

      • There are more questions I could ask, but here are a few points:
        – use a local lender (NOT one of the big banks and NOT a mortgage broker). The small local lenders use local appraisers who are familiar with the area. I’ve been in situations where the big banks send an appraiser up from Richmond or something – they know nothing about the DC property market. The local lender will most likely sell your loan on to a big bank after closing anyway, so you will eventually get the service/convenience of a big bank without all the upfront hassle. A good local lender is First Savings Mortgage Corp. I have used them many times.
        – make sure the appraiser actually comes into your home, visually assesses its condition, and takes measurements and photos. If this didn’t happen, fight it hard. “Drive-by” appraisals happen all too often and they are just plain wrong.
        – if you have a good relationship with the agent who sold you your home, maybe you could ask him/her for an opinion and to pull some comps for you from MRIS if they think the appraisal is off.

  • No, your tax assessment doesn’t increase based on an appraisal. I suppose it could with a re-fi, but that’s not necessarily the case.

    I assume the independent appraisal came from your lender. Check it closely, make sure it doesn’t have any factual errors about your property – the best thing to do is to compare it with the original appraisal that was done when you bought your house. If there are factual errors, you may be able to make a case.

    Many appraisers will not negotiate and believe that their word is law, even when they are wrong. Appriasal is an art rather than a science, and people can differ about reasonable values and assumptions, especially as they relate to adjustments for neighborhood or property condition. It may be worth trying to negotiate with the appraiser, but you also might be better off with a clean slate. IF (and this is a big if) you are sure the comps support the value you’re trying to hit.

  • I jawboned an appraiser up by $20k once. I had a lot of data on my side in the form of comps. I still think he was low; he was penalizing me for not having a finished basement, when I have a three finished levels (most in my neighborhood have two) in addition to an unfinished basement.

  • Accountering

    I was able to challenge my appraisal and get it increased by $30,000. What you need to do is find an error or inconsistency in the appraisal. For mine, the size of the basement was incorrect, so I hit him on that. I also included another 6 or 7 issues I saw, and included it all in an e-mail. I sent the e-mail, and then called a few times to follow up.
    Argue basically everything they used to assess your house – try and get them to toss out the worst comp or two, because your house is better, or the comp is in a worse location… talk about ANY improvements you have done to the house since your last appraisal… Pretty much anything you can fight them on, fight them on it. Hopefully they agree with one or two of your points, but this is certainly a YMMV.
    Good luck!

  • No, your tax assessment doesn’t increase based on an appraisal The appraiser is hired by the lender. There’s no link between the appraiser and the city’s assessor.

    1. Check the new appraisal and make sure the facts are correct. You are most likely to make progress with an appeal if the appraiser missed a bathroom or parking or something like that.
    2. Make sure the comps in your neighborhood support the value you are trying to hit.
    3. Appraisal is an art rather than a science. Reasonable people can disagree, and trying to hit a target within 3% is actually a pretty small range.
    4. Appraisers do not like to be wrong and tend to dig in rather than listening to reasonable arguments about comp selection, neighborhood adjustment factors, etc. (see: appraisal is an art.) If the comps support the value you need, you may be better off with a clean slate and new appraisal/appraiser.

  • good chance you’re screwed. after the 2008 housing bubble crash banks have become much more gun-shy on this stuff. we had no luck getting our comically low appraisal of $615K for a 5 bed / 2.5 bath 4 level row house in Ledroit Park overturned.

    • That just doesn’t make any sense to me. I understand being gun-shy but how can an appraiser justify that? ( unless of course your home isn’t in livable condition). Please let me know if you feel like going on the market at the the appraised price – I’d happily snatch up your ledroit park home for 615. 🙂

  • All of my dealings with appraisers in DC have shown me that the real estate appraisal process(in DC) is a total sham. IE, if you have a number you need to hit and as long as that number isn’t totally bananas, you’ll hit that number +-5k. It’s unbelievable wizardry on their part.

  • This happened to me when I refinanced in 2012. I just found comps that I thought were better than the ones provided by the appraiser… it bumped us up enough to get out of PMI, which is all I cared about. It really wasn’t a big deal at all but I am sure each appraiser is different.

  • HI, this often happens when the borrower searches the “deal” and finds this “great” lender with the “deal”. usually way on the other coast or god knows where. Then they do not have the same pool of appraisers to order tom rather someone who is NOT familiar with DC comes out and screws up your life. Lesson for all is to work with your local lender, preferably not the Big 4 (BOA, WF,Chase, Citi) Best of luck.

  • Funny – we had a pretty similar experience on our refinance. The refinance appraisal came in at EXACTLY what we paid for it a year ago, which is clearly a joke considering that our neighbors (who moved in a week before we did) just sold at a 22% increase in price. One thing that I think was going on for us is that there weren’t comps in the type of house we have and so the lazy appraiser used last year’s comps…Also, the lender is the one who chose the appraiser so I doubt his independence, despite the fact that they claim they are 100% independent….

    • We had a similar experience with a refinance last year. The appraisal came in at exactly, to the penny, the value we needed to refinance. Because the refinance could go through, we didn’t challenge it much. However, we sold our place less than 12 months later for close to 15% higher than the appraisal. There were other comps in our building that were close to our recent sale price, so it’s not an issue of the market conditions in the last few months. Bottom line, the appraiser was way off. It might be worth telling the lender you are willing to walk if they don’t get someone in there that will conduct an accurate analysis of your property. Refinance and mortgage applications are way down, so I am sure many loan officers would be more than happy to have your business.

  • Mortgage lender here…a few thoughts. I think 3% is an important number. On a $500,000 property, 3% is just $15,000. No idea what the market value of your property is, but 3% lower than last year tells me the appraisal is not WAY off. It could simply be that your appraisal last year was a bit on the high side, and this one came in a bit low.

    At least with us, in order to appeal, you need to cite specific errors in the report (such as the wrong number of bedrooms) and/or provide 3 recently SOLD comps that support a higher value.

    It’s a bit of legwork, but if you’ve already paid for the appraisal and can’t make the deal at the current appraised value, then you might as well go for it.

    Matt Palmer

    • Matt, I appreciate your posting here, and your logic is spot on – an appraised value of just 3% lower than the previous year could easily be explained in most markets. However, many neighborhoods in DC have seen substantial price increases for single family homes (particularly so for neighborhoods like Hill East/ H St. / Trinidad). So while in a stable market a 3% drop in appraised value is an understandable margin, in areas with yoy value increases well into the double digits, a 3% fall seems completely out of place and that 15K difference suddenly looks like a baffling 65K difference.

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