Friday, December 13, 2013

What Can I do If My Appraisal Came In Too Low?

By Mike Young 
Home Inspector with, covering California & most other states S0289 

You hear stories now and again that indicate the apprased value of a home was lower than expected. That happens now and then but you must remember that the appraiser is only giving you their "opinion" of value and that if you disagree, you can suggest other comps you feel they should have used or have another appraisal done if you feel the appraiser didn't know the neighborhood. The appraiser will obligated to respond to your comps and tell you why they didn't use them.

You can even use the same lender's stable of appraisers. You don't necessarily need to change lenders to get that second opinion though you may want to. Using in AMC isn't always the right answer but they will have more than one appraiser to choose from for sure.

USPAP or Uniform Standards of Appraisal Practice calls for an appraiser to know the area they are appraising, and understand and apply their appraisal principles. Two appraisers given the same assignment and using the same comparables may come in 3-5% different. If it is more than that then you have to read the reports to see what each thought was more important and why they gave more weight to one comp over another and then decide if another appraisal is needed.

 I did an appraisal review years ago in Fairfield CA, about six blocks from where I lived. The subject property had a pool and the appraiser had given most wight to a home within a block that was at the entry to that micro neighborhood so each car in the neighorhood had to pass this house on the way home while the subject was the second house from the end of the block on a dead end street. Most weight was given to this first comparable sale. There was an adjustment for lack of a swimming pool.

Being the first house at the entry to the micro neighborhood it backed to a busy street, sided to a busy street. When I was doing the review I merely got out of my car, walked to the fence on the sidewalk and could see it had a swimming pool. I was able to use the exact same comps the appraiser used, correct their adjustments for the false assumptions and come up with a more accurate assessment which was about $20,000 less than the appraised value as I recall. As you make adjustments on the grid and you adjust properly the value should present itself. The amazing thing is it will be supported across the board on all of the comps if your adjustments are correct.

If you miss fixing some health or safety items like straps on the water heater or CO or smoke detectors your appraiser may have to revisit the site for a 442 inspection to see these items have been corrected at an additional fee and you have to let them in which costs YOU time and money. Best to have those fixed prior to the first visit.

If the appraisal is only 5-10% low you can change loan programs to the FHA 203k and gain 10% advantage as long as those little issues are included in the report the appraiser has to see them "as repaired".. Having had about 39 appraisers on my staff over the years it was an issue from time to time to prove but not a regular occurrence. FHA 203k loans, both the streamlined k which has no lower limit or the Standard 203k can gain you that 10% advantage on the appraised value.