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AARRGGHH! What's the deal with appraisals these days?

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My husband and I are trying to build a house. We got the preliminary appraisal back today and are dumbfounded. It's about $200,000 LESS than the projected tax assesment on the property.


They figured $85 a square foot for the finished space... and gave us NO VALUE for the 1800 square foot basement the 250 square foot workshop, the 350 square foot garage, or the 600 square foot bonus room. PLUS, they didn't add in the additional 5% value for building it from an ICF product (insulated concrete forms)


The bank is also scratching their heads. They are looking at my budget numbers and calling them "low" -- but then say the value assessment has to be off.


I'm sitting here looking at a builder's quote (cost+) and Their estimate to build the thing using 2x4 exterior framing, basic insulation, and minimum code requirements, with vinyl floors, cheap cabinets and formica counters, cheap, cheap, cheap still exceeds the appraised value of the home -- by more than $50,000!


I realize we're in a down market, but geez louise, this is a 4,000 square foot home (plus the garage, workshop, basement and bonus room) -- on 3 acres, outside of DC. Comparable new homes (from builders like Lennar) are close to $600,000 -- but they aren't concrete! Comparable custom homes are $650k+ (but they aren't concrete either).


I'm just in shock. I won't be sleeping tonight.

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Appraisers do make mistakes. What I would recommend doing is calling your loan officer (assuming this appraisal is for new construction) and have him/her talk to the appraiser and make sure that the things you noticed that were omitted are added in. Why have the loan officer do it? Well, even though you pay for the appraisal in your bank fees, technically speaking the appraisal itself was ordered by your bank, and paid for by them. So the bank is the appraiser's client, not you.


Just be calm. If the loan officer wants you to contact the appraiser, then by all means do so. But remember - the appraiser is paid the same whether your deal goes through or not. He/she gets no benefit from lowballing your value. Or estimating it too highly.


See if you can get a copy of the appraisal. See what comparable sales were used in determining market value. It may be that you are over-building for your area... in other words, your costs may exceed what you could actually get for the property when it's complete. This is a common harsh reality in many markets across the U.S. If this is the case for you, then the bank will be hesitant to give you a loan based on construction costs alone. They have to look at the real estate market trends to protect themselves should you default on the loan.


I was also a tax assessor. Most assessments are a percentage of market value. Call your assessor's office and ask them what their values are in relation to market value. This will give you an indication as to whether or not the assessment is close to market value. If the assessments on average are not very close to actual market value, then comparing them to appraisal values via your bank loan would be close to meaningless.

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Thanks for the advice. I'm trying to remain calm -- but basically we now can't close on the lot on Friday, and I'm hoping the seller doesn't have a back-up offer and sell it out from under us.


I have copies of the land assessments, which all value the land at $90k more, than the appraisal. The county valuation put the home approximately $595 -- and they haven't accepted any appeals to-date to lower assessments based upon appraisals.


I totally get what you're saying about over-building for the area. Houses are still being bought and sold, and our home is in keeping with the neighborhood. Similar new homes are being sold (albeit, on .25 acres versus 3) for $550+ all around us. Homes back in this area do vary in size and age -- but we're not the biggest house (by any stretch). My parent's 15 yo home (about 4 miles away) is roughly half the size on 3 acres and appraised at $436 by the bank.


At $195 for the land and $50 a sq. ft. for total under roof, this should translate to approximately $545 using the same standards. However, building an energy-star, green home also is supposed to increase our home value by 5%, which should mean our house (just as a basic build, no deck, no hardwood, everything cheap -- like my folks), should make aour appraisal at $562 -- which while a bit lower than we expected, is still within a more acceptable range.


I still feel I should have gotten a copy of the appraisal, especially since we actually wrote the check, and paid for the appraisal ourselves -- not the bank.


Thanks for listening.

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In our area- they never value a basement- and at least here they won't give much value if any to a shop/garage. You will get some but not even close to a build value if it is nice. We had our home reappraised several years ago- disappointed and puzzled by the assessment (tax assessment value is the same- which I find odd) this was in prep for putting it on the market. After I asked around I was told- even a daylight basements will only add a little and no matter how nice a shop/garage they won't give it more than $20, 000, that is the cap- I know its very frustrating.

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The biggest problem is the land -- if the land was valued properly, I'd be a little dissapointed, but at least we wouldn't be in the bind we are right now.


I found our future neighbor's house size/sale information. New house 2 doors down: almost the exact same finished square footage & lot size $588k sold 1/28/2008. My house? $476k. Major difference? Their land was valued at $215k, mine at $111k.


New house down the street (4 doors away) Sold Nov. 15, 2007 for $678k. Larger finished space. New house around the corner? Sold Dec. 18, 2007 for $725,000 (larger lot and larger house).


New home of comp size, different neighborhood (within 3 miles) $505k -- difference? They have 1/3 acre, and we have 3.


I haven't heard back from the appraisal company yet... I would have thought I would have by this time, though.



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We had our house reappraised this winter and the value of the land came out to be 55K. We have almost 6 acres. Typical flat farm land that has been subdivided for building lots go for about 10-12 K per acre here in our acre. Out land has woods, a creek, and is adjacent to the bike path. If just the land were on the market it would probably sell for 17-20 k per acre. But that is not what the appraiser said. It is frustrating but they work iwth averages.

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I sent a copy of the county assesment to the appraiser and the bank -- as well as the valid comps (last 1-6 mos) from the neighborhood for same sized house/land.


The bank agrees that the land valuation is not correct.


The appraisal company is re-doing the appraisal based upon the county numbers.


We should have this cleared up (and my new appraisal in for about $550-580k) this week.




The bank & builders we're working with called to say that they were "impressed" by the statistics, county tax assessment information, neighboring comps (using new construction only), and area builder prices for similiar homes on similar sized lots.


I backed it all up, forwarded the links and every piece of information I could. Apparently, it made a difference.

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At first, they weren't -- until I faxed & e-mailed all of the information (I was very detailed). The county assessment is from Jan '08 -- and is based on "fair market value." They use the same formula for all of the county -- so it's pretty hard for an appraiser to say this ONE lot is worth less than the county stipulates (unless there is a reason).


Most of the developers in the area are into their land for a lot more than I'm paying for it (our county requires proffers... a developer has to pay the county around $35k just to build a house, add that to minimum lot sizes of 3 acres and that all factors into drive land values up). An appraiser can't ding you for being a good shopper! I got my GE Monogram Gas Cooktop (36") for $560 including shipping! It retails for $1899. I'm getting my flooring for $4.25 (Brazillian Cherry 5" planks, 3/4" thick -- normal retail is around $7-9, not including installation). It's work, but it pays off!


As an FYI, mistakes in appraisals happen all the time. I still don't know what comps were used to bring mine in so low, but I have a feeling they based some of it on conversation we had (regarding what my cost to build was coming out to be... I neglected to tell them we were doing about $40k in labor, and some of the deals I was getting that MOST people don't get).


The actual cost to build my home should be about $525,000 (including the land). We're building the hosue for around $431,000 (including the land, closing costs, interest, etc.). When all of the finishes are in, and the house goes through the final appraisal, we should be seeing a number closer to $650k, even in the down market. If we are able to finish the basement -- that number should jump to about $700k


But, all we are hoping for (at the end of the process) is to have a final appraisal of around $600, making our loan-to-value 75% (our loan will be for $450... I need some furniture :D). Any "extra" value just means a better ratio and lower interest rates for us!


Have fun! It's a wild ride these days.


www.trulia.com has some great comp information. Look at all of the homes in your area, and find the ones that come closest to your home in age, size, location -- and you'll have a great start for your appraisal. You get $$$ for better finishes, recent remodel work (just like you lose $$$ for poor condition).


Good luck!

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Obviously, I can't answer your questions, but I do confess that I always read the threads about the US economy, the extra fed $ conversations etc etc, mtg's, real estate bubbles, -- it's a fascinating thing to have access to real opinions, feedback, ideas from you folks on the other side of the border. Very insightful.



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