I’ve you been following along in my journey, I decided to convert my home into a rental property, and purchase another home we love more. If you’ve been through the lending process before, you know it is extremely tedious. You have to fill out long applications, get a bunch of paper work in order, and so on. You can read my Ultimate Guide to Shopping For a Loan for more information, but in general, it is a lot of “hurry up, then wait”.
Well, last week, after a period of waiting, we got the appraisal back on the house we are looking to buy, and it ended up coming in a full $70,000 below our offer price, and well below fair market value to similar properties inside the same development. SO IRRITATING!!!!!
My Appraiser Botched The Report
The bottom line is the appraiser who did my appraisal botched the report. I can never say for sure if it was “pencil whipped” or he just made a lot of mistakes, but the bottom line is that there were 8 different technical and factual errors that contributed to this extremely low property valuation. To make me even more frustrated, the appraiser only got his appraiser license 2 weeks prior to doing my house!
Here are several factual things he missed that I found when looking over the report in detail:
- He said he reviewed the sales contract (according to a box he checked on the report), but didn’t include any of the seller concessions or the appliances included in the sale
- He had several discrepancies in the description of the home, including the foundation and exterior and interior descriptions
- The first comparable sale he used was a foreclosure from last year, which is currently a pending sale as of the appraisal date. Instead of listing it as an active listing for the current price of $550,000, he listed it as a closed sale for the foreclosure price of $338,000. That is a huge difference and is probably what directly impacted the value of my home. You can obviously see it was a flip, and the appraiser totally failed to note that.
- Comparable sale #5 was a similar issue. It is a current foreclosure listed for $390,000, but he listed the condition as good and needing no repair. However, if you look at the MLS listing, it is obviously in need of over $100,000 in repairs to bring it up to current market value.
Basically, all of these issues combined just hammered my home’s value. The other 4 comparable sales all support the price I offered, but these two mentioned completely tank the market value.
My Options to Appeal the Appraisal
Now this is where it gets pretty irritating. Luckily, I’m doing a conventional mortgage, so I have the opportunity to appeal the appraiser. However, if I had gone with an FHA mortgage, you don’t get that option.
As such, I have to write a letter to my lender detailing exactly what was wrong with the appraisal and how I believe it contributed to an incorrect home value. Then, only if the lender agrees and the appraiser agrees, does the appraisal actually get re-done.
If both parties don’t agree, my only other option is to get another lender and start the process all over.
I just send in my appeal letter, so we shall see how it goes!
Readers, have you ever had to deal with a botched real estate appraisal? How did you deal with it?