What to do about a bad appraisal?
April 10, 2011 5:16 PM Subscribe
We got our home appraised so we could remove PMI ahead of schedule. The home declined in value and the request was denied. But we're convinced the appraiser did a poor job. What can we do?
So we bought our first house a year and a half ago. We got a conventional loan, but had to get PMI because we didn't have 20% to put down. A few months ago, we passed the 22% mark on our mortgage, which is the point at which you can request that PMI be removed. We did so, and had an appraisal done, according to the requirements.
The house appraised for 17% less than it appraised for when we bought it, and the PMI removal request was denied. We read through the assessment thoroughly, comparing it to the last one, and we're convinced this assessor did a poor job.
The first thing we noticed was that the square footage was different, nearly 200 square feet less than the first appraisal. But real problem was that the comparables he chose were terrible. We live on a block with lot size that's literally twice as much as most of the houses on nearby streets, but nothing on this block has sold recently so there weren't any comparables in lot size; still, it doesn't seem like he took this into account.
In addition, most of the comparables he chose were clearly not on the same level as ours. One of them sold for two-thirds what we paid for ours, and another one for just over half (a short sale in poor condition, as noted on the appraisal); the lot sizes were tiny and the number of bedrooms and bathrooms was less. We went on Zillow and found a few other ones (within the same distance as the comparables) that sold for $10-20k more than ours within the past 90 days, and they had very similar specs. Our next-door neighbor's house sold about nine months ago for $10k more than ours, and our house is in better repair than theirs - but nine months is outside the window for comparables.
We do not have any fanciful ideas that our house could never decline in value, but I feel like we got a bad appraisal and have to keep paying PMI because he chose bad comparables. The bank selected the appraiser both times, but this one only charged $150 vs. the $400 that we paid for the other one; his report is very sparse compared to the other one, and he was only here for about 10 minutes when he did the appraisal. Maybe I'm just being cynical, but it seems like it's in the bank's best interest to choose an appraiser who will rate it accurately (and highly) at the time of sale, and to choose one who may not be as thorough and will appraise it at a lower value when it means that we continue to pay for their insurance...
What should we do? Should we call the appraiser and (nicely) ask him about it? Should we call the bank and contest the appraisal, and request that they have another one done? Or should we just wait for a few nearby homes to sell this spring so that the comparables are better, and then get another appraisal in six months with our fingers crossed?
So we bought our first house a year and a half ago. We got a conventional loan, but had to get PMI because we didn't have 20% to put down. A few months ago, we passed the 22% mark on our mortgage, which is the point at which you can request that PMI be removed. We did so, and had an appraisal done, according to the requirements.
The house appraised for 17% less than it appraised for when we bought it, and the PMI removal request was denied. We read through the assessment thoroughly, comparing it to the last one, and we're convinced this assessor did a poor job.
The first thing we noticed was that the square footage was different, nearly 200 square feet less than the first appraisal. But real problem was that the comparables he chose were terrible. We live on a block with lot size that's literally twice as much as most of the houses on nearby streets, but nothing on this block has sold recently so there weren't any comparables in lot size; still, it doesn't seem like he took this into account.
In addition, most of the comparables he chose were clearly not on the same level as ours. One of them sold for two-thirds what we paid for ours, and another one for just over half (a short sale in poor condition, as noted on the appraisal); the lot sizes were tiny and the number of bedrooms and bathrooms was less. We went on Zillow and found a few other ones (within the same distance as the comparables) that sold for $10-20k more than ours within the past 90 days, and they had very similar specs. Our next-door neighbor's house sold about nine months ago for $10k more than ours, and our house is in better repair than theirs - but nine months is outside the window for comparables.
We do not have any fanciful ideas that our house could never decline in value, but I feel like we got a bad appraisal and have to keep paying PMI because he chose bad comparables. The bank selected the appraiser both times, but this one only charged $150 vs. the $400 that we paid for the other one; his report is very sparse compared to the other one, and he was only here for about 10 minutes when he did the appraisal. Maybe I'm just being cynical, but it seems like it's in the bank's best interest to choose an appraiser who will rate it accurately (and highly) at the time of sale, and to choose one who may not be as thorough and will appraise it at a lower value when it means that we continue to pay for their insurance...
What should we do? Should we call the appraiser and (nicely) ask him about it? Should we call the bank and contest the appraisal, and request that they have another one done? Or should we just wait for a few nearby homes to sell this spring so that the comparables are better, and then get another appraisal in six months with our fingers crossed?
I was in your exact situation with the PMI. I contested my appraisal, and was denied. The appraisers, trying to make nice with the banks, are deliberately setting their numbers low, and there's nothing I could do about mine. We pointed out all sorts of things, but he kept insisting that because one person three blocks away sold their home at a very low price (heirs who just wanted to get rid of the property quickly), that was the value of the neighborhood.
My only other option was to find another appraiser. I wasn't interested in shelling out another $400 to only find the same conclusion if not lower, so I didn't bother. I think this is an overall trend that we just have to wait to blow over.
posted by Melismata at 6:21 PM on April 10, 2011
My only other option was to find another appraiser. I wasn't interested in shelling out another $400 to only find the same conclusion if not lower, so I didn't bother. I think this is an overall trend that we just have to wait to blow over.
posted by Melismata at 6:21 PM on April 10, 2011
We had this come up when we passed the 22% mark and wanted to have the PMI removed. As I had been tracking the sales of homes in our neighborhood I was aware that our appraisal was most likely going to come in lower (similar situation as described by Melismata, homes were being sold by heirs who wanted to get rid of property quickly). Rather than throw away $400.00, we went with Option C and refinanced via a home equity loan, dumping the mortgage and PMI altogether.
posted by theBigRedKittyPurrs at 6:39 PM on April 10, 2011
posted by theBigRedKittyPurrs at 6:39 PM on April 10, 2011
We had a similar issue when we refinanced last year. The appraiser (chosen by the bank that our new mortgage company was planning to resell the mortgage to - ugh) turned out to be somebody in a cube farm 3000 miles away, who didn't actually visit the house, just looked up comps for our zipcode. Our zipcode covers a pretty diverse set of neighborhoods, and we are at the top end of that diversity, so they totally and ridiculously lowballed our house value.
We called the mortgage brokers and had a shit-fit about this. Of course we weren't going to refi at that appraised value, so it was in the broker's interests to help us out. They paid for a local appraiser to come out to view the house, and do proper comps. He wrote a rebuttal, which was sent to the bank. Sanity prevailed at last.
posted by Joh at 10:42 PM on April 10, 2011 [1 favorite]
We called the mortgage brokers and had a shit-fit about this. Of course we weren't going to refi at that appraised value, so it was in the broker's interests to help us out. They paid for a local appraiser to come out to view the house, and do proper comps. He wrote a rebuttal, which was sent to the bank. Sanity prevailed at last.
posted by Joh at 10:42 PM on April 10, 2011 [1 favorite]
Try to think of it from the bank's point of view. If your home is worth, say $500,000, it's in their interest to value (effectively, loan against) it as little as possible: say, $300,000? In the present economic situation, there's a high possibility that your plans for the money that they're assuming you want to release for other uses will go bust. The lower they can appraise, the bigger their possible profit in the future (in this case, any where up to and including $200,000). The bank is "shorting" you. All of the reasons they give you for the low appraisal are just reasons they need to lower the value---they have nothing to do with the "real" value of your place. Joh's strategy is the best, because of the way it allows you to document the case when you take it to a higher authority---in the event that they don't cave :)
posted by alonsoquijano at 2:18 AM on April 11, 2011
posted by alonsoquijano at 2:18 AM on April 11, 2011
Do you own one of your vehicles outright? You could get a loan with your vehicle as collateral with a smaller interest rate than your mortgage (or a credit card) and potentially make up the difference so that you don't have to pay PMI. Of course, you would want the auto loan payments to be less than the total PMI you are paying.
Check your local credit unions - they tend to have very good deals on auto loan rates.
Appraisals in this economy are going to be less than you hoped, I think, anywhere. Ours was.
posted by jillithd at 6:59 AM on April 11, 2011
Check your local credit unions - they tend to have very good deals on auto loan rates.
Appraisals in this economy are going to be less than you hoped, I think, anywhere. Ours was.
posted by jillithd at 6:59 AM on April 11, 2011
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YMMV and it doesn't hurt to try, but you may end up waiting the amount of time necessary and hope for a better result.
posted by maxg94 at 5:46 PM on April 10, 2011