My hubby and I are trying to take advantage of the low interest rates and refinance. No problems with approvals...until the appraisal. Some history: We bought in 2005 and assumed the appraisal would come in near what we paid, which was in line with 2004/2005 prices at the time. The appraisal has come in for much less and we're pretty sure it's off. Since there aren't a ton of good comps the comps... [more]
My hubby and I are trying to take advantage of the low interest rates and refinance. No problems with approvals...until the appraisal. Some history: We bought in 2005 and assumed the appraisal would come in near what we paid, which was in line with 2004/2005 prices at the time. The appraisal has come in for much less and we're pretty sure it's off. Since there aren't a ton of good comps the comps the appraiser used are for smaller apartments, with no viws in less established buildings. (I know the exact apartments the appraiser used because my hubby and I actually looked at most of them when we were buying and they either had terrible floor plans or were dark, back facing, etc.) The reason we bought our apartment was that compared to the rest in terms of size our place was and still is beautiful with side park views, etc.
What's odd is that appraiser's own comps show that the other apartments have keept their 2005/2006 value (he used StreetEasy). For example, an apartment he used as a comp sold in 2005 for x. That same apartment just sold for the same amount. Yet, our apartment which sold for y in 2005 he has adjusted downward significantly.
Has anyone else had the problem? I'm pretty aware of the market conditions so have no grand illusions that our apartment is worth more today than it was in 2005. So why the odd discrepancy between thinking a different apartment would hold it's value and ours wouldn't?
Thoughts?
Thoughts?
[less]
Response by grunty
about 16 years ago
Posts: 311
Member since: Mar 2007
Wow - can't believe no one commented on this. Anyone out there?
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Response by inonada
about 16 years ago
Posts: 7952
Member since: Oct 2008
How many percent lower was the appraisal than what you paid?
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Response by chuckl1233
about 16 years ago
Posts: 122
Member since: Jun 2007
What are the differences in the buildings, the appraiser used as opposed to yours?
What number did the appraiser come up with and what do you think your place is worth?
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Response by grunty
about 16 years ago
Posts: 311
Member since: Mar 2007
The appraisal was 15% lower than what we paid in 2005. I'm less worried about the percent (though obviously I do care) and more worried about the lack of logic with the appraiser.
The comps the appraiser used stayed flat in terms of their pricing btw 2005 and 2009.
The BIG differences between our place and the comps: the specific comps are rear facing (vs open, side park facing), low flows (in one case the comp was a ground floor) and/or the building is on busy/major cross town street vs. on the park.
Somehow lesser apartments are holding their 2005 value and ours is not?
We're not selling, just refinancing to take advantage of the lower interest rates. We can pass on the whole thing but I just it very odd.
hmmmm...
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Response by alanhart
about 16 years ago
Posts: 12397
Member since: Feb 2007
I've read that (despite rising appraisal costs to buyers) fees paid to appraisers have been slashed, the result being that appraisers from way outside expensive urban areas are doing appraisals for which they're totally unqualified, and often don't at all understand the market.
Do you know if your appraiser is based in Suffolk County, or way out in NJ or PA?
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Response by ab_11218
about 16 years ago
Posts: 2017
Member since: May 2009
i agree with alanhart... whenever you are doing a refi, the bank gets the most incompetent, least knowledgeable and furthest away appraisal company. they do not know the buildings, neighborhoods, views or layouts, they just know the $ per square foot, if that much.
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Response by REMom
about 16 years ago
Posts: 307
Member since: Apr 2009
Our appraiser valued our renovated 3rd fl unit at $650/sf, even though the unrenovated ground floor unit in our building sold weeks before for $750/sf. The previous 3 sales in our building were at over $750/sf from 2008 to summer 2009. It was annoying but did not impact our refi since our LTV was below 50%. I think refi appraisals typically come in lower.
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Response by mimi
about 16 years ago
Posts: 1134
Member since: Sep 2008
I heard of some appraisals that were way higher than the price the places were worth.
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Response by alanhart
about 16 years ago
Posts: 12397
Member since: Feb 2007
recently?
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Response by chuckl1233
about 16 years ago
Posts: 122
Member since: Jun 2007
Lenders are choosy who they tend to give their appraisals to, however, if there is an appraisal mgmt company involved, there could be a problem. An appraisal mgmt company gets a large part of the appraisal fee and gives the actual appraiser a very low portion. Now, you have unqualified appraiser who will work for nothing because they need the work. This has been happening since the HVCC rule has gone into effect. Be careful though, just because an appraiser is from a firm from LI or Jersey,doesn't mean they don't know NYC; they might only complete Manhattan appraisals. Anyway, good luck.
If you really believe, the appraisal is low in value, dispute the value. Be ready to explain your side.
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Response by mimi
about 16 years ago
Posts: 1134
Member since: Sep 2008
Yes, Alan.
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Response by 30yrs_RE_20_in_REO
about 16 years ago
Posts: 9881
Member since: Mar 2009
"I heard of some appraisals that were way higher than the price the places were worth."
If appraisals are coming in BOTH way too high AND way too low, I think it strengthens the "incompetance" theory, no?
____________________
David Goldsmith
DG Neary Realty
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Response by KeithB
about 16 years ago
Posts: 976
Member since: Aug 2009
Just had two done on same unit; #1@ $3m #2@ $2.5m= perhaps 30yrs is right (again :)
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Response by modern
about 16 years ago
Posts: 887
Member since: Sep 2007
"If appraisals are coming in BOTH way too high AND way too low, I think it strengthens the "incompetance" theory, no?"
How about it strengthens the illiquid assets are hard to price theory?
There is no "right" answer when valuing stuff that is illiquid and has no real active market. Maybe cookie cutter apartments that sell a dozen a month, other than that comps are not really comps.
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Response by 30yrs_RE_20_in_REO
about 16 years ago
Posts: 9881
Member since: Mar 2009
modern: I would agree with that except when hearing things like "Our appraiser valued our renovated 3rd fl unit at $650/sf, even though the unrenovated ground floor unit in our building sold weeks before for $750/sf." and "the specific comps are rear facing (vs open, side park facing), low flows (in one case the comp was a ground floor) and/or the building is on busy/major cross town street vs. on the park.".
But also, it's not as if ZERO transactions are vein done. I'm sure there are as many sales being done today as in 1984, 1992, etc. and appraisals still got done with valid comps. Or do you think the market is SO illiquid right now that even a fully competent appraiser can't find true comps for most units?
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Response by 30yrs_RE_20_in_REO
about 16 years ago
Posts: 9881
Member since: Mar 2009
vein = being
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Response by grunty
about 16 years ago
Posts: 311
Member since: Mar 2007
30 years, I think you nailed it: "do you think the market is SO illiquid right now that even a fully competent appraiser can't find true comps for most units?". Since there are few true comps , the only thing that they can compare to is what's actually been sold. I did a ton of research on StreetEasy and I couldn't find one single true comp in our area.
Wow - can't believe no one commented on this. Anyone out there?
How many percent lower was the appraisal than what you paid?
What are the differences in the buildings, the appraiser used as opposed to yours?
What number did the appraiser come up with and what do you think your place is worth?
The appraisal was 15% lower than what we paid in 2005. I'm less worried about the percent (though obviously I do care) and more worried about the lack of logic with the appraiser.
The comps the appraiser used stayed flat in terms of their pricing btw 2005 and 2009.
The BIG differences between our place and the comps: the specific comps are rear facing (vs open, side park facing), low flows (in one case the comp was a ground floor) and/or the building is on busy/major cross town street vs. on the park.
Somehow lesser apartments are holding their 2005 value and ours is not?
We're not selling, just refinancing to take advantage of the lower interest rates. We can pass on the whole thing but I just it very odd.
hmmmm...
I've read that (despite rising appraisal costs to buyers) fees paid to appraisers have been slashed, the result being that appraisers from way outside expensive urban areas are doing appraisals for which they're totally unqualified, and often don't at all understand the market.
Do you know if your appraiser is based in Suffolk County, or way out in NJ or PA?
i agree with alanhart... whenever you are doing a refi, the bank gets the most incompetent, least knowledgeable and furthest away appraisal company. they do not know the buildings, neighborhoods, views or layouts, they just know the $ per square foot, if that much.
Our appraiser valued our renovated 3rd fl unit at $650/sf, even though the unrenovated ground floor unit in our building sold weeks before for $750/sf. The previous 3 sales in our building were at over $750/sf from 2008 to summer 2009. It was annoying but did not impact our refi since our LTV was below 50%. I think refi appraisals typically come in lower.
I heard of some appraisals that were way higher than the price the places were worth.
recently?
Lenders are choosy who they tend to give their appraisals to, however, if there is an appraisal mgmt company involved, there could be a problem. An appraisal mgmt company gets a large part of the appraisal fee and gives the actual appraiser a very low portion. Now, you have unqualified appraiser who will work for nothing because they need the work. This has been happening since the HVCC rule has gone into effect. Be careful though, just because an appraiser is from a firm from LI or Jersey,doesn't mean they don't know NYC; they might only complete Manhattan appraisals. Anyway, good luck.
If you really believe, the appraisal is low in value, dispute the value. Be ready to explain your side.
Yes, Alan.
"I heard of some appraisals that were way higher than the price the places were worth."
If appraisals are coming in BOTH way too high AND way too low, I think it strengthens the "incompetance" theory, no?
____________________
David Goldsmith
DG Neary Realty
Just had two done on same unit; #1@ $3m #2@ $2.5m= perhaps 30yrs is right (again :)
"If appraisals are coming in BOTH way too high AND way too low, I think it strengthens the "incompetance" theory, no?"
How about it strengthens the illiquid assets are hard to price theory?
There is no "right" answer when valuing stuff that is illiquid and has no real active market. Maybe cookie cutter apartments that sell a dozen a month, other than that comps are not really comps.
modern: I would agree with that except when hearing things like "Our appraiser valued our renovated 3rd fl unit at $650/sf, even though the unrenovated ground floor unit in our building sold weeks before for $750/sf." and "the specific comps are rear facing (vs open, side park facing), low flows (in one case the comp was a ground floor) and/or the building is on busy/major cross town street vs. on the park.".
But also, it's not as if ZERO transactions are vein done. I'm sure there are as many sales being done today as in 1984, 1992, etc. and appraisals still got done with valid comps. Or do you think the market is SO illiquid right now that even a fully competent appraiser can't find true comps for most units?
vein = being
30 years, I think you nailed it: "do you think the market is SO illiquid right now that even a fully competent appraiser can't find true comps for most units?". Since there are few true comps , the only thing that they can compare to is what's actually been sold. I did a ton of research on StreetEasy and I couldn't find one single true comp in our area.
Thanks all for the insights.
We're going to pass on the refi.