Appraisal came in really low

It's amazing how the consumer can blow away the "professional" at his own profession. Appraisers are a dime a dozen. Get rid of this nincompoop look at that the word "comp" is in there. Point out to the bank that they are using incompetent look again "comp"! people to perform the appraisal and you will take your business elsehwere if the situation isn't rectified. and you won't pay the appraisal fee due to negligence.

Dumb Appraisers.

you can request another appraisal from the bank. most of the time they will not do it nowadays. i would suggest going to another bank. getting an idiot to do an appraisal is one of the easiest things in real estate and happens often.

Wow, finding a 2BR in Cobble Hill for 500K is extremely difficult (unless it's on the wrong side of the BQE). I'm even impressed you found one for 550K.
Yeah, I'd get another appraiser.

The problem is is that it's really tough to find adequate comps. There just hasn't been a lot of turn over so there isn't any data.

@B'wayron: I said that to the mortgage broker. If i found an apartment this nice in Cobble Hill for 500, i'd already be living there!

This is one of the comps used:
http://streeteasy.com/nyc/sale/497956-coop-368-state-street-downtown-brooklyn-brooklyn

I remember looking at this place, thinking that the living room size was a joke. Listed for 600, sold at 480 - and then a phantom listing at 525. What's going on?

And, hell, 368 State St is quite a stretch (logistically) for a CH comp. Granted, State St is nice, but that neighborhood has a completely different vibe than CH.
Heh, a 9ft wide living room... if you are sitting on your couch, you won't need a remote to change the channels on the tv.

so they used a 1 br, really that's all it is, in Boerum Hill for your appraisal in Cobble Hill. most appraisers come from Upstate or Suffolk. they think that brooklyn is just a borough and pulling comps from within the MLS and 1 mile area should be good enough.

Can someone explain "comp." Can someone explain the overall appraisal process too?

ab_11218,

Thanks for your information! Can you shed more light on your reply?

typically the appraiser is suppose to figure out what kind of apartment it is (1 br, 2 br, etc). then look within a 1 mile radius, in the neighborhood, of similar apartments that were sold within the last 6 months. they try to do it within the last 3 months if there were enough sales.

if the appraiser knows the area, they can do a good job. if not, then they just follow those guidelines.

in your case, i would expect that they would look in cobble hill/carroll gardens area as they are more or less the same. the one who doesn't know any better would use a comparable (comp) for an apartment around court street and use something from columbia st. it's within a mile, but a very different price. i would never take a comp for cobble hill from the other side of atlantic avenue. brooklyn heights is more expensive and boerum hill is less. they may also take a comp next to the projects for something on henry st which would be incorrect as well.

if you are working with a mortgage broker, rather then a bank, you just pay another $300 and they will get someone who actually knows the are. i've had great experience with MMJ appraisal company. they're in manhattan and do a lot of work in that area. they used to have an office in brooklyn heights before the melt down. all banks take their appraisals and they do so many.

what i forgot to mention above, and this is a biggy, is the condition of the apartment vs comps. this is something that can only be determined by an appraiser who knows the area and has contacts in the RE arena. when they find something that sold, they can usually call the agent who sold and determine what +/- need to be given in the appraisal.

The appraisal was pretty complete, but the main thing was location and sqft of the comps used. If they are off by even 50sqft, it's a big different.

The appraisal company was Landsafe...and it appears they contracted out 'Superior Real Estate Appraisals, Inc"...somewhere in the Flatlands area of Brooklyn.

Our appraisal was from Landsafe, too. It had numerous material errors (e.g., source of heating fuel) that had to be corrected before the mortgage could be issued. The value stayed the same, however.

What I found interesting is that the appraiser used measured square footage for our apartment and stated square footage for other apartments.

We have a ~750 square foot space (900 in realtor speak) that was compared against apartments that had stated square footage of 750, but actual square footage of 600 or less based on floorplans. (And I had been in some of them to verify.)

It made us feel good that our place still appraised for the purchase price when our square footage was given a 20-25% handicap.

the people from flatlands should not have been doing appraisals. they know that part of brooklyn and have no clue about "downtown" area, as they call it.

@lad: Exactly. When Price/GLA is the #1 determining factor, it's baffling that they use measuring tape for the subject apartment, and simply a listed sqft for others.

Cc?

yes hones?

> but it's so much lower, that it's not good for anyone.

it's great news for you! just offer $500k for the place and that's it!

it's the seller's issue, not yours as far as i can see

ab_11218,

You are thorough. Thanks for the enlightenment.

As an update:
I prepared a thorough dispute to the appraisal. I'm not getting my hopes up. But mind you, my (hopeful) place is smack in the middle of Cobble Hill. The comps used were on Degraw, the other had a 51sqft second bedroom with a fake kitchen in BrkHgts, the State street one (a block from the substance abuse center and 4 from Atlantic Yards mess), and the other on Union, 1.5 blocks from the Canal. No adjustment was made to the quality of the neighborhoods.

Also, i'm going to another bank and rolling more dice with another appraiser. Who knows - they might be worse! Can we educate the appraiser with some neighborhood info and decent comps? Good money after bad??

Gato,

I know $50K is a lot of money from where you're standing, but OTOH, 10% variance between the contract price and the appraisal price isn't "much."

That might work in your favor -- you can tell the second appraiser that the first was lower than you'd hoped by a small margin, but used comps A and B while you feel like comps Y and Z are more relevant to your neighborhood and the contract price of $550K.

Good luck!

ali r.
DG Neary Realty

If appraisal is lower than your purchase price, doesn't it mean you're overpaying? Great for the seller, bad for the buyer.

What does a lower appraisal mean when you are refinanciing. For example, five month ago appraised at $1MM and then appraised now at $900K. If refinancing and putting money in should this make a difference?

Many banks will consider another appraisal. First I would check the comps to make sure they are in fact comparable. So many times I find sub-par comps, when the banks become more conservative, or they use appraisers that don't seem to know the area as well! Sounds like you did that! Second check sq. ft. and overall accuracy of the appraisal. ( Perhaps do that 1st) You may need to do some leg work and find other sales in the area. In the old days you couls call Real Estate offices for closing prices but now you can find on line ( the appraisers will veryfy the info)
However, we have found that getting a second appraisal usually works the best with most banks. Sounds like you are on the right track. Remember, it is always better to be an owner than a renter!
Tim Bascom BascomRealestate.com

most banks will not do another appraisal. my friend owns 2 units in the same building, on the same floor. when she was doing a refi of both units from the same bank, 2 appraisers came out. one did a comp of a 2 Br, this is a Jr 4/2 Br (not converted), the other did it as a 1 Br. one took comps that were accurate, the other took comps that had flip taxes of 20%. the comp difference of virtually identical apartments, was 30%. the bank refused to do another appraisal eventhough they already had another one available done at the same time.

@bascom: Doing all that. Cobble Hill has zero turnover, so the comps are hard to come by. Using some 1BRs instead of 2BRs, but that's better than using Gowanus. Square footage was off on one (using floor plan) by about 100sqft...which had a large impact on that comp's $/sqft. It's like what "lad" said above.

@Drujan: Yes, it does. Great for the seller (if i follow through). You see, the bank will give me less than i need...and since it's in my contract that i need the proper financing - currently there is no deal. So BAD for the seller at this point. In fact, it looks like he over priced his apt. Of course, the comps are bad...so no wonder the appraisal came in low.

@front: I've asked the seller to aggresively prime the second appraiser with better comps and a profile of the neighborhood. Any appraiser who thinks Cobble Hill = Union & Hoyt doesn't know Brooklyn very well.

Just to close the loop on the discussion:

I went to another bank (Citi) and got another appraisal. This appraisal came in just 1k over my purchase price. Two appraisers, 11% off. The comps were obviously vastly different. The Citi appraiser used more Brooklyn Heights data, and valued the location and condition a bit more...which ended up being the difference. Looking to schedule a closing next week. Unfortunately, rates have gone up in the time (by about half percent!), so that sucks, but at least the deal can move forward.

Thanks for all the advice...
-GP

Why not use the low-appraisal to re-negotiated the purchase price.

goodwork gato!

most appraisers are mind-numbingly incompetent and half-ass at what they do. they overvalue during bubbles and undervalue during recessions. and that sucks because each time you use one - it costs you 300-400 no matter the result.

also a piece of advice for the next time....always have your esq. negotiate as a part of your rider that unless the place appraises at contract price, the contract's void and DP monies shall be returned. also, you can further protect your DP by negotiating a 90LTV mortgage contingency - which stips that unless you can obtain financing at 90%, teh DP is still yours...otherwise, when you make a moronic suggestion post-contract (and assuming a typical 80 LTV mortgage contingency clause) such as what riversider suggested, the seller coudl tell you to take hike, PP is what is and if you don't close he'll hold your DP (or 10% of it) as liquidiated damages. in most cases bye bye DP.

Not all apprasals are the same, Some are just BPO, AVM's etc.

congrats gat! Many happy years in the new place.

ali r.
DG Neary Realty

That's great, Gato & good luck to you.
After you close, would you please post the name of the first bank?

great news. when something like this happens, it's worth it just to move on as quickly as possible to lessen the chance of rate increases. you ended up in the cusp, but getting a unit you want and will pay just slightly more per month.

another ridiculously stupid comment by perpetual RE moron-extraordinaire, riversider....BPO's on a home loan??!?! jesus i hate talking to people who don't walk their TALK.....

We are going through a refinancing craze in my building right now. Most of the appraisals have come in quite low. Some so low that I would consider buying and flipping them if the owners were to put the units on the market for such a price.

The quality of them generally seems very shoddy. E.g., two mirror image apartments were measured to be 750 square feet and 1,050 square feet. Not exactly a minor difference. And the "1,050" square foot apartment appraised for less, even though it is in similar condition and is (according to the appraiser) 40% larger.