Refinance appraisal issue

[barnburner4444]

I'm in the middle of a refi with AIM to a no cash out 15 year loan. Approx 10 months ago we got an appraisal for a HELOC and our house appraised at $379,000 so thats the value figure I used on applications.  I just received new appraisal back from mortgage company and its for $320,000 and an email stating we might have to revisit loan terms.  I don't get it.  I watch the local market pretty close and haven't seen a decline, especially that magnitude. Everyone I know in real estate says everything is going well in my area, at least up until C19 and it hasn't had time to do much yet.  We have made some nice improvements to home since the first one and even gained a significant Intracoastal view by land being purchased by our city and cleared for a park ( explained to the appraiser when he came)

How can these appraisals be so different ? Something isn't adding up. We owe $180ish on house so thats not an issue but if they count the available HELOC ($100k but no balance) then the LTV is really ugly @$320k. Is it simple enough to drop the HELOC? I'm only locked til 7/1 and I really don't want to lose the rage I have locked or the appraisal that ironically I had to pay for upfront....

[runner540]

I don't get it.  I watch the local market pretty close and haven't seen a decline, especially that magnitude. Everyone I know in real estate says everything is going well in my area, at least up until C19 and it hasn't had time to do much yet.

If you think 15-20% unemployment and more pain to come (double the worst of the Great Recession) won’t impact your RE market, I can’t help you understand. Yes, sales might still be happening but housing market reacts slowly.

[barnburner4444]

I didn't realize appraisals were forward looking. Also I didn't say it wouldn't, in fact I said "hasn't had time to do much yet". Are you suggesting there has a 15% decrease in sales price the last 2 months?

[invest4]

Appraisal should be relatively clear with supporting market comps. Take it up with the appraiser and lender and see how it shakes out.

My own appraisal for my recent refinance was also lower than expected. However, given the fluidity and crush of refinancing at the time I simply decided I was fine to put an additional 10k toward the house and move on.

[runner540]

I didn't realize appraisals were forward looking. Also I didn't say it wouldn't, in fact I said "hasn't had time to do much yet". Are you suggesting there has a 15% decrease in sales price the last 2 months?

"hasn't had time to do much yet" = sellers haven't been forced to drop prices yet. Have any comp deals actually gone under contract and closed in the last month?
15-20% was referring to unemployment rate. The appraiser isn't just looking at past sales comps, they are also looking at market conditions today (at least in my property's appraisal that was a section). Have you looked at the appraisal itself compared to the $380k one to see where they differ?
What is the procedure and cost to request additional appraisals? I can't speak to the appraisal techniques but if you have a $100k HELOC and a $180k mortgage balance on the property, then there's not much equity left at $320k.

[mbasherp]

I also got burned by a low appraisal, but back in February before all this. No cash out refi... I heard from a friend that appraisers are often motivated to come in lower for these loans, no idea why. But ours indicated that we were worth the same as a smaller, non updated, poorly maintained home down the street that sold a year prior. Made no sense, and it cost us via smaller lender credit at closing, but not enough to make me walk from the whole loan.

Our area has jumped UP by about 5% since Covid hit.

[rascott]

I don't get it.  I watch the local market pretty close and haven't seen a decline, especially that magnitude. Everyone I know in real estate says everything is going well in my area, at least up until C19 and it hasn't had time to do much yet.

If you think 15-20% unemployment and more pain to come (double the worst of the Great Recession) won’t impact your RE market, I can’t help you understand. Yes, sales might still be happening but housing market reacts slowly.

That's totally irrelevant for an appraisal done today. All an appraiser does is pull sales in last 90 days or so in your area and pull a number out of the air, typically on a sold price per sq ft.

OP.... did you get a copy of the appraisal? What comps did they use? Are they valid or did they pull in a bad comp?

[barnburner4444]

I did get the appraisal. I am not familiar with the comps off hand, but they appear to be much less updated and maintained. I would say bad comps vs the prior appraisal but I need to go back and find it. We live in an up and coming area with some older houses being sold and redone. The prices reflect those while mine is totally redone and updated in last 3 years.

[kir_royale]

We were doing a cash-out refi with LenderFi late 2019. Appraisal came back LOW. In December, rates were dropping and I asked about dropping the rate and got radio silence. We started going through Better.com (Ally) and our appraisal was $100k higher, less than two months later. I think some companies offer teaser rates and then contract with low appraisals to force you to bump up the interest rate terms.

My advice: shop around.

[barnburner4444]

I hate to think that, but honestly it crossed my mind. Our neighborhood was hit by two hurricanes in back to back years in 2017,2018. So many people are totally redoing or knocking down and rebuilding and a lot are just finishing. The amount of improvement in the neighborhood as a whole in the last 10 months seems to have driven values way up. I was very surprised it didn't go up, even more surprised it wasn't down so significant

[Goal33]

Sometimes you get an appraiser on a bad day. I’ve been fortunate on my appraisals but my mom has had a bad appraisal. 10% lower than relevant comps in same complex for same floor plan, same quality, etc.

[BillyK]

Unfortunately, you often get what you pay for with the limited appraisal reports used for residential loans. Unless the appraiser is well familiar with the subject market, not a lot of time is spent in the important informational gathering process needed for accurate appraisals. It is often hit or miss with limited appraisals; particularly, if you aren’t in a cookie cutter type subdivision where the home are all very similar and the comps require very limited adjustments.

[unclescrooge]

The same thing happened to me 4 years ago. I gave the bank a spreadsheet with sales information in a couple of miles radius.

I listed sale price per square foot and I noted why certain houses should be excluded (bad location, bad condition).

The bank accepted this and increased the valuation.

[London]

Appraisals aren’t a science. I have a very expensive home and at one point had three appraisals done in quick succession. The highest and lowest were $500k apart. At that time I was hunting for a low appraisal to challenge property tax so I went with the lowest.

Recently I refinanced. Obviously, I wanted to ensure a high appraisal so I “helpfully” offered to give the appraiser a copy of my most recent appraisal. I used the highest one from the exercise above. What do you know, his number came in at the exact same amount.

[vested1]

I assume your lender holds the mortgage and is using their own appraiser. This may explain the lower than expected appraisal. I suspect they have a motive.

I applied for a HELOC on my previous home in California but as is my (bad) habit, told them too much. I mentioned that I was not going to use it unless I found a piece of land that I wanted to construct on in another State. They offered me a loan on an additional vacation home that I didn't ask for with an amount of $450,000, but weren't real keen on giving me the HELOC.

I was applying for a 100k HELOC and had what I estimated was 4 times that in equity. They appraised the house with a drive by appraisal 300k below comps and said the best they could do was 70k on the HELOC. They provided me a list of comps that were not near my home which had all been repossessed. When I complained and withdrew the loan application and warned that it had better not affect my credit, which was at 820, they promised it wouldn't. They then sent me a letter stating the loan was denied due to bad credit.

I ended up selling the house last year at 75k over comps and 400k over their previous appraisal. I now own my new home and have no mortgage, but if I did, it wouldn't be with that lender.

If you really want the loan I would shop around and perhaps change lenders.

[barnburner4444]

Just to follow up with this, spoke with AIM this week and said no issues and it won’t change anything. Evidently they don’t care about the 100k HELOC

[Jeff P]

I didn't realize appraisals were forward looking. Also I didn't say it wouldn't, in fact I said "hasn't had time to do much yet". Are you suggesting there has a 15% decrease in sales price the last 2 months?

Just bought a house. Put the offer in right when the stay at home stuff was starting. Appraisal said “market is going up” or something. No mention of Covid or its possible impacts at all.

Appraisals are a crapshoot though. They dont even come to the house to gauge condition. Theyve never seen the house they are comparing it to. Maybe not even interior pictures.

Appraisals and real estates are both unnecessary necessary evils. Oooh. And home inspectors too, but they are only 50% useless.